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Apple slowson iPhone 5

speculationAPPLE recorded a rare quarter of dis-appointing sales last night, sendingshares down almost six per cent inafter-hours trading, as demand forits iPhone fell ahead of the impend-ing release of its next model.

The worlds largest company bymarket value said revenues were$35bn (22.6bn) in the threemonths to July, lower than the$37.2bn forecasted.

Apple attributed the miss torumours and speculation aboutthe next iPhone, expected to bereleased in the autumn, and weakperformance in Europe. Netincome was $8.8bn, 21 per cent upyear-on-year but lower thanforecasts of over $9.5bn.

Apple sold 26m iPhones over theperiod, down from 35m in theprevious three months, althoughiPad sales rose by 44 per cent to17m following the release of thenewest version in March.

Chief executive Tim Cook saidhe could not be more confidentin our product pipeline.

Apple also announced last nightthat it will release the latestversion of its Mac operatingsystem, Mountain Lion, today.

Cook said that growth inmainland Europe had been flatover the last year. Apple expectssales in the next quarter to fallslightly to $34bn, suggesting thenext iPhone will not launch untilOctober at the earliest.

Earlier yesterday, the tech giantclaimed rival Samsung owes it

$2.5bn over the use of Applestechnology in the Korean firmsproducts. The two companies aredue to go to trial on Monday.

Greek PM Antonis Samaras is failing to keep his government finances on track, while Spanish leader Mariano Rajoy faces bailing out regional authorities

THE SPANISH governments borrow-ing costs shot to a euro-era high yester-day as another regional authorityrequested a bailout, panicking alreadynervous investors who now fear a fullrescue might be needed to try to helpthe country out of its debt troubles.

It came as EU officials warned Greececould also need another bailout,meaning the European Central Bankand International Monetary Fundcould lose the cash they pumped inearlier this year an eventuality theypreviously said would never happen.The single currencys plight was

highlighted late last night as Moodysshifted the European FinancialStability Facility bailout fund from astable to a negative outlook, after asimilar knock to Germany on Monday.Yesterday, Italian stocks plunged to

their lowest level since the euro wascreated, as investors feared it couldalso need a bailout if its situation doesnot improve soon.And influential survey data indicat-

ed the Eurozones private sector out-put fell in July, raising expectations ofa recession as JP Morgan slashed itsforecast to predict a 0.5 per cent con-traction in GDP in the fourth quarter.

Catalonias regional government willapply for aid from the Spanish govern-

ment, its finance minister said yester-day, as it cannot access debt markets.It follows Valencia, which called for

assistance on Friday, seeking to tap the

central governments 18bn (14bn)bailout fund for regional authorities.

But Spains government is alreadyunder enormous strain dealing withits own debts, and had to arrange a100bn Eurozone rescue plan for thebanks as it cannot bail them out itself.

Yields on its 10-year bonds rose tonew highs of 7.636 per cent yesterday,and a 3bn auction of three- and six-month debt saw six-month yields rise

to 3.691 per cent, up from 3.237 percent last month.A bailout is looking more likely by

the day, warned Jonathan Loynes of

Capital Economics. That would signif-icantly deplete the resources of thebailout funds and leave little in thepot to provide further assistance toPortugal and Ireland and, more cru-cially, to deal with problems in Italy.Yields on Italian 10-year bonds also

jumped 0.26 percentage points to6.597 per cent, while the stock marketdropped another 2.71 per cent, hittinga euro-era low in the course of the day.

Meanwhile EU sources told Reutersthat Greece could need to restructureits debt again just four months afterthe countrys last bailout.

Troika officials are in the countryahead of European Commission presi-dent Jose Manuel Barrosos visit tomor-row, and have found governmentfinances far worse than hoped inpart because they now expect GDP tofall seven per cent this year, not thefive per cent previously believed.

Meanwhile Standard & Poors down-graded the subordinated debt of sever-al European banks as it believes the

creditors will not receive any help inthe event of a bailout, under new ECdraft bank resolution plans.

BY JAMES TITCOMB

FTSE 100 M5,499.23 -34.64 DOW M12,617.32 -104.14 NASDAQM2,862.99 -27.16 /$ 1.55 unc / 1.28 unc /$ 1.21 unc

DEBATE: Page 19

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LONDON2012

days to go

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Follow me on Twitter: @allisterheath

THE HOME Office is mounting a last-gasp attempt to block planned strikeaction by border workers during theOlympics, it emerged yesterday.

Procedural errors in the strikeballot could be used in support of aninjunction to halt the industrialaction due to start tomorrow.

The PCS union has said thousandsof public sector workers, includingthose manning the immigrationdesks at Heathrow and other keyroutes into London, will walk outthe day before the Olympics begin.The High Court will hear theinjunction application today.

Games strikes

face injunctionBY MARION DAKERS

GETTY

Londons enterprise seesbright future for businessLONDONS businesses are bullishabout both their own futures andthe short-term economic outlookfor London as a whole, according toresearch published by the LondonChambers of Commerce andIndustry (LCCI) today.A balance of 37 per cent of firms

had positive overall expectationsfor their business over the coming12 months, compared to 12 percent six months ago and 31 percent last quarter. A balance of zerowould indicate that firms expectedno change in conditions.

Businesses were not quite as posi-tive on the future of Londons econ-omy, but nevertheless 80 per centof companies thought the capitalsprospects were positive or neutralover the coming 12 months.

Enterprises reported their ownemployment climbing over the sec-ond quarter, to a four and a halfyear high, with a positive figure ofeight per cent on balance.

In spite of the poor operatingenvironment London firms aremaintaining their staffing levelsand many are actually taking onstaff, the report stated.

London businesses are clearlygearing themselves up for a greatsummer, taking on staff and feel-ing much more positive about

Green energy compromise reachedWind investors will escape deep cuts tosubsidies but the coalition will notcommit to tough new targets fordecarbonising British electricitygeneration under a compromise dealthrashed out between George Osborneand Ed Davey, the energy secretary.Under the agreement, to be announcedtoday in parliament, Mr Davey will claimvictory for seeing off a treasury threat tocut onshore wind subsidies further thanplanned, a decision that will anger Torybackbenchers.

Small banks fear rule squeezeSmall European banks are warning thattough EU rules aimed at staving off futuretaxpayer rescues of bigger banks couldwreak havoc with their capital costs andforce them to cut back lending.MEPs areseeking to rewrite bank safety rules.

Big push on 2.5bn train dealThe most ambitious train procurementprogramme undertaken in the UK isexpected to be signed off this week aftera delay of more than three years, creatingat least 500 jobs in the north-east andsupporting thousands in the supply chain.

Canadians strike Irish goldThe locals of Ba llinvalley in Co Wicklowhave known since the Avoca rush of 1796that there was gold in them thar hills. Butit has taken Canadian funding to confirmthat the land contains large seams ofuntapped, high-grade ore.

Carmakers given green lightThe lack of a genuine world leader indesigning and developing electric andhybrid vehicles could offer a route to thefuture global success of Britishcarmaking, a leading industry body says.

Romney would restore British linkMitt Romney would restore "Anglo-Saxon"understanding to the special relationshipbetween the US and Britain, and return SirWinston Churchill's bust to the WhiteHouse.

San Marino falls victim to euro crisisFitch has downgraded the republic, whichrelies on banking and tourism, from A toBBB+, with a negative outlook meaningthat its rating could drop further, followingan Italian crackdown on tax evasion.

Obama leads as voter anxiety risesAmerican voters are growing morepolarised and locked in their views asthey witness a presidential campaign thatis boosting negative feelings about bothcandidates, a poll shows.

Finland pleased With Moody'sFinland said it was "very pleased" withthe confirmation of the country's AAArating by Moody's, which has left it theonly Eurozone member to have a toprating backed by a stable outlook.

TRADE minister Lord Greenyesterday admitted that heregrets HSBCs failures in relationto alleged money laundering whilehe was in charge of the bank butsays he has no intention ofresigning.

As HSBCs former chairman andchief executive, Green has comeunder pressure to explain what heknew about the companyscompliance procedures followinglast weeks publication of a USSenate report that alleges the bankdealt with rogue nations and drug

gangs under his watch.HSBC has expressed its regret

that there were failures ofimplementation in [compliance],and I share that regret, Green

wrote to Chris Leslie, Laboursshadow Treasury minister.

HSBC has always sought to dothe right thing, and when things go

wrong, worked hard to put themright. I have sought to embodythese values in my own work, headded.

Green later told Sky News he hadno case to answer over the moneylaundering allegations.

Business secretary Vince Cablegave the peer his backing: He is avery good trade minister and thatis what the Prime Minister hiredhim for and he is doing that job

very well.

Green regrets

HSBC failingsbut will stay on

In the second quarter only 12 per cent of businesses said their employment went down

2 NEWS

BY JAMES WATERSON

BY BEN SOUTHWOOD

To contact the newsdesk email [email protected]

WITH the Eurozone back incrisis, it is tempting toassume that Britain will befine, that we dont share the

problems plaguing much of thecontinent. Such complacency wouldbe a mistake. As an intriguing notefrom Credit Agricole points out,

there are growing signs that investorsare losing confidence in sterlingsstatus as a semi-safe haven, to use thesomewhat bizarre term favoured bymany market participants.After peaking at 38bn in November

2011, Bank of England data showsthat foreign investor demand for giltshas slumped, registering a 5bn out-flow in the three months to June2012, according to the French bank.Foreign capital inflows from abroadwere one of the drivers of the poundsrelative strength during the crisis; ifthis reverses, perhaps because of

EDITORSLETTER

ALLISTER HEATH

First signs that foreign investors are losing trust in Britain

WEDNESDAY 25 JULY 2012

growing fears about the budgetdeficit, George Osbornes claim tohave tamed the financial markets willlook increasingly hollow.

In fact, in what could be the firstsigns of a shift in sentiment, theeffect has already started to show onthe foreign exchange markets, assome of those seeking to buy curren-cies to travel abroad this summer willhave noticed. To see the significanceof this change, it is worth taking alook at recent history.

Sterlings broad nominal effectiveexchange rate had spectacularly out-performed both the euro and dollarsince early 2009, following a collapsein the pounds value in the earlystages of the crisis and during itspeak. The pounds 7.5 per cent gainover the past 12 months is a key rea-

son why it is up by more than 10 percent over the past three years.Sterling/euro is up close to 13 per centin the past 12 months and by morethan 20 per cent in the past threeyears; the pound has also done wellagainst the dollar, Swiss franc andNorwegian kroner.Yet more recently the dollar has

recovered, with the pound falling overthree per cent against the greenbackin the past 12 months. The pound hasalso dipped against the yen, Canadiandollar and Australian dollar over thepast three months, helping exporters

mentators realise. They have begun tonotice that things are not proceedingaccording to plan, and are starting tovote with their feet.

Who can blame them? Last Fridaysbudget deficit figures were woeful.Borrowing is on course to overshootthe official full-year forecasts by a

long way on current trends, by20bn, according to CapitalEconomics. Osbornes saving grace, asever, will be the Eurozones evenworse performance: it is clear thatSpain will need a huge bailout andthat Greek debt will require anotherrestructuring. The UK, which will sim-ply continue to monetise its debt, willnever look as risky in comparison. Butperceptions of the UK are clearly shift-ing, and not for the better.

to those markets. The Credit Agricoleresearch shows that sterling hasunderperformed against other devel-oped country currencies recently.

So what are we to make of all ofthis? It does seem that some investorshave started to see through Osbornespropaganda. The economy has

ground to a halt, at least if the off icialstatistics are to be believed; what iscertainly unquestionable is that thepublic finances are deterioratingagain. Most depressingly, income taxreceipts are falling; declining pay andbonuses in the City are part of thatstory, something that banker-basherswould do well to remember. Anotherlesson is that those who are relaxedabout the budget deficit and actuallywant to borrow even more (supposed-ly to stimulate demand) need to thinkagain. The markets are much morefixated on the deficit than most com-

their future, despite other indicatorsbeing weak, said LCCI chief execu-tive Colin Stanbridge.

The next few months should bringa much needed boost to sales both athome and abroad, and should hope-fully be the start an economic recov-ery across the capital, Stanbridgewent on to say.

But nevertheless, firms face plentyof problems, the survey showed.Export and domestic sales remainedin negative territory for domesticorders.And while export orders were mar-

ginally positive rising on the quar-ter, but still remaining down

compared to the same period lastyear. Similarly, 31 per cent of firmsreported that their cashflow wors-ened, compared to just 19 per centwho reported improvement.

Confidence in company propects over the next 12 months

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The new jobs website for London professionalsCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

FORMER Anglo Irish Bank head SeanFitzPatrick was charged yesterdayover his part in Irelands mostexpensive bank failure, making himthe highest profile banker to faceprison in connection with hiscountrys financial meltdown.

FitzPatrick, the face of Ireland'sbanking crisis after serving as Anglochief executive during its rapid riseand chairman during its stunningfall, was arrested in Dublin airportand brought before court to face 16charges. He was released on bail andis due to appear again on 8 October.

Boss of AngloIrish charged

HARRY BANKS

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TOP LAWYER Anthony Salz will havefree rein to speak to staff and examinecompany documents in his inquiryaimed at cleaning up Barclays cul-ture in the wake of the Libor scandal,the bank revealed yesterday.The former Freshfields senior part-

ner has roughly nine months to inves-tigate what went wrong at the bankand to come up with a new code ofconduct, which Barclays boardintends to accept and implement.

Pay and bonuses are expected to bemore closely linked to good behaviourtoo, the bank explained.

Salz will report to a committee ofnon-executive directors, made up ofDavid Booth, Alison Carnwath and SirJohn Sutherland, and headed bydeputy chairman Sir Michael Rake rather than former chair MarcusAgius or chief executive BobDiamond, who were forced out overthe scandal.

He has been tasked with explainingthe key values and beliefs thatBarclays expects its staff to hold andfollow, and ensure the structures arein place to maintain that behaviour.

BY TIM WALLACE The measures are likely to includeensuring policy and rewards arealigned with those values, as well asmaking sure bosses at the bank set agood example to other staff.

Salz will be given a team from a pro-fessional services firm to help in hisinvestigation, and will make his workpublic next spring, shortly beforeBarclays annual general meeting.

We will ensure that he has whatev-er resources necessary at his disposalto make it thorough and far-reaching,promised Rake.

We expect this work to contributesignificantly to the broader changethat we intend to bring about to theway in which Barclays operates.

ANTHONY Salz, appointed yesterday to leadthe investigation into staff culture atBarclays, has a long record in City law, bank-ing and public works, as wellas experience of leadingreviews into voluntaryregulation at privatefirms.After 30 years as acorporate lawyer atFreshfields, including 10years as senior partner, in2006 Anthony Salz movedto become executive vicechairman at Rothschild.He also works in the public andcharitable sectors, as leadnon-executive

member of the

board of the Department for Education, andis a trustee of the Tate Foundation, the EdenProject, the Paul Hamlyn Foundation, theScott Trust and the Royal Opera House.

Salz was vice chairman of the BBCboard of governors from 2004 to2006.On top of that distinguished career,Salz has direct experience inrunning the kind of behavioural

review Barclays is after. He chairedtwo review groups on press

self-regulation on behalf of the MediaStandards Trust, which published

reports in 2009 and June 2012.As a result, Barclays deputy chair-

man Sir Michael Rake calledSalz the ideal individual

to lead this review.

Deutsche Bank reveals slumpin profit due to euro weaknessDEUTSCHE Bank rushed out aprofit warning yesterday

afternoon, and became the latestglobal investment bank to revealweak second quarter pre-taxprofit, as the flagging euro andlower trading activity hit earnings.

Preliminary figures releasedyesterday ahead of Deutschesplanned 31 July reporting dateshowed the bank expects quarterlypre-tax profit of about 1bn(645m), down from 1.8bn a yearearlier and below market

BY HARRY BANKS expectations. Deutsche said itwould take steps to de-risk itsoperations as a result.

Deutsche blamed the weak euro

for inflating its dollar and sterlingcost base, shrinking its second-quarter net income to about700m from the 1.2bn a yearbefore. The results are the firstsince new co-chief execs Anshu Jainand Jrgen Fitschen took over inJune.

Philipp Haessler, banking analystat Equinet, said: The figures areweaker than expected, mainly dueto costs and risk provisions.

Costs were 300m higher thanexpected, Metzler bank analystGuido Hoymann said, adding theresults did not appear to include

any provisions for a potentialsettlement in the Libor riggingscandal.

An internal probe at Deutschefound that two of its formertraders may have been involved incolluding to manipulatebenchmark interest rates, butthere was no indication of failureat the top of the organisation,three people close to theinvestigation said.

THE proportion of women on the boards of FTSE 100 firms has risen to 16.7 per cent from 12.5per cent in 2011, according to new figures from the Department of Business. The news willadd steam to business secretary Vince Cables insistence that quotas to force board diversityare unnecessary. Recent appointments include Lucinda Bell, finance director at British Land.

WOMEN TAKE MORE SEATS ON FTSE 100 BOARDS

Barclays PLC

24 Jul18 Jul 19 Jul 20 Jul 23 Jul

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PROFILE: ANTHONY SALZ

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GOOGLE has agreed on the basis of

an antitrust settlement with the EU,it emerged last night.The EUs competition

commissioner Joaqun Almunia hasaccepted proposals from theinternet giant on changes to theway it ranks its search results.Although the deal has not beenfinalised, developments haveopened the door for Google to settlethe investigation.

Antoine Colombani, thecommissions spokesman, told CityA.M. last night that negotiationshave been positive.

We have reached a good level ofunderstanding, its a good basis forfurther discussions at a technicallevel, Colombani said, adding thatthis was only a preliminaryagreement.

The EU has been investigatingclaims from several firms that

Google favours its own services insearch results. The tech companysexecutive chairman Eric Schmidtoutlined settlement proposals tothe EU earlier this month.

In May, Google was told of fourareas of concern where its practiceswere considered a potential abuseof its position. It currently has a 90per cent market share in Europe.

A Google spokesman said: Wecontinue to work co-operativelywith the commission.

EU and Googleagree outlinedantitrust deal

BY JAMES TITCOMB

GETTY

A YEAR and a half after it sparked a10bn row, Rosneft has waded backinto the dispute between BP and itsRussian partners by offering to buyhalf of their joint venture, TNK-BP.

BP said yesterday it had entered for-mal talks with state-owned Rosneft tosell its 50 per cent holding in TNK-BP.

Last year, BP scrapped its 10bnshare swap and exploration deal withRosneft after coming under heavypressure from AAR, the vehicle usedby a trio of Russian billionaires to con-trol half of TNK-BP.

Meanwhile, BP said it will continue

its 90 days of good faith negotiationsto sell the same stake to AAR, asrequired by their joint venture.The parallel talks mean the final

make-up of TNK-BP is unclear, withsome analysts speculating thatRosnefts interest could bounce AARinto selling out rather than BP.

Relations between all three firmshave soured further since AAR tooklegal action to thwart Rosneft andBPs alliance in January 2011, beforeturning down a $32bn bid from the

Rosneft returnsto BP with offer

for Russian armBY MARION DAKERS pair to buy it out of TNK-BP.

BP put the stake in TNK-BP on theblock on 1 June, after receiving unso-licited approaches for the lucrative buttroublesome venture. TNK-BP hasdelivered $19bn in dividend paymentsto BP since it was formed in 2003.

Rosneft appeared to have no qualmsabout its potential partners yesterday,with president and former govern-ment minister Ivor Sechin saying:Rosneft has an established expertiseand track record in managing largeassets and considers the potentialacquisition of BPs participation inTNK-BP to be an attractive commercialproposition.

BP PLC


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DAVID Camerons former head ofcommunications Andy Coulsonand ex-News International chief

executive Rebekah Brooks are toface criminal charges in relationto phone hacking offences, it wasannounced yesterday.

The Crown Prosecution Service(CPS) alleges that 600 people weretargeted between 2000 and 2006.Brooks and Coulson face specificcharges of conspiring to interceptthe voicemails of murderedschoolgirl Milly Dowler.

Six other people with connec-tions to the defunct News of the

Brooks and Coulson to facecharges over phone hacking

BY JAMES WATERSON World newspaper will also becharged.

There is sufficient evidence forthere to be a realistic prospect ofconviction in relation to one or

more offences, said CPS legaladviser Alison Levitt QC.

I have concluded that aprosecution is required in thepublic interest.

In a statement Brooks said: Thecharge concerning Milly Dowler isparticularly upsetting not only asit is untrue but also because I havespent my journalistic careercampaigning for victims of crime.I will vigorously defend theseallegations.

WEDNESDAY 25 JULY 20124 NEWS cityam.com

Ex-NI chief Rebekah Brooks and former NotW editor Andy Coulson were charged

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ALTERNATIVE fund manager ManGroup said yesterday it would cutmore staff in an attempt to resize thebusiness amid falling asset alloca-tions from investors, sending itsshares higher.

Chief executive Peter Clarkeannounced a further round of costcuts totalling $100m (64.5m),including headcount reductions, ontop of a planned $95m squeezeannounced in March a savingequal to nearly a quarter of groupoperating costs.

Mans funds under managementslumped 9.8 per cent to $52.7bn this

year, down from $58.4bn at the endof last year and $71bn in June 2011.

Clarke told City A.M. the firm wasgoing through a transition to geton the front foot for wheninvestor appetite for riskier assetspicked up.

He said: There is a programmethere around sizing the businessappropriately. We have announcedadditional steps to get on the frontfoot in maintaining attractive levelsof profit.

Investors cheerMan Group cuts

to save $100mBY MICHAEL BOW

We dont know when sentimentis going to turn we dont knowwhen investors will put risk back on.We would have hoped we werethrough it all.

Clarke did not reveal where staffwould be reduced.

Bank of America Merrill Lynchanalyst Philip Middleton said: Wethink the market has been worryingexcessively about short term factorswith Man, ignoring the companyspowerful strategic positioning aswell as its solid financials.

Shares in the FTSE 250-listed firmrose as much as 9.3 per cent in earlytrading, before settling to close 4.12per cent up at 72p.

N+1 and Singer mergeBY MICHAEL BOW

Tim Cockroft will be chief executive.Cockroft told City A.M.: It puts us

in a very strong position. Its going tobe business as usual from day one.Realistically the key is to integrate itquickly.

Ive known their business for along time and its a similar type ofbusiness to ourselves. Theyre a goodgroup of people and culturally its agood fit.

N+1 Brewin head of corporatefinance Sandy Fraser added: Thehouses know each other reasonablywell and theres been dialogue onand off. Its a pretty neat fit.

MAN Group showed yesterdaythat the City already hasplenty of investors with along-term outlook, as it

announced further outflows andanother round of cuts, only to see asignificant gain in its share price.

Meanwhile Vodafones shares fellmore than one per cent, in the wakeof tough first quarter numbers outon Friday, with UK revenue down 0.8per cent and a loss of 1.5m

customers across Europe. Butshareholders at the AGM didnt seemtoo worried either: 96 per cent votedfor the boards remuneration report.

In a year when 14 per cent dissentis the new normal, such strongsupport proves that the shareholderspring isnt a generalised mood ofvindictiveness against all highly-paidchief executives. Perhaps Vodafonesowners are mollified by its promiseddividend per share growth of at leastseven per cent a year to March 2013,

and the 10bn returned to investorsover the past year. The attention

Vodafone pays to avoiding rewardsfor failure may also be a factor. Chiefexecutive Vittorio Colaosremuneration increased by 23.4 percent in 2012, but his salary fell, withhis shareholding in the companyincreasing from six times his salaryto over ten times his salary. Firmsthat want to avoid a revolt need tolearn from one that got it right.

Marc Sidwell is City A.M.s managingeditor

BOTTOMLINE

MARC SIDWELL

Man Group PLC


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EASYJET founder Sir Stelios Haji-Ioannou plans to press theairlines board on the cost ofnew planes and its advisers

when he meets with the firmtoday.

Fresh from a scuffleover the suitability ofEasyJet chairmanand Barclaysdeputy chair SirMike Rake, SirStelios has voiced

EasyJet to face fresh questionsfrom Stelios alongside update

BY MARION DAKERS

concern over an Airbus order.And in a list of questions for the

board published last night tocoincide with EasyJets thirdquarter update today, the airlineslargest shareholder also criticised

Amir Eilon, an adviser to the firmwho parted ways with Stelios in2010. EasyJet has had a fraughtrelationship with Stelios since hequit the board for a second timein May 2010.

VODAFONE: Page 10


Peter Clarke did not say where planned staff cuts could hit

Provident cardsboost earnings

BY MICHAEL BOW

CREDIT firm International PersonalFinance yesterday announced a drop

in profits after an increase in earlysettlement rebates in the CzechRepublic and Slovakia region.

The group reported a fall inunderlying pre-tax profits to 31.4m,down from 35.7m last year.

Profits from the Czech-Slovakiaregion were down 28 per cent due toa 4.9m loss attributed to high earlysettlement rebates and weak foreignexchange rates.

Shares in the FTSE 250-listed firmclosed 8.2 per cent higher.

BY MICHAEL BOW

SMALL and mid cap companyadvisers Singer Capital Markets andN+1 Brewin yesterday announcedplans to merge the two companiesinto a new business called N+1Singer, in a tie-up first revealed inCity A.M. earlier this year.

The deal between the two houseswill put the company in the top fivecorporate advisory and brokingbusinesses in the UK small and midcap market. N+1 Group chairmanSantiago Eguidazu will chair thenew firm and Singer chief executive

EasyJets largest investorSir Stelios Haji-Ioannou

PROVIDENT Financial, the moneylending firm, revealed a 17 per centincrease in pre-tax profits to 72.9myesterday due to a surge in peopleusing its low-limit credit cards.

The jump was led by its VanquisBank business, which increased pre-tax profits by 60 per cent to 28.2m.

Chief exec Peter Crook told CityA.M.: Its a part of the market wherereally were the only active players.High street banks have retreated andwere enjoying a period where wehavent got a huge amount ofcompetition.

IPF shares upas profit falls

Spring turns to a summer of loveas investors look to sunny side

How City A.M. first revealed the news ofa possible merger on 15 March

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BUSINESS borrowing slumped again

in June according to industry figuresreleased yesterday, raising more fearsthat there is little demand for creditand so the governments fundingfor lending scheme, which startsnext month, may not work.

Net lending to non-financial busi-nesses fell 3.2bn in June, reversingMays 1.3bn rise, British BankingAssociation data showed.

Household lending also performedpoorly, with the number ofmortgages approved falling from66,653 in June 2011 to 59,923 in May2012 and 51,610 last month.

We do not think that the terms ofthe funding for lending scheme willsufficiently change the bankslending patterns, as they remainunder continued pressure tomaintain large liquidity buffers andincrease their capital ratios, warnedBarclays analyst Blerina Uruci.

Furthermore, credit is demand- aswell as supply-constrained, in ourview, and therefore purely supplyside measures are bound to haveonly a limited effect on credit flows.

Firms demandfor credit fellagain in June

BY TIM WALLACE

Turner could replace Sir Mervyn King


Turner wants to take Bank jobTOP regulator Lord Turneryesterday said he would considerrunning for governor at the Bankof England, confirming hisposition as one of the favourites totake the role when Sir Mervyn

Kings term ends at the end ofJune next year.In a wide ranging speech and

interview the Financial ServicesAuthority (FSA) boss blamed freecurrent accounts for the lack ofcompetition in the banking sectorand said the popular service mayappear good for customers butsimply pushes up costs for otherproducts.

He also told a Bloombergaudience that they should notdemonise banks as the source ofall our economic problems, butinstead recognise that banks facetheir own external constraintssuch as the high cost of funding,which has hit borrowing levels.

I would obviously not rulemyself out, Turner said whenasked about taking over at theBank of England. It is something

Ill have to think about when thetime comes.

Other lead contenders for thetop job include former civil serviceboss Sir Gus ODonnell and Bank

BY TIM WALLACEdeputy governor Paul Tucker.

And Turner stressed theimportance of prudentialregulation to promote financialstability something the Bank ofEngland will soon haveresponsibility for.

But he argued that regulators

should not be given too many roles.I do not believe it is the role ofthe regulator itself to haveresponsibility to promote thecompetitiveness of the City,because the moment you introducethat requirement, you create aconfusion of objectives and openthe door to regulatory arbitrage,he explained.

He ended by arguing that banksmay be stuck in a damaging

tradition by offering free currentaccount services, hittingcompetition in the sector.

That means that it may bedifficult for a new entrant to makea business plan stack up unlessthey assume the sale in somefuture year of high margin

ancillary products, he said.And that pressure to makemoney elsewhere means manywho stay in credit get a good deal,subsidised by others who paythrough, for instance,unauthorised overdraft chargesand PPI insurance premiums. Thisis not a sound basis for a long-term trust-based relationshipbetween a competitive bankingsystem and its customers, he said.

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IMPERIAL Tobacco yesterdayannounced improved revenues,despite sales volumes falling as reces-sion-hit Europeans reduce theirtobacco consumption.

Price rises for its premium brandsenabled net revenue to increase bythree per cent for the nine months tothe end of June, even though theamount of tobacco it sold fell by threeper cent during the same period.

Im particularly pleased with thequality of the volume and revenuegrowth were achieving with our keystrategic brands Davidoff, GauloisesBlondes, West and JPS which nowaccount for almost a third of our totalstick equivalent volumes, said chiefexecutive Alison Cooper.The Bristol-based firm said it contin-

ues to invest in new packagingdesigns to attract customers butthese may be hit by the UK govern-ments intention to enforce plainpackaging on all tobacco products.Volumes in Spain, the companys

third-biggest market, fell 11 per centas a rise in the unemployment rate to

Imperial grows

despite drop incigarette salesBY JAMES WATERSON one in four of the population forced

consumers to cut back on cigarettes sales of which tend to be relativelyresistant to economic conditions.

Other areas for concern includeUkraine, where illicit sales mean mar-ket volumes are down 11 per cent andPoland, where the business for handrolling tobacco dropped 37 per cent.

But there was some good news fromImperials niche divisions with salesof snus, a Swedish form of tobaccothat is banned in the rest of the EU,up by 39 per cent in the last ninemonths and sales of Cuban cigars inemerging markets increasing by 10per cent.

Imperial Tobacco Group PLC


2,450

2,425

2,475

2,500

2,525

2,550 p

2,449.0024 Jul

The third quarter has come in below our expectations with an impliedvolume decline in the quarter of around one per cent. We are disappointed: thereshould have been decent share momentum out of the second quarter, andthe third quarter presented the weakest volume comparative of the year.

ANALYST VIEWS

Although the level of net debt is high, we are comfortable given thebusiness is defensive and highly cash generative. Imperial has very low fixedcapital investment, high margins and a target to convert 90-100 per centof profit into cash. We reiterate our Buy recommendation.

Despite lowering our earnings per share forecasts to reflect foreign

exchange headwinds we believe that Imperial remains well positioned to deliver

further volume growth from its key brands and should also benefit frompositive pricing momentum. The valuation remains attractive.

DID IMPERIALS RESULTSPROVIDE SHAREHOLDERS

WITH A QUICK HIT?by James WatersonMARTIN DEBOO INVESTEC

JONATHAN JACKSON KILLIK & CO

DAMIAN MCNEELA PANMURE GORDON

SHARES in leading gambling firmsrose yesterday after MPs said strictrestrictions on casinos and high-street betting operations should be

watered down.

Ladbrokes, Rank Group andWilliam Hill all received a boostfollowing the publication of theculture, media and sport selectcommittees report, whichrecommended allowing more high-stakes gambling machines intoshops and giving local councils theflexibility to award casino licenses.

Betting shops and casinos arecurrently allowed just four high-stakes machines offering prizes of

Bookmakers win big as MPs callfor gambling laws to be relaxed

BY JAMES WATERSON up to 500 but the report suggeststhat casinos should be allowed tohave up to 20.

Other recommendationsincluding bringing duties on bingointo line with other forms of

gambling and adjusting tax levels

on online gambling in the hope ofattracting offshore operationsback to the UK.

While we recognise the need tobe aware of the harm caused byproblem gambling, we believe thatthere is considerable scope toreduce and simplify the current

burden of regulation and todevolve decision-making to a morelocal level, said committeechairman John Whittingdale.


Raise the allowed numberof betting machines

in casinos from

Chargeindependentbookmakers

Reduce bingo tax from

4 to 20

LESS

15%

20%

Local authorities should be allowed todecide whether they want to allow casinos

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YES

NO

A

A

to

for licenses

MPs recommendations on gambling

CHEMICALS firm Croda reported asix per cent increase in first-halfprofit yesterday as the company soldmore higher-margin products andstrong demand in North America

offset softness in Europe.The company, which countsProcter & Gamble, Unilever, LOrealand Estee Lauder among itscustomers, said adjusted pre-taxprofit rose to 132.6m from 124.8ma year earlier.

Sales rose 2.5 per cent to 572.9m,driven by a six per cent increase atits core consumer care division. Thecompany raised its interim dividend8.1 per cent to 26.75p per share.

Croda ups divias profits rise

BY CITY A.M. REPORTER

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CSR, the British chipmaker thatsold its mobile phone technologyto Samsung last week, postedbetter-than-expected second-quarter results helped by demand

for its platforms in audio andautomotive.The Cambridge-based company

posted a 37 per cent rise in second-quarter revenue to $266.5m(172m), just exceeding its ownguidance, while underlyingearnings per share of $0.09,unchanged on a year ago, beatmarket expectations.

It said order patterns for thesecond half of the year were morecautious than the first, although itstill expected revenue for the fullyear to be broadly in line withmarket consensus.

The group last week struck a$310m deal with Samsung to exitsmartphones, where it was losingground to larger rivals, a movethat was well received byshareholders.

The company said last week it

expected third-quarter revenue tobe the range $260m to $265m.

Audio and carsboost for CSR

BY CITY A.M. REPORTER

GETTY

VIRGIN Media reported better thanexpected sales yesterday, driven bystrong demand for the cable opera-tors internet-connected televisionand high-speed broadband services.The popularity of Virgins TiVo

equipment, which offers on-demandinternet services as well as tradition-al channels, offset a seasonal fall inthe number of cable TV subscribers.Virgin signed up its one millionth

TiVo subscriber this month, havingadded more than 260,000 users inthe three months to July, whichhelped sales rise 4.2 per cent to 1bn

for the period.The company lost 14,700 pay-TV

customers overall during the quar-ter, a time when many students cutthe service off before the summer.

Broadband andTiVo lift Virgin

Media revenueBY JAMES TITCOMB Subscribers to Virgins superfast

internet service increased by 460,000,although income for the period fellfrom 98m to 72m.

Chief executive Neil Berkett said:We are well placed to benefit fromthe fast-growing demand for super-fast broadband and TiVo positions uswell to lead the evolving TV market.

IN BRIEFBookings slump for Volvon World number two truck makerVolvo's order bookings suffered adeeper-than-expected fall in thesecond quarter, hit by slumpingdemand in North America andEurope, but it stood by its outlook forits two top markets in the facegrowing uncertainty. Volvo saidyesterday order bookings of its trucksfell 19 per cent year-on-year across allits markets. Operating earningsslipped to 7.34bn crowns (678m)from 7.65bn a year ago.

London health accelerator opensn US venture capital firm Sandboxhas put 750,000 into a healthcare

technology seed fund to be launchedin London. Europes first healthcareaccelerator will comprise 10 teams ofentrepreneurs who will receivefunding as well industry links andoffice space. Mayor Boris Johnsonsaid the investment recognisesLondon is Europes science and techcapital. Sandbox said they hadalready had applications from all overEurope and was beginning theselection process as of last night.

Profits fall at Morgan Cruciblen British advanced materials groupMorgan Crucible said yesterday itsfirst-half profit had fallen about threeper cent, hurt by lower revenue at its

engineered materials division.Morgan Crucible's underlying pre-taxprofit fell to 57.8m for January-Junefrom 59.7m a year earlier. Revenuefell about five per cent to 533m.

SAP maintains full-year outlookn SAP kept its full-year outlookyesterday amid an uncertaineconomic environment as it continuedto draw clients, especially from thefinancial industry and the retailsector, to its new cloud-basedservices. The worlds biggest makerof business software, which reportedkey figures on 12 July, said it stillexpected 2012 operating profit to riseto between 5.05bn and 5.25bn.

Virgin Media Inc


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1,660

1,680

1,700 p

1,662.0024 Jul

SHAREHOLDERS in Vodafoneoverwhelmingly voted to backchief executive Vittorio Colaospay package at yesterdays annualmeeting, despite warnings of aninvestor rebellion.

Colaos remuneration package,

which has more than doubled inthe last year to 14m, wassupported by 96 per cent ofinvestors, despite advisory bodyPirc urging them to oppose it.

Vodafones shareholder springfizzles out as CEOs pay backed

BY JAMES TITCOMB Vodafones shareholders, whowere the FTSEs best repaid lastyear, backed all motions, but didcall for extra dividends from

Vodafones 45 per cent stake in USmobile operator Verizon Wireless.

Chairman Gerard Kleisterleeadmitted tensions between thetwo companies, citing very

difficult discussions withVerizon, but said he hoped for adividend soon. Kleisterlee alsoraised the possibility of makingnew acquisitions in Indonesia.


Chief executive Vittorio Colaos 14m pay packet was supported by Vodafone investors

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TELECOMS regulator Ofcom

yesterday said that the auction oflicences to run fast 4G mobilenetworks will be held before the endof this year, enabling services to berolled out by the middle of 2013.

Countries such as the United Statesalready have 4G networks offeringhigh-speed mobile broadbandconnections capable of data-hungrytasks such as streaming video.

But the UK has lagged behindthanks to legal wranglings over thequality of the spectrum that is up forsale and competition concerns.Ofcom fought hard to ensure thatspace was reserved for a fourthnational provider, probably Three,despite claims that such an actioncould constitute state aid.

Analysts at PwC said they expectedthe auction to raise up to 3bn-4bn for the UK Treasury.

EverythingEverywhere, owner of

T-Mobile and Orange, said yesterdaythat it is still seeking Ofcomspermission to bring 4G connectionsto the UK in 2011 by exploiting spaceon its existing 2G network.

4G high-speedmobile data tohit UK in 2013

BY JAMES WATERSON

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GREAT Portland Estates yesterdayposted a buoyant set of quarterresults, boosted by its prized WestEnd offices and pipeline of upcomingdevelopments.The firm said the value of its portfo-

lio rose by 3.1 per cent to 2.1bn in thequarter to 30 June, while net assetvalue lifted 3.5 per cent to 417p.

The main drivers were its West Endoffices, up 3.8 per cent, while its devel-opments rose by 5.5 per cent, includ-ing a 10 per cent gain at its HanoverSquare scheme above Bond StreetsCrossrail station.The FTSE 250 firm has been aggres-

sively disposing of properties, with140.5m from sales in the quarter tothen reinvest into acquisitions andprojects mainly in the West End.

The group this week announced ithas bought the Jermyn Street Estate

West End gives

Great Portlandquarterly boost

BY KASMIRA JEFFORD in Piccadilly from its joint venturewith Capital and Counties. Earlier thisyear it bought the Royal Mails old sort-ing office at Rathbone Place and willseek planning application next year.

In the City, the group said talks tosell down its stake in 100 Bishopsgatewere still ongoing. The 40-storey tower,jointly owned by Great Portland andCanadas Brookfield, has yet to securethe pre-lets it needs to start building.

HELICAL Bar said yesterday it has submitted plans to build 1,150 homes as part of a giant 12-acre residential-led development in White City, west London. The site, known a s Brickfields, isbeing built in partnership with Aviva Investors and is expected to be worth 750m.

HELICAL BAR SUBMITS PLANS FOR WHITE CITY

Great Portland Estates PLC


422.5

420.0

417.5

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427.5

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We offer a Satisfaction Guarantee. 100 if you like us, 200 if you dont.Satisfied with your bank?

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 18 or over. We reserve the right to decline to open an account. Written details, terms andconditions are available on request. Well take into account your current standing orders and Direct Debits when assessing your application for an overdraft, using our usual criteria. If there is a delay or mistake in the switching processwe will refund any charges or interest youve paid to us. If youre a Nor thern Ireland customer your old bank will also refund any charges or interest youve paid to them and if youve used our switching service we can offer you aninterest-free overdraft for up to three months. HSBC Bank plc 2012. first direct, 40 Wakefield Road, Leeds LS98 1FD. All rights reserved. AC22907.

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OFF-LICENCE chain Oddbinshasnt so much tweaked the nosesof London 2012 chiefs as clampedthem in a vice and swung themfrom a wrecking ball.

In a tongue-in-cheek attack onthe strict branding laws designedto protect the Games officialsponsors, Oddbins have offered adiscount to anyone who provestheyve shunned all of Adidas,BMW, Lloyds TSB, Visa, Samsung,EDF Energy, Coca-Cola andMcDonalds.

Thirsty customers sporting Niketrainers and able to produceVauxhall car keys, an RBSMasterCard, an iPhone, a BritishGas bill and a receipt for a Pepsi

bought from KFC will qual ify for a30 per cent off their beer andwine.

If that were not enough, theyhave also created an array ofposters for their shop windowsdeclaring: Celebrate theCENSORED with Oddbins.

London 2012 chiefs are unlikelyto be impressed, although theCapitalist understands thatOddbins is confident its activity islegally watertight.

Off-licence hitsback at Gamesbranding rules

LAURALEAN/CITYA.M

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THE OFFICIAL medal target forBritish athletes may be 48, but if ateam of financial risk analysts havetheir way then Team GB should betaking home a much higher haul ofprecious metals.According to Airton Risk

Management, part of betting firmPaddy Power, the home turf advan-tage and some surprise star perform-

ances could push the final count to61, meaning the British team couldfinally muscle in on the traditionaltop three positions held by China,the US and Russia.

On top of expected victories byTeam GB stalwarts such as sailor BenAinslie and boxer Anthony Joshua,Airton is predicting that up-and-com-ing 400m hurdler Perri Shakes-Drayton could triumph in front ofher home crowd, while discus new-bie Lawrence Okoye (he only took up

the sport 18 months ago) may alsobag a medal.

Meanwhile economists at ING havetaken a rather more scientificapproach to the art of medal predic-tion linking the likelihood of suc-cess not only to GDP per capita, butalso claiming a good performancewill boost UK productivity.

In addition to the home advantage,

a link has been established betweenwealth a higher gross domesticproduct (GDP) per capita and medalsuccess, shown in a body of academicresearch, INGs chief economist IanBright.

As far as effects on personalfinance go, it is possible that Britswill get a happy effect from Britishathletes doing well. When people arehappy, they tend to be more produc-tive, which can be good for them andgood for the wider economy as well.

Got A Story? Email

[email protected]

13cityam.com

cityam.com/the-capitalistTHECAPITALISTWEDNESDAY 25 JULY 2012

ATLONDON2012

LONDON 2012 IMAGE OF THE DAY

PRINCESS Anne yesterday attended theofficial welcome for Team GB to the OlympicVillage. Britains competitors were greetedby a ceremony of dancers and musicians.

During the Olympics, City A.M. will publish anImage of the Day. If you have a shot you thinkour readers will like, [email protected]

Bumper medalhaul predictedfor Team GB

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SOAPMAKER PZ Cussons yesterday

reported a sharp fall in full-yearprofits after shouldering higher rawmaterial costs and sufferingworsening trading conditions inNigeria and Australia.

The owner of Imperial Leathersoap and St Tropez fake tan saidprofit before tax fell by 55 per cent to48.5m in the year to 31 May.

Profits were hit by 43.7m ofexceptional costs largely related tothe groups restructuring inAustralia and Nigeria and awritedown on its Australian HomeCare brands.

Overall revenue increased aboutfive per cent to 858.9m, whilerevenue in Africa, its largest market,grew seven per cent. But sales on thecontinent were dented by economicand social unrest in Nigeria and astrike against the end of an $8bnfuel subsidy in January.

Strong growth in the UK andIndonesia helped offset weakrevenues in Australia, where it hasbeen squeezed by domestic retailerspromoting own-brand products.

PZ Cussons hitby Nigeria andAustralia woes

BY KASMIRA JEFFORD

CARPETRIGHT, the troubled floor cov-erings retailer, showed some signs ofrecovery yesterday after revampedstores and improvements to its bedrange helped boost first quarter sales.The group, which has issued a string

of profit warnings over the last twoyears, said like-for-like sales at its 486UK stores rose 1.7 per cent in the 12weeks to 21 July.

That compared with a 1.4 per centincrease in the previous quarter.

Chief executive Darren Shaplandattributed the uptick to self-helpactions such as extending its lami-nate range, developing its bed offer,

and refurbishing stores.But he conceded that it had benefit-

ed from the unusually wet weather,which helped drive customersthrough its doors.

Wet weatherhelps lift sales

at CarpetrightBY KASMIRA JEFFORD Carpetright has been particularlyhard hit because of a stagnant housingmarket and cash-strapped consumersdelaying home DIY projects.Taking into account the four store

closures, total UK sales fell 2.1 per cent.Economic woe in the Eurozone

meant sales in the Netherlands,Belgium and Ireland slumped by 6.3per cent on a like-for-like basis.

IN BRIEFFinsbury Food sales up to 207mn Bakery goods maker Finsbury Foodyesterday posted a 9.4 per cent leapin sales to 207m for the year despitetough market conditions and priceinflation in key ingredients such aseggs and sugar. Its cake divisionenjoyed a 9.2 per cent jump in saleswhile its bread and free from division

grew 10 per cent on the back ofdemand for gluten-free products andits Vogels specialty bread brand.

5.5m to support high streetsn Nearly 400 struggling towncentres have won support from agovernment programme that aims tohelp revive high streets. Fifteen will

become Portas Pilots named afterretail consultant Mary Portas andwill receive investment and supportfrom leading industry figures. Newlyannounced Portas Pilots in Londoninclude Lower Marsh and The Cut inWaterloo, Forest Hill and Sydenhamin Lewisham, and parts of TowersHamlets. The total package ofsupport is worth 5.5m nationwide.

Carpetright PLC


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BOOMING demand for mid-pricedwatches in China is more thanoffsetting a slight cooling at thetop end of the market, SwatchGroup said yesterday as it stuck toa forecast for record annual sales.

The worlds largest watchmaker,whose Omega brand is the officialtimekeeper for the LondonOlympics, reported first-half salesup 14 per cent to SFr3.85bn

Swatch revenue soars despiteweaker China luxury demand

BY CITY A.M. REPORTER (2.5bn), while net income rose 25per cent to SFr720m, beatinganalyst expectations.

Asia-Pacific, led by China, is thefastest-growing luxury market buta slowdown in the Chineseeconomy has slightly dampeneddemand for ultra-pricey

timepieces there, Swatch said.We see a slowdown in the very

high end. But if we talk aboutslowdown, its relatively healthy,chief executive Nick Hayek said.


Swatchs higher end brands include Omega watches

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DISAPPOINTING economic dataweighed on US stocks yesterday, asworrying surveys continue to dentconfidence in the recovery of theworlds biggest economy.

An estimate of American factoryactivity for July revealed the slowestgrowth in 19 months, while a region-al manufacturing survey showed itsworst top line since April 2009.

The Richmond Federal Reservesindex for manufacturing plungedfrom minus one per cent to minus 17per cent, as shipments cascaded tominus 23 per cent (from zero), andnew orders tumbled to minus 25 percent (from minus seven per cent).

Negative scores show that a largerproportion of factories in the areareported worse levels compared to theproportion reporting improved levels.The Richmond Fed also released

Poor US factorydata hits stocks

BY JULIAN HARRIS data on service sector revenues, the

index of which dived to minus 11 percent from a positive reading of 14 percent last month.

Meanwhile, a flash purchasingmanagers index survey by Markit, ofmanufacturing across the US, fell to51.8 from 52.5 in June. Scores above 50indicate growth.The Dow Jones closed down over 100

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IN January, I wrote about howBritish Airways had recoveredfrom the difficulties it faced in2010 when strikes, snow and the

Icelandic ash cloud all causeddelays and cancellations. In 2011,crisis was avoided and the companyovertook many of its rivals in termsof brand perception to sit in secondplace behind Virgin Atlantic. I

suggested that 2012 could be theyear it regained its mantle asBritains favourite airline.

Looking at the Index score (acomposite of six key imagemeasures), we can see that it hasnow edged above Virgin Atlantic.

Focusing on one specificattribute recommendation BA

will be delighted that its recoveryhere was even quicker. It movedinto first place among airlines inBritain as early as September 2011,a position held ever since.

Recent weeks have seen many of

our biggest brands, particularly

banks but also the likes of O2,suffer crises. The British Airwayscase shows that while there may bean inevitable decline in brandperception, what really matters interms of long term impact is theresponse. It can take time, but BAshows that if you respond well youcan recover lost ground.

Understanding who is feelingdifferently and what you need todo to bring them back is crucial toknowing how to respond well.Stephan Shakespeare is the chiefexecutive of YouGov

BUSINESS conditions in Chinesefactories worsened this month,according to data releasedyesterday by Markit and HSBC.

Yet the fall was only marginal,as the rate of decline improvedsignificantly.

Chinese survey picks up in JulyBY BEN SOUTHWOOD


Telecoms firm AT&T posted higher thanexpected second quarter earnings yester-

day. Gross profit was at $3.9bn, up from$3.59bn a year before. Customers waiting for

the new iPhone postponed upgrades in the lastquarter, falling to six per cent from seven per cent.

AT&T beats expectationsGlobal courier UPS said yesterdayearnings rose in the second quarter but

came in below estimates due to Eurozonewoes and weakening Asian trade. Net earn-

ings were $1.12bn from $1.09bn a year earlier,and the firm pared back its full year forecasts.

UPS cuts its outlook

The worlds largest payment transfercompany Western Union reported a sec-

ond-quarter profit above analysts estimatesyesterday as it was boosted by higher revenue

from its business solutions segment. Net incomerose to $271.2m from $263.2m a year earlier.

Western Union income risesHousehold appliance maker

Whirlpool was hit by anemic Eurozonedemand as its quarterly results yesterday

showed sales falling 4.6 per cent. Sales wereespecially hit in the EMEA region, falling to

$692m from $841m a year earlier.

US corporate results round-up

BRANDINDEX

STEPHAN SHAKESPEARE

Index Chart

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The flash purchasing managersindex (PMI) for manufacturingrose to 49.5 in July, where 50indicates no change the highestresult for five months.

In the previous month, June,the PMI score had come in at 48.2,indicating deeper contraction.

Recommend

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WEDNESDAY 25 JULY 201216

LONDON REPORT

Worrying statshelp pull WallStreet lower

WALL Street stocks fellyesterday, hit by signs theEurozone crisis isworsening and evidence

that Europes slowdown is hurtingUS companies, including bellwetherUPS.The decline was the third straight

for the S&P 500 index, which testedits 50-day moving average, a technical

support level that could trigger moreselling if convincingly broken.

United Parcel Service, seen bymany as a proxy for economic activi-ty, fell 4.6 per cent after reportingquarterly results that missed fore-casts and cut its 2012 outlook, citinguncertain global economic condi-tions. UPS helped pull the Dow JonesTransportation average down 1.2 percent.

We are going through an adjust-ment period where there has been alot of talk about Europe facing arecession in 2012. Now we are actual-ly seeing it in the earnings and themarket is reacting to that, said GailDudack, chief investment strategistat Dudack Research Group.AT&T lost 2.1 per cent after the

company reduced its outlook for busi-ness services this year. The S&P tele-com index dropped 1.8 per cent.Whirlpoolslumped 7.5 per cent

after the worlds largest appliancemaker missed Wall Streets expecta-tions for quarterly earnings and sales,hurt by weak demand in Europe anda stronger dollar.The Dow Jones industrial average

was down 104.14 points, or 0.82 percent, at 12,617.32. The Standard &Poors 500 Index was down 12.21points, or 0.9 per cent, at 1,338.31.The Nasdaq Composite Index wasdown 27.16 points, or 0.94 per cent, at2,862.99.

BRITAINS top share index closedback below 5,500 for the firsttime this month yesterday, withfinancials among the worst off

on Eurozone debt exposure fears asSpain looked to be nearing a fullsovereign bailout.

Spain paid the second highest yield onshort-term debt since the birth of theeuro at an auction yesterday, reflectingthe growing belief that the country willneed a bailout that the Eurozone canbarely afford, with internationallenders having already bailed outGreece, Ireland, and Portugal.

Merged airline group IAGwas a bigblue chip faller, down 2.2 per cent, onconcerns over the situation in Spain,with investors worried that hard-pressed Spanish banks will need to selltheir big holdings in the firm created bythe takeover of Iberia by British Airways.At the close, the FTSE 100 index was

down 34.64 points, or 0.6 per cent, at5,499.23, having slumped 2.1 per centon Monday. Volume was 60 per cent ofthe 90-day daily average.

Commodities trader Glencorewas thetop blue chip faller in London, down 2.3per cent as Qatar Holding, the second-largest shareholder in the Swiss-basedfirms takeover targetXstrata, againadded to its stake in the miner. Xstratafell 1.8 per cent.

Chilean copper minerAntofagastabucked the weaker market and sectortrend, adding 1.8 per cent as it appoint-ed a new chief executive.

Chemicals firm Croda Internationalwas the top FTSE 100 gainer, jumping6.1 per cent as it posted a six per centrise in first-half profit.

FTSE tumbles below 5,500 mark asSpain edges closer to a full bailout

BESTof the BROKERSAfrican Barrick Gold PLC


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AFRICANBARRICK GOLDNumis has upgraded theminer from hold toadd with a target priceof 430p, due to pricedepreciation. Full-yearforecasts are reducedafter a miss on Q2 costs.

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Amlin PLC AMLINCanaccord Genuity hasupgraded the insurerfrom hold to aspeculative buy with a400p price target aheadof first half results on 20

August. The broker hasupped its 2012 earningsper share by 10 per cent.

Savills PLC


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SAVILLSUBS has lowered itsrating on the real estategroup from buy toneutral following theshares recent strongperformance. The brokersays the stocksattractions are nowreflected in its price.

Intelligent EnvironmentsThe digital banking software

provider has appointed DavidWebber as its managing director.He has over 20 years experiencein financial services software andjoins from Patsystems Group,where was chief executive.

Houlihan LokeyMagnus Scaddan has been appointed managing director,and head of consumer and retail for Europe, Middle Eastand Africa, at the investment bank. He was most recently atNomura, where he was a managing director. Scaddan has

also previously held positions at HSBC and Credit Suisse.

HSBC Global Asset ManagementThe asset management division of HSBC has made twoappointments to its London global macro and investmentstrategy team. Julien Seetharamdoo joins as a senioreconomist from Coutts Investment Services. Rabia Bhopaljoins as an economist from Standard & Poors.

Simmons & SimmonsDr Wolfgang Kotzur has been appointed as a financepartner in the law firms Frankfurt office. He joins fromFreshfields Bruckhaus Deringer, where he focused onacquisition finance, infrastructure finance, real estate

finance and restructuring.

WH IrelandThe wealth management firm has appointed Miles Nolan asresearch editor. He joins from Growth Company Investormagazine, where he served as editor. Nolan has over 14years experience in journalism and finance, and previouslymanaged funds at Unicorn Asset Management.

Octopus InvestmentsShay Ramalingam has been appointed as an investmentdirector in the investment firms specialist finance division.He previously worked as an investment director at ShoreCapital, and has also held roles at Nomura.

WHOS SWITCHING JOBS Edited by Tom Welsh

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

CITY MOVES

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

in association with

7/31/2019 Cityam 2012-07-25

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WORDS BY PHILIP SALTER

THE word legacy is somewhatoverused. But Visi the real-timeenergy monitoring technology,installed by EDF Energy at sports

venues across the Olympic Park has abusiness case that reaches beyond theGames.Visi (see screenshot right) helps

energy managers understand andreduce electricity consumption. It willremain at the Olympic Stadium,

Aquatics Centre and Velodrome whenthe athletes have gone home. But, in a

bid to help managers and employees

understand their own energy issues,EDF Energy will also offer Visi

technology to its business customers.Visi offers managers insight into a

buildings energy use. The costs ofwasted energy can mount up. Andsimply switching off equipment thatemployees control individually suchas computers in an office or a bakeryoven in a supermarket can make a

big difference. Visi will provide thestatistics to back up company policies.

The technology also allowsemployees to interact with a real-timedisplay of the energy being used

within their workplace to see how it

changes during different parts of theday and year; along with the impact

that factors such as the weather haveon consumption levels. Historicenergy trends also provide a valuabletool for monitoring use.

On its travels across the globe, EDFEnergy has literally helped keep theOlympic flame ablaze (it fuelled the8,000 relay torches and the OlympicCauldron). Through the vagaries of

various climates, EDF has managed tokeep the fire burning. When it comesto powering the country, innovativecompanies will also keep the lights on,

but costs also matter. Visi will help

make the case for less waste whichcan only be a good thing.

EDF Energy is whipping up a stormof innovation for electric vehicles

Londons chargepoint upgrade willbe a lasting legacy

THE atmosphere will be electricwhen the worlds greatestathletes compete at LondonsOlympic Games over the

coming weeks. But the power neededto stage the greatest show on earthhas to come from somewhere, andresponsibility for this falls on theshoulders of EDF Energy officialpartner and the official electricitysupplier of the London 2012 Olympicand Paralympic Games.

EDF Energy will be powering theOlympic venues, as well as supplyingenergy to light up two of Londonsmost iconic landmarks: The nine-teenth-century Tower Bridge, and thetwenty-first-century London Eye.

Gareth Wynn, group director of theOlympic & Paralympic programme atEDF, explains that there are threedimensions to the companys involve-ment with the Games. The first dimen-sion is to transmit a clear brandmessage. And that message is low car-bon the Games will be run on 80 percent nuclear and 20 per cent renew-ables. The second dimension isemployee engagement, and thethird is the development andshowcasing of the companys tech-nology.

Part of this innovation can beseen in EDF Energys support beyond

2 DAYS TO GO

COUNTDOWNTO THE LONDON2012OLYMPIC

GAMES

OLYMPICBUSINESS17

WDNESDAY 25 JULY 2012cityam.com

the event spaces and landmarks.Wynn explains that EDF Energy decid-ed to use the Olympics to give a boostto electric vehicles, noting that fore-casters expect we will have 600,000electric vehicles on our roads as early

as 2020. As such, 120 charge pointshave been installed in five key loca-tions in East London where theywill be used by the Olympic fleetduring Games. And after theGames, the charge points will

become part of the Source London

network, benefiting all electric cardrivers in the capital. Mayor Boris

Johnson is committed to increasingthe network to 1,300 points by 2013,which would give London morecharge points than petrol stations.

LOCOG is running 200 electricBMWs. EDF Energy had to ensure thatthe local electricity network wasntdestabilised when as many as 30 vehi-cles are charging simultaneously at asingle location. Never before has apublic electric vehicle charging net-work been installed in this density inthe UK before, said Wynn. By finding

a fast, effective and safe way of simul-taneously charging in the same loca-

tion, we have made another signifi-cant step forward in making electricvehicles an attractive low carbon alter-native to traditional motoring. Wynnbelieves this is an investment in thefuture: Our innovative solution torecharging will not only help keep theentire Olympic fleet of electric vehi-cles charged up during Games time,but could also provide a valuableinsight into how electric vehiclescould be used on a mass scale infuture.

EDF Energy has put electric vehicleson their marks. Its full throttle ahead.

EDF will keep thelights on for

Victoria Pendletonand her fellow

Olympians

An energetic tool to help manage business ambitions

A screenshot of Visi in action

7/31/2019 Cityam 2012-07-25

18/23

THE DEBT problem currentlyafflicting the UK and Europeis essentially a question ofpolitical economy. Basically,there is a lot of debt around

and everybody is wondering who isgoing to pay for it. All the economictheory in the world fails to getaround this fundamental issue.

Traditionally, bondholders tookthe hit when governments wereunwilling or unable to pay backwhat they had borrowed. The realvalue of debt has historically beeneroded by inflation. In 1945, forexample, the UKs public sectordebt to GDP ratio stood at a massive250 per cent. Slow but steadyinflation ensured that, by 1970,

this had fallen to 67 per cent

GEORGE Osbornes fiscalstrategy increasinglyresembles alphabet soup:Plan A for austerity, Plan A+for magic bullets, Plan B for

debt and Plan I for infrastructure.Flexible planning is not necessarily abad thing. What is a problem,however, is if revisions do not reflectchanging economic circumstancesbut a weakness in the Treasurysapproach.

On one level, the chancellors fiscal

strategy has delivered. Ed Balls iswrong to say that our current situa-tion means an earlier increase inspending would have been the rightstrategy. The Treasury got the big callbroadly right. The pace and depth ofconsolidation brought market confi-dence. But it did little more than this,with Osborne planning a structuralbudget deficit of 1.5 per cent of GDPfor 2014-15, compared to AlistairDarlings pre-election plan of 1.3 percent. Nonetheless, the country doeshave breathing space. This marketcredibility has been reinforced byBritain being outside the Eurozone.

in association with category sponsorsvenue sponsorchampagne reception sponsor

City A.M. Awards 2012

Wednesday 17 OctoberGrange St. Pauls Hotel, London.

Visit: www.cityamawards.com to book your place.

cityam.com/forum

New Zealand has

shown that rescuingpublic finances can builda stronger economy

THEFORUM

Twitter: @cityamforum on the web: cityam.com/forum or by email: [email protected]? Disagree? Got a sharp comment?

The Forum wants you to join the debate. Top responses will be reprinted in The Forum.

18WEDNESDAY 25 JULY 2012

PATRICK NOLAN

The coalition must press reset andmake a positive case for austerity

But in other ways the Treasurysapproach has been a disappointment.At Reform, economists and business

people are increasingly telling us oftheir concern over the lack of a sup-ply-side agenda. And their concernsgo deeper. There are also worries thatthe government is failing in itsefforts to rescue the public finances.These budgetary problems are not

just caused by drag from theEurozone. Major departments havefailed to make promised savings.Indeed, most experts predict that thelargest departmental budget, theNHS, will receive a cash boost beforethe election. On the revenue side, thecoalitions tax policy has increasedcomplexity. By introducing high and

variable rates, the coalition hasincreased incentives for tax avoid-ance. Sensible efforts to broaden thebase, including VAT, have ended withembarrassing climb downs.

For long-time watchers of publicfinances these problems will nothave come as a surprise. As early asJune 2010, Reform was warning thatthe Treasurys approach had real lim-itations.

One concern was a lack of realism.The coalition underestimated how

hard fiscal consolidation can be.Ministers took their eyes off the balland spent too much time on otherprojects, like reform of the House ofLords. They also tried to move onbefore the job was finished. Theymust recognise there is much morework to be done.

Another concern was a lack of con-sistency. Major spending areas werering-fenced, including the NHS andpensioner benefits. This meant theseareas had fewer incentives to do morewith less, cuts in other areas had tobe deeper than otherwise and lobbygroups were encouraged to argue for

extending special treatment.Fiscal consolidation has also been

poorly implemented. Even when thecoalition set out to do the right thing,it failed to do it in the right way. Anobvious example of this is the target-ing of child benefit, which was sopoorly implemented that the wholeidea of means-testing has been dam-

aged.The Prime Minister appears to

recognise some of these concerns.Last week he noted that austerityshould be expected to last until 2020.But this should not be seen as anadmission of defeat. It is a clich, butfiscal consolidation presents oppor-tunities as well as challenges.

Rescuing the public finances canhelp build a stronger economy. This iscertainly the experience of countrieslike New Zealand, which wentthrough major reforms in the 1980sand 1990s. There is no doubt abouthow hard this decade of reform was,but the changes made have provenresilient.

Rather than alphabet soup, theeconomy needs greater clarity fromthe coalition. This requires honestyabout the changes that must take

place. Austerity is the new normal.Trying to prop up growth in the shortterm will simply postpone theinevitable.This also requires the coalition to

press the political reset button with aspending review now, not in 2014 orafter the next election. This spendingreview must learn from the mistakesof the last. Rather than being anopportunity to develop a list of cuts,this should be seen as an opportunityto have an honest debate on how tocurb the over-reach of the state.Dr Patrick Nolan is the chief economist at

the independent think tank Reform.

lower than it is today. This wasbefore the inflationary surge of the1970s, but 3 to 4 per cent averageannual inflation doubled pricelevels over the course of 20 years.This, on its own, halved the realvalue of the debt.

The case of Japan is instructive.In the crash of the late 1980s, the

Nikkei share index fell 80 per cent

imagine the FTSE at just 1,400 and land values dropped astunning 90 per cent. The countrywas awash with debt, accumulatedto buy these assets at their peakprices.

Almost ever since, Japan hasfollowed an expansionarymonetary policy, with interest ratesclose to zero. It has carried outquantitative easing on a huge scale,ever since three big bankscollapsed in the late 1990s. Yetsince 1990, Japanese inflation hasbeen barely positive, averaging just0.3 per cent a year. Japansgovernment needed 3 per cent andgot just a tenth of it.

The evidence suggests very

strongly that, in general, inflation

is not purely a monetaryphenomenon. We can identifyspecial historical cases where it hasbeen, like during civil wars orsieges. But, in developedeconomies, very lax monetarypolicy can go hand in hand withlow inflation.

Inflation in the UK, and the Westin general, fell in the early 1990s. Ithas remained low ever since,despite unemployment fallingmore or less continuously for over adecade up until the crash of 2008.

Low inflation is not due to thebrilliance of politicians or centralbankers. After Gordon Brown andSir Mervyn King, who could believethat anyway? Low inflation exists

for purely structural reasons.

Globalisation has led to a flow ofcheaper goods from emergingmarkets. It has restricted the abilityof the labour force in industrieswhich compete with this trends toenforce wage increases. This, inturn, enables companies to raisetheir profit share and hold realwages down.

In short, we are in a regime oflow inflation which no amount ofmonetary expansion will overturn.We must look elsewhere for theanswer to the question: who paysfor the debt?

Paul Ormerod is an economist, apartner at Volterra, and author ofPositive Linking: How Networks CanRevolutionise

cityam 2012-07-25

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