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BUSINESS WITH PERSONALITY

Soros revealsnew stake inMan UnitedBILLIONAIRE investor George Soroshas splashed out on a 7.85 per centpassive stake in Manchester United,a filing with the US Securities andExchange Commission revealedlate last night.

Soros Fund Management boughtover three million of the new classA shares, which were created forthe clubs initial public offering(IPO) in New York on 9 August.

The shares hold only one tenth ofthe voting power of the majorityclass B shares, which are held byUniteds Florida-based Glazerfamily owners.

Last week it emerged that Sorosacquired 341,000 shares inFacebook over the previous quarter,building his stake at a time whenthe social networks stock wasbattered by valuation concerns.

Soros is famed for bettingagainst sterling on BlackWednesday in 1992, a move thatearned him in excess of $1bn.

The news that he has piled intoManchester Uniteds stock cameafter the share price closed at$13.06 last night.

The price of the stock has fallenconsiderably since the launch ofthe clubs IPO, dropping from aninitial $14 per share.

And the expected range for thefloat had been even higher, atbetween $16 and $20 per share.

Manchester United supportergroups have complained that theIPO was over-priced and preventsinvestors from having a say in therunning of the club, as t he Glazershold onto the levers of power.

Groups such as the ManchesterUnited Supporters Trust alsocomplained that the Glazerspocketed a substantial amount ofthe revenue raised from the IPO,rather than using it all to helpreduce the clubs large debts.

Former tycoon Asil Nadir was a business star of the 1980s after leading his Polly Peck International conglomerate to a stellar FTSE performance

POLLY Peck International founderAsil Nadir, one of the London stockmarket stars of the 1980s, was yester-day found guilty of three counts oftheft totaling 5.5m from the for-mer FTSE 100-listed global conglom-erate.Turkish-Cypriot born Nadir, who

left the UK for northern Cyprus in1993 and returned in August 2010 toface the charges, was found guiltyon the three counts of theft by ajury at the Old Bailey yesterday.

He was cleared of one count oftheft totaling 2.5m. The jury hasyet to reach a verdict over nine fur-ther allegations of theft.

It was sent home last night andwill resume deliberations this morn-ing.

Nadir, 71, had been charged with13 specimen counts of theft of 34mfrom PPI between 1987 and 1990.The three counts for which Nadir

has been found guilty are for steal-ing 1.3m from PPI to pay for compa-ny shares on 15 June 1989, stealing1m from the firm to pay forantiques on 19 December 1989, andstealing 3.25m from the firm on 19March 1990 and placing it in 19 dif-ferent end destinations.

Born in Cyprus in 1941, Nadir soldnewspapers at the age of six beforemoving with his family to London in

the 1950s.The tycoon, once dubbed theSultan of Berkeley Square by a biog-rapher, bought the Polly Peck tex-tiles company in the late 1970s andset about turning it into one of thebiggest public companies in the UK.

Polly Peck duly became the darlingof the London markets during theboom years of Margaret ThatchersConservative government. It enjoyeda stellar rise during the 1980s andbecame the best performer on theLondon Stock Exchange.The firm, based out of a small

office in Mayfair, had interests span-ning the globe. It owned Santana inAmerica, Del Monte in SouthAmerica, Vestel and Pizza Hut inTurkey, Sunzest and Unipac inCyprus and Japanese electronics

www.cityam.com FREE

maker Sansui.In the UK it controlled Joseph Le

Shark and Russell Hobbs.However, on 19 September 1990 its

shares plummeted from an openingprice of 243p to 108p in a matter orhours, and its shares were suspend-ed. The firm collapsed the following

year amid an investigation by theSerious Fraud Office.

This years trial, which has beenrunning since January, has seenprosecutors for the Serious FraudOffice, led by Philip Shears QC,argue the case against Nadir.

Nadir has been represented byPhilip Hackett QC.

Kingsley Napley criminal depart-

ment head Stephen Parkinson saidthe SFO has done particularly well

CHOOSING THE OLYMPIC SPORT THAT INSPIRES YOU

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to bring the case given the length oftime that has elapsed.

This is a flagship case for the SFOand the reputation of the Officedepends upon its flagship cases.

The SFO has done particularlywell given the circumstances such asthe age of this case.

Nadir has argued he had beenunjustly treated by the SFO.

The land Asil Nadir found when hereturned to the UK in 2010 was distinctlyaltered from the one he left in 1993.Music and film had reached somethingof a high water mark in 1993, with MeatLoafs seminal Id Do Anything for Love(But I Wont Do That) dominating theairwaves and blockbusters such asJurassic Park and Mrs Doubtfire fillingcinemas.For those thirsty after all this

entertainment, a pint of lager would setthem back just 1.44. A first class stampclass was 25p, a pint of milk cost 34p,and bread was just 48p a loaf.But some things have stayed the samesince those halcyon days the PrimeMinister was Conservative and KennethClarke was in the Cabinet.

Meat Loafs single held the topspot for seven weeks in 1993

Manchester United PLC

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[email protected]

Allister Heath is away

IN BRIEFApple now most valuable firm Apple became the most valuable

public company of all time yesterday,breaking a 13-year record asspeculation mounted about newversions of its iPhone and iPad as wellas a set-top box to deliver live TV.The Californian firm reached a marketcapitalisation of $623.5bn in tradingyesterday, overtaking the $618bnMicrosoft hit in 1999. Apples shareprice has risen steadily since itbecame the worlds most valuablecompany last year.

Parties find it tough to get funds Donations to political parties fellalmost 1m in the second quarter,Electoral Commission figures showedyesterday. Parties reported receiving

just under 7.9m, with almost 3.8mgoing to the Conservatives,approximately 3m to Labour and just

over 700,000 to the LiberalDemocrats. The biggest donor was theUnite union, which gave Labour840,275, and together the unionsdonated close to 1.6m to EdMilibands party.

Health firm Aetna in $5.6bn bid American health insurer Aetna saidyesterday it plans to buy rivalCoventry Health Care for $5.6bn(3.5bn) to increase its share of thefast-growing, US government-backedMedicare and Medicaid programmes.The deal comes amid consolidationacross the sector as firms try toposition themselves to benefit fromPresident Barack Obamas healthcarereforms.

BAAs airport sale luresRyanair and ManchesterMANCHESTER Airport Group (MAG),which owns Manchester,Bournemouth and East Midlands air-ports, is understood to be the front-runner to make a 1bn bid forStansted Airport.Aviation firm BAA revealed yester-

day that it is to sell Stansted Airportafter it gave up on a long legal battle.

BAA had been fighting a 2009Competition Commission rulingthat forced it to sell Stansted, whichhandles 17.5m passengers and133,500 flights each year, because ofa lack of competition betweenLondon airports.The firm, which is owned by a con-

sortium led by Spains Ferrovial, hasasked banks including Bank ofAmerica Merrill Lynch, DeutscheBank and Morgan Stanley to pitchideas for the sale process.

MAG previously said in a statementthat it was exploring the opportuni-ty to add a quality airport to thegroup. It is thought to have enoughcash on its balance sheet to buyStansted Airport.

Meanwhile, it is thought thatGlobal Infrastructure Partners,which previously bought Gatwickand Edinburgh airports from BAA,has ruled itself out of the bid.

Qatars sovereign wealth fundcould also be a potential bidder for

Citi chief rejects calls for bank splitsCitigroups chief executive has knockedback the idea of big banks being split upafter calls from people such as hispredecessor Sandy Weill. Vikram Panditsaid Citi, formed in Mr Weills time withmergers such as the acquisition ofTravelers in 1998, had already gone backto the basics of banking, and aside fromsome global markets businesses had soldmost of the units from that deal. Thetransformative Citi purchases helped endthe Glass-Steagall separation of retail andinvestment banks in the US.

Handling of Jackson changes handsMichael Jackson hits from Beat It to BillieJean will for the first time be representedby the late singers publishing jointventure with Sony.

Footballers pay rises 1,500 per centTop footballers salaries increased 1,500per cent from the creation of the PremierLeague in 1992 to 2010, according to aHigh Pay Centre report. Over the sameperiod, average UK wages rose 186 percent. The report says salaries now accountfor up to 70 per cent of a clubs turnover,compared with 48 per cent in 1997.

Hunt sets broadband deadlineJeremy Hunt has given telecomscompanies three years to speed up thebroadband network after pledging thatBritain will have the fastest internet ofany leading European country by the endof this parliament.

Drugs patent bonanza challengedNovartis is taking the Indian governmentto the nations Supreme Court tomorrow ina landmark case that could affect the priceof medicines for hundreds of millions.

Orange/T-Mobile in spec trum saleBritains biggest mobile operator,Everything Everywhere, formed from themerger of Orange and T-Mobile, is inadvanced talks to sell a chunk of airwavesto the countrys smallest operator, Three.

Murcia could request 700mSpains Murcia region could request up to700m (550m) from the centralgovernment to keep it afloat, amidgrowing concern over the state of theregions finances.

Chinas Gu may serve only 9 yearsGu Kailai, the wife of deposed partyofficial Bo Xilai, could be released fromprison within nine years on medicalparole, legal experts say, despite beinggiven a suspended death sentence for themurder of a British businessman.

Syrias leader broke, says FranceFrance plans to discuss with Russia ways toreduce funding to Bashar al-Assad'sregime, which is running out of cash, theFrench foreign minister said yesterday.

REVISIONS to GDP due on Fridaywill show that output shrank moreslowly than previously thought, andperhaps even grew slightly over thesecond quarter, economic analystshave predicted.

Fridays revision will reveal a fallof 0.5 per cent in the UKs GDP overthe second quarter, predictedGoldman Sachs economics team,

below the original 0.7 per cent dip.Three datasets published since

the original figures feed into thismore positive expectation.Industrial production fell by 0.9 percent over the quarter, rather than1.3 per cent as originally believed,

while construction output andretail sales were also revised up.

Vicky Redwood at CapitalEconomics went further, proposingthat the underlying picture mighteven be positive when taking intoaccount the extra bank holiday.

Analysts predict

upward shift inGDP revisions

BAA boss Colin Matthews has finally agreed to sell off Stansted Airport

2 NEWS

BY BEN SOUTHWOOD

BY CATHY ADAMS

To contact the newsdesk email [email protected]

THERE are more than a handful ofless than busy investmentbankers celebrating the decisionyesterday by Spanish group

Ferrovial that it will sell StanstedAirport. The group is finally doing soafter three years of wrangling withthe competition authorities.

The Spaniards have been trying longand hard to avoid a sale, even threat-ening last month to appeal against aCourt of Appeal ruling. But yesterdaythe owners of BAA snapped and gaveup the fight.

It is an unwilling seller, havingalready been forced to sell bothGatwick and Edinburgh airports inresponse to a CompetitionCommission (CC) report in 2009 intoits ownership of seven airports in totalin the UK.The CC felt this was an uncompeti-

tive arrangement and that the UKs

EDITORSLETTER

DAVID HELLIER

Stansted considered a prize asset now it is finally being sold

TUESDAY 21 AUGUST 2012

airport industry would benefit frommore varied ownership.

BAA has long argued that Stanstedserves a distinct market fromHeathrow and therefore that its own-ership of both airports could hardlybe deemed anti-competitive.

Essentially Stansted, which has beenlosing passengers from a peak ofaround 24m a year to under 18m, isserved mainly by two low-cost air-lines, easyJet and Ryanair, whereasHeathrow is a hub served by a variety

of airlines, including major long-haulcarriers.

It seems unlikely that Stanstedcould ever become a major hubbecause long-haul operators prefer tobe where the most passengers are.

But new ownership has arguablygiven Gatwick the freedom to market

itself for services in all sectors, includ-ing long-haul.For example it has attracted the new

Asian-based airlines such as AirChina, Korean Air and VietnamAirlines to give passengers flyingfrom Gatwick more destinations tochoose from.

BAA sources say there are countlessslots up for grabs at under-utilisedStansted for free but airlines arereluctant to give their slots up atHeathrow under any circumstances.Whatever the rights and wrongs of

the competition argument, Stansted

SFO GETS A MUCH NEEDED BOOSTTHE SERIOUS Fraud Office (SFO) willbe especially relieved at getting aresult in the long-delayed trial of AsilNadir, the tycoon who fled the coun-try to go to northern Cyprus in May1993. Nadirs 17-year exile was a major

embarrassment for the SFO, whichwas powerless to seek his return.There were then fears the jury mightnot understand fully some of thecomplex accounting issues presentedto them by the prosecution.

Success may not be enough to fullyrevive the body, though, says StephenParkinson of Kinglsey Napley. Fearsthe SFO might be folded into theNational Crime Agency and budgetcuts have badly affected morale.

is seen as a very saleable asset, withanalysts estimating it could fetcharound 1bn or so.A number of groups are believed to

be interested, including the council-controlled Manchester AirportsGroup, which is in discussions with afinancial buyer over selling a stake.

Also said to be monitoring the situa-tion are South Koreas Incheon andRyanair, which has said it might takea stake but in reality might support anew owner with some guaranteedcontracts for a couple of years or so inreturn for some favours on landingcharges.

Manchester Airports Group is proba-bly the early favourite given that it ispursuing two key recommendations:one to explore the opportunity to adda quality airport to the group and theother, to bring in new equity invest-ment as part of the deal.

the Essex-based airport, as it bought up20 per cent of BAA last week, underlin-ing its interest in UK airport assets.

Budget airline Ryanair, whichaccounts for three out of four flightsfrom Stansted, has also beenapproached by several potential buyerswanting to join a consortium bid. It isunderstood that the airline is after a25 per cent stake.

Ryanair has long been critical of BAAand its stranglehold over Stansted, par-ticularly with the fees that it chargesairlines to use the airport.

The charges have doubled since

2007, said Ryanair spokesmanStephen McNamara. He argued thatBAA kept aviation fees artificiallyhigh to make the airport more attrac-tive to a future buyer.

Gatwick Airport yesterday welcomedthe sale. Stewart Wingate, chief execu-tive of the Sussex airport, said: TheCivil Aviation Authority now needs toremove the unnecessary burden of eco-nomic regulation imposed when BAAwas a monopoly, and which threatensto restrict full competition and invest-ment, which will benefit passengersand airlines.

Revisions to GDP have been frequent and significant

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WHAT THE OTHER PAPERS SAY THIS MORNING

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PayPal founder Peter Thiel has sold most of his Facebook shares

FORMER Exxon Mobil boss LeeRaymond is investigating the so-called London Whale derivativeslosses that hit JP Morgan earlierthis year, the bank said yesterday.

The institution hopes athorough investigation headed bythe well respected business leader

will at last draw a line under theepisode which saw the bank takehuge losses on the derivatives.

Last month JP Morgan postedlosses of $5.8bn (3.7bn) on theposition built up by the ChiefInvestment Office (CIO) in London,and warned that it could generateanother $1.2bn or more of losses.

Raymond willlead JPM probe

BY TIM WALLACE

TUESDAY 21 AUGUST 20123NEWS

cityam.com

VIRGIN Atlantic will today announceplans to operate flights betweenLondon and Manchester, just daysafter its sister firm Virgin Trains lostthe right to run rail services betweenthe two cities.

Richard Bransons airline will startflying between Heathrow andManchester airport in March 2013and says this is the first step in build-ing a domestic network. Both compa-nies said the timing of theannouncement was entire-ly coincidental.

Operating a London toManchester route will pro-vide an invaluable feed toour existing long haul net-work for both business andleisure passengers, saidVirgin Atlantics chiefexecutive SteveRidgway.

Last week VirginTrains controversial-ly lost out to FirstGroup in the bid-ding for a new WestCoast rail franchise.

BY JAMES WATERSON First has promised the governmentsubstantially higher payments butVirgin claims its rivals sums do notadd up and necessary cutbacks willresult in a lower standard of service.

Last night a spokesman for VirginTrains told City A.M. that the firm wasnot giving up the fight to hold ontothe rail franchise: We are keepingour options open, including judicialreview. The company has until 28August to launch a legal challenge.

The rail operator has also been pub-licising an independent online peti-tion that urges the government to

reconsider the decision to hand thefranchise to First. It hasalready attracted more than14,000 signatures.The House of Commons

public accounts com-mittee and transportselect committee areexpected to examinethe rail deal whenparliament returns inSeptember.

OPERATIONS resumed in a mutedfashion at the Marikana mine

yesterday, as less than a third ofLonmin workers returned to

work.Across the 12 shafts at

Marikana, 27 per cent of workers out of a 28,000-strong workforce turned up for the morningshift.

It comes despite an earlierultimatum issued by Lonmin,

which ruled that those illegallystriking who did not return to

work yesterday would facedismissal. The platinum firm has

given those who did not turn upfor work until today before

Just a third of workers returnto Lonmins Marikana mineBY CATHY ADAMS dismissals are decided upon.

The ultimatum was issued aftera 10-day long strike that left 44people dead, but it only appliedto the 3,000 illegally-strikingrock drill operators.

Lonmin was unable to give abreakdown of how manystrikers and non-strikersreported to work.

Deutsche Bank now forecastsLonmin to make a loss in 2012,expecting at least three weeks

worth of production to be lostdue to the strikes.

Lonmin shares fell for thesixth straight day yesterday,closing 4.61 per cent down at

610p. The stock has fallen froma high of 774p on 7 August.

Richard Bransons Virginwill retain a link fromLondon to Manchester

Early investor Thielsells Facebook stockEARLY Facebook investor, currentboard member and billionaire

PayPal co-founder Peter Thiel lastweek unloaded most of his shares inthe social networking giant,according to a filing to the USregulator released yesterday.

The venture capitalist and hedgefund manager sold around 20mshares in the tech firm, at anaverage price of $19.73, netting him$400m compared to an initialinvestment of $500,000.

Thiel was locked into his stake,

BY BEN SOUTHWOOD which he has held for eight years,until last Thursday, along with otherearly investors, meaning he wasunable to take advantage of the

opening price of $38 which hadmade Facebook the first firm todebut at a market capitalisation ofabove $100bn.

Facebooks share price fell six percent on Thursday as investors werereleased from their post-IPO lock-up.

Thiel had planned to sell theshares as part of a trading strategyset out in May, according toyesterdays filing. He still ownsaround 5.6m shares.

Virgin launches

flights on WestCoast rail route

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Spanish bond yields remain high

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GREECE hopes to obtain itslenders approval for a new waveof austerity measures by the

middle of next month, a Greekfinance official said yesterday.

The news coincided with aseparate statement from Germanforeign minister Guido

Westerwelle, who warned that hisgovernment would not soften itsdemands for Greece toconsolidate its public finances.

Any substantial watering-downof the conditions for Greecesrescue package would beunacceptable, Westerwelle said

Greece pledges fresh austerityas Germany toughens stance

BY CITY A.M. REPORTER after meeting his Greekministerial counterpart Dimitris

Avramopoulos.Fresh austerity moves worth

around 11.5bn (9bn) are in the

pipeline, according to the Greekfinance ministry.

A senior official said: Our aimis to have agreed with ourpartners by 14 September.

Winning approval for thesavings due in 2013-14 is key toappeasing the troika the EU,European Central Bank andInternational Monetary Fund

who are expected back in Athensnext month to decide whether tocontinue with the bailout.

FORUM: Page 12

TUESDAY 21 AUGUST 20124 NEWS

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Greek Prime Minister Antonis Samaras must reassure the countrys bailout providers

ACTIVITY in the Eurozone

construction industry sank furtherin June, Eurostat said yesterday.Seasonally adjusted production

in the blocs construction industryedged down 0.5 per cent comparedto May, putting it 2.8 per cent downon the year, and almost a quarterlower than its pre-crisis peak.

Economic powerhouse Germanyregistered a surprise two per centmonthly dip, while besieged Spainsaw a 1.3 per cent increase inconstruction output.

Construction looks unlikely torecover much over the next twoyears, said industry experts in theirsummer conference, selectedresults of which were released byGerman think-tank Ifo yesterday.Growth would be just one per centin 2013, they predicted, following acompletely flat 2012.

However, manufacturers in

western German regions areplanning to increase their 2012investment some seven per centover the 44bn (34.6bn) spent in2011, a separate survey, alsoreleased by the Ifo institute,showed.

Respondents plan to invest notonly in expanded production, butalso in adapting their productpalette to changing demand. Afteradaptation, the next most commonplan was replacement of capital.

Construction inEurozone deepin depression

BY BEN SOUTHWOOD

SPANISH government borrowing costsdropped yesterday on hopes that theEuropean Central Bank (ECB) couldannounce further bond buying to capyields at safe levels, even though theECB denied the claims.

Germanys Bundesbank made clearits opposition to any such scheme,arguing that bond-buying amounts tothe central bank financing govern-ment spending something the ECBis not allowed to do.Yet yields on Spanish 10-year bonds

dropped, ending 16 basis points downat 6.28 per cent.

Some economists had hailedrumours that the ECB was set to helptroubled governments, arguing it rep-resented the most effective way ofreducing pressure on states finances.

The hope would be that, simply bymaking an explicit pledge to keepyields below particular levels, the ECBmight reduce the chances that it willactually have to wade into the bondmarket, said Capital EconomicsJonathan Loynes.

To be credible, the ECB would

BY TIM WALLACEquickly have to back up its pledgewith hard cash, and any commitmentto potentially unlimited purchaseswould probably require the centralbank to undertake full-blown quanti-tative easing too. Throw in the issuesof monetisation of debt, and this ideaappears to be a non-starter, he added.And an ECB spokesperson hit out at

the rumours: It is absolutely mislead-ing to report on decisions which havenot yet been taken and also on indi-vidual views which have not yet beendiscussed by the governing council.The Bundesbank added that it

remains critical of the purchase ofeuro system sovereign bonds.

Bundesbanksinks hope of

ECB bond buy

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BEST Buy founder Richard Schulzesplans to take over the retailer have col-lapsed after negotiations between thetwo parties broke down, theAmerican firm said yesterday.

The electronics megastore owner,which shut its UK shops last year hav-ing launched a joint venture withCarphone Warehouse, said Schulzerejected proposals to work with BestBuy on a deal that would have led toan offer in the next two months.

Best Buy said it was willing to waiveMinnesota law and provide Schulzesteam with non-public informationabout the company, but that Schulzedeclined to participate with meas-ures to provide certain protectionsfor Best Buy and its shareholders.

Schulze is said to have been unhap-py with the timing of the deal pro-posed by Best Buy, which would nothave seen an offer to shareholdersuntil next year.

He said: I am disappointed and sur-prised by the Best Buy boards abrupttermination of our discussions,

adding that the proposals were com-pletely unacceptable in light of thefact that urgent change is needed atBest Buy and value is eroding furtherevery day.

BY JAMES TITCOMB Schulze, who founded Best Buy in1966 and stepped down as chairmanin May after a misconduct scandalinvolving then-chief executive BrianDunn, recently made public his plansto buy the company. Best Buy said yes-terday that Schulze had providedinsufficient information for it to con-sider the deal as it stood.

Best Buy also announced thatHubert Joly is set become its new chiefexec, ending a four-month search afterDunns departure in April. Joly, who iscurrently CEO of hospitality firmCarlson, will arrive in September.

Despite Schulze repeatedly declaringhis plans to purchase Best Buy atbetween $24 and $26 a share, theshare price has remained stubbornlybelow that level, with traders scepticalthat the deal will go through.

Legal firm Irwin Mitchell givenregulatory go-ahead to expandLAW firm Irwin Mitchell said

yesterday it had been given theregulatory nod to go ahead with itsconversion to an AlternativeBusiness Structure (ABS), paving theway for ambitious growth plans.

The mid-tier firm was among thefirst batch of companies to apply forapproval from the SolicitorsRegulation Authority (SRA) inJanuary, and yesterday received fivelicences covering its various groupbusinesses.

BY ELIZABETH FOURNIER The decision means it can pressahead with ambitious expansionplans, with group chief executive

John Pickering saying the licencesposition us well to take advantageof the opportunities which we thinkwill arise from the changing legallandscape.

Irwin Mitchell stuck its head wayabove the parapet in early 2011when it announced its intention toseek ABS approval, challenging thetraditional law firm structure bytargeting potential mergers andacquisitions and looking for up to

50m of outside investment.We can now push on with our

plans for growing the business.

Conversion to ABS status sends aclear signal that we intend to moveforward with our strategy, saidPickering yesterday.

Irwin Mitchell is one of thelargest organisations we haveauthorised so far, and the firstmulti-licence to be granted. It justshows that the new legislation givesplenty of scope for all types ofapplications, said the SRAs chiefexecutive Antony Townsend.

AMERICAN bookstore Barnes & Noble is set to take on Amazon by launching its Nookebook reader in the UK, the company announced yesterday. Two ereaders will bereleased in mid-October, Barnes & Noble said, although pricing was not revealed. Anumber of partnerships with high street retailers are due to be announced soon.

BARNES & NOBLE NOOK COMES ACROSS THE POND

CASINO giant Rank Groups205m purchase of Gala took amajor setback yesterday as theOffice of Fair Trading (OFT)announced that the deal will facea competition inquiry.

The OFT raised fears that the

deal would reduce competitionboth at a national level and in nine

Ranks odds get longer as Galadeal faces competition inquiry

BY JAMES TITCOMBlocal areas and referred it to thecompetition commission, which

will report in February.A takeover will make Rank the

biggest casino company in the UK,with 44 per cent of the countryscasinos. Shares dipped yesterdayand analysts warned the probe willpossibly cancel the deal.

Rank said it was consideringthe implications of the decision.


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Schulze fails inBest Buy bid astalks collapse

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IN BRIEFQuintain picks new top staffn Quintain said yesterday it hasappointed two new development

directors at its two large scale Londonregeneration projects. The developerhas poached Anthony Gill, a formerproperty director at Grosvenor, to leadits 14m square feet GreenwichPeninsula scheme. Ben Giddens hasbeen promoted to developmentdirector of the Wembley City project.

Qantas chief exec to forgo bonusn The head of Australian airlineQantas will forgo his bonus and payrise for this financial year, as thecarrier announced it has forecast a 90per cent drop in profits for the yearending 30 June. It is understood thatchief executive Alan Joyces pay willfall to around A$2.5m from A$5m theyear before. Qantas has beenstruggling with increased fuel costsand a weak US and European market.

Barratt signs 250m Croydon dealnHousebuilder Barratt Developmentsannounced yesterday it has exchangedcontracts with Greater LondonAuthority for a 250m redevelopmenton Cane Hill in Croydon. Proposals forthe 83 hectare former hospital site the size of 100 football pitches include 650 homes of which 163 will beaffordable, as well as 70,000 squarefeet of office, leisure and retail space.

Rab Capitals hedge fund ups valuen Rab Special Situations fund, thehedge fund backed by Rab Capital, yes-terday said it will continue to reduce itsexposure to unlisted equities. However,it said the success or failure ofFalkland Oil and Gas, the funds biggestposition in its portfolio, would continueto determine the success of the fund.

INSURER Amlin yesterday reportedstronger than expected profits afterthe firm enjoyed six months with-out any major catastrophes.The Lloyds of London firm report-

ed first half pre-tax profits of184.5m against a loss of 192.3mfor the same period last year.

This is a welcome return to profitand the strength of our underwrit-ing result underlines the qualityand diversity of our business, saidchief executive Charles Philipps.

The improving trading environ-ment is creating many opportuni-ties for profitable growth, for whichwe have both the capital and theunderwriting capability to takeadvantage.

In common with most insurers,Amlin was hit hard by a series ofmajor catastrophes in 2011, includ-ing earthquakes in New Zealand,floods in Thailand, and the tsunamiin Japan, resulting in hefty lossesand forcing the firm to raise premi-ums at the start of this year.

But so far in 2012 there have beenfew substantial disasters, enablingthe firm to report a larger than

expected underwriting profit.As a result Amlins claims ratio ameasure of how much underwrit-

Amlin bouncesback thanks tofewer disasters

BY JAMES WATERSON ing income is paid out to cus-tomers plummeted from 92 percent to 53 per cent, while incomefrom premiums increased by 20 percent at 1.81bn.

Investment return on Amlins4.2bn assets was doubled to84.7m, while the firms effectiverate of tax dropped to just eight percent, largely thanks to the amountof business put through the insur-ers Bermudan unit.The FTSE 250 company also told

investors that it had agreed a newfive-year, unsecured 300m debtfacility with its lenders, replacing a250m loan that was due to maturein September 2013.Amlin raised its half-year dividend

by 4.2 per cent to 7.5p and sharesclosed yesterday up 2.5 per cent at389.1p.

Insider trading couple orderedto hand 1.5m proceeds to FSAA HUSBAND and wife insider

dealing team were yesterdayordered to pay more than 1.5m tothe Financial Services Authority(FSA) in one of the biggest cases ofits kind.

Former Dresdner Kleinwortbanker Christian Littlewood and hiswife Angie Littlewood pleaded guiltyto eight accounts of insider dealingat a hearing in 2010.

They admitted making a 590,000profit from offences committedbetween 2000 and 2008, assisted byfamily friend Helmy Omar Saaid.

BY JAMES WATERSON But yesterdays confiscation order wassubstantially higher as the courtassumed that all other trading that

they undertook within the same peri-od represented the proceeds of crime.Tony Woodcock, a partner at law

firm Stephenson Harwood, told CityA.M. that the hefty punishment waspart of the FSAs tough approach toinsider trading.

What they derived from theillegal contact was a substantialnumber of shares which the court isentitled to confiscate, not just theprofit.

Over the last four years the FSAhas been more aggressive in relation

to insider trading, prosecuting it as acriminal offence rather than usingthe civil process of market abuse.

A previous confiscation order for640,000 from Saaid brings the totalseized to 2.17m, the FSAs biggesthaul for an insider dealing case

Christian Littlewood had beenearning around 1.5m a year from hisday job and the couple had bought anumber of houses in Hampstead.

But in February 2011 he was jailedfor 40 months after admitting theoffences. His wife received a suspend-ed sentence for the sake of their chil-dren. Mr Littlewood was released inMay this year after serving 15 months.

Amlin PLC


400

395

390

p 389.1020 Aug

385

380

375

405

Amlin have delivered a good set of numbers following the peer groupafter a benign catastrophe half year. We think that the potential for Amlin todeliver attractive profitability in 2012 and 2013 is good. However theshares have performed well and we see better upside elsewhere.

ANALYST VIEWS

First half pre-tax profit of 185m is comfortably ahead of consensus,mainly reflecting investment earnings outperformance. These results are awelcome return to form for Amlin with the large reinsurance portfoliodelivering strong profits.

Gross written premiums have increased to 1,815m from 1,515m. The

increase has largely been driven by a 116m uplift to reflect an improvement in

the process for recording premium income and strong growth in AmlinRe Europe, a start-up in its second year, where premiums have doubled.

HOW ARE AMLIN DOING INTHE ABSENCE OF ANYMAJOR CATASTROPHES?Interviews by James Waterson

JOY FERNEYHOUGH ESPRITO SANTO

NICK JOHNSON NUMIS

MARCUS BARNARD ORIEL SECURITIES

A NEW derivatives exchange is setto break open the dominance ofthe NYSE Euronexts Liffe andDeutsche Bourses Eurex, industry

experts forecast yesterday.CME announced its plans toestablish the new exchange by themiddle of next year, beginning inforeign exchange futures andpotentially expanding into areasincluding interest rates and metals.

It is applying for a RecognisedInvestment Exchange licence fromthe FSA, to whom it will need toprove it has the proper systems,controls and personnel in place aprocess that typically takes fromsix months to a year.

CME plans to grab market sharewith currency futures exchange

BY TIM WALLACE Steve Grob from Fidessa believesthe firm could well establish astrong position in the market.

This is a significant move asCME tries to enter a sectorhistorically dominated by Eurex

and Liffe, he told City A.M.By starting with currencyfutures, they are extending theirsuccessful US franchise. CME can

build that up, and later try to gointo the interest rate business, andexpand from there.

Grob added that the competitioncould also push regulators to try toopen up the market in derivatives,for example by making oneexchanges contracts comply withanothers systems, allowingcustomers more choice.

TUESDAY 21 AUGUST 20126 NEWS

cityam.com

Amlin chief executive Charles Philipps praised his firms resilience

Tesco faces illegal worker finesSUPERMARKET giant Tesco may

be hit with f ines after the UKBorder Agency (UKBA) found it

was employing foreign studentsfor more hours than allowed bytheir visas.

Twenty students were arrestedin a 3am raid on a Croydon

warehouse where employeeswork on fulfi lling internet

orders. Tesco faces fines of up to10,000 per worker if the UKBA

BY BEN SOUTHWOODfinds they did not carry out thelegally required checks.

The students are not illegalimmigrants, and did have theright to work, but their visaslimit term-time employment to20 hours a week. Investigatorsfound they had been workingsome 50 to 70 hours.

In a statement, Tesco stressedthat it was working with theauthorities to tackle the issue,

and that it did not sanction whatthe immigration authorities

describe as visa abuse.In co-operation with Tesco,

the UK Border Agency visited ourdotcom store in Croydon in July,the statement read.

We take our responsibilitiesas an employer very seriouslyand do not condone illegal

working of any kind, it went on.Seven of the student workers

have been deported, as part of acampaign by the UKBA, which

has resulted in the deportationof around 2,000 illegal workers.

SWISS private bank Julius Baer willlimit a rights issue to help fund itsbuy of Bank of America MerrillLynchs overseas wealth-management business to SFr500m(393m) from SFr750m.

The bank said in a statement lateyesterday that the board had decided

to limit the rights issue due toshareholders feedback ahead of an

Julius Baer lowers target forrights issue to fund purchase

BY CITY A.M. REPORTER extraordinary general meeting(EGM) to approve the issue of newequity capital set for 19 September..

The bank reiterated its plans toissue an additional SFr240m in newequity to Bank of America as part ofthe acquisition funding.

Baer announced the acquisition aweek ago as it seeks to expand inemerging markets, but investors

balked at the total cost of aroundSFr1.47bn, sending its shares down.

7/31/2019 Cityam 2012-08-21

7/19

7/31/2019 Cityam 2012-08-21

8/19

IT might not sounds like muchgiven the recent exploits of cyclingheroes Bradley Wiggins or MarkCavendish, but the 30-strong teamarriving in London today at the endof a 150-mile bike ride across thecountry are far from professionalcyclists.

In fact the majority of the groupcompleting the route from Cardiffto London are cricketers joined bythe odd investment manager allpeddling furiously to raise money inhonour of cricketer Tom Maynard, aformer batsman for bothGlamorgan and Surrey who died inJune.

In memory of Tom his family has

established a trust to providebursaries to aspiring cricketers andother sportspeople who needsupport to fund their training.

Cycling alongside playersincluding Andrew Flintoff and SteveJames are Toms father, MatthewMaynard, and two brave volunteersfrom Brewin Dolphin, theinvestment management firm thatis sponsoring the gruelling ride,with the team due to finish at TheOval ground this afternoon.

The total amount raised wasnearing 19,000 last night, buttheres still a chance to boost thetrusts funds by donating at:

justgiving.com/teams/TomMaynard

IS THE UK HANDLING THEASSANGE AFFAIR WELL?Interviews by Michael Bow and Annabel Palmer

The UK may have been more aggressive than itwould have been due to pressure from the US,

but as a member of the EU there are obligations to Sweden.Threatening to storm an embassy seems a tad extreme.

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

DAOUD AOUANEAMLIN

The sanctity of an embassy shouldnt bebreached. We could have been more proactive

in investigating the case against him and ensuring thetrial is fair.

SEAN MCGUINESSDLA PIPER

The UK is potentially putting itself in aprecarious position in its handing of the

extradition affair. It sets a dangerous precedent and hasinternational implications that the UK needs to consider.

JUSTIN KINGGUIDE PUBLIC AFFAIRS

Mayors auction passes 200,000JUST four days into the bidding forCity Wenlock, the huge sumsoffered for the gentlemanly mascothave helped pushed the totalamount raised for the MayorsFund for London in the Olympicsauction to 201,000 with plentymore to come in the next fewweeks.

The highest price reached so farhas been a staggering 20,000 forthe Union Jack-decorated Wenlock

statue, but with a good 10 days togo were confident our favouritepinstriped character can beat thattotal especially as last night hiscurrent bid was nearing 17,000.

For those who want a slice of theLondon 2012-themed memorabiliabut are less inclined to give a hometo a two-metre tall cyclops, therewill be plenty more items appearingonline in the coming days.

All the items on the Mayor of

London Presents... page of theauction are being sold to raisemoney for the Mayors Fund, acharity that aims to give lifechances and aspirations todisadvantaged children, youngpeople and their families inLondon.

To check out the latest prices andmake a bid for your piece of Gameshistory, please pay a visit tomemorabilia.london2012.com

CITYVIEWS

Legendary England all-rounder Andrew Freddie Flintoff is helping to raise funds

Got A Story? [email protected]

8 cityam.com

cityam.com/the-capitalistTHECAPITALIST


150-mile cycleride to honourcricketer Tom

7/31/2019 Cityam 2012-08-21

9/19

MORE than half of all jobs at risk

when high street retailers fall intoadministration are saved, newfigures from the insolvency tradebody R3 show.

Its analysis of major retail insolven-cies in the last financial year revealsthat 53 per cent of jobs are saved dur-ing the insolvency process while 48per cent of stores survive.

Clinton Cards shed 49 per cent ofits stores and cut 43 per cent of itsstaff when it went into administra-tion, while Peacocks closed 37 percent of stores and made 42 per cent ofstaff redundant.

These figures show that the insol-vency process, whilst never goodnews, can result in significant partsof the business surviving, said LeeManning, R3 president and a partnerat Deloitte. But he called for the retailsector to change its methods, such asmaintaining unprofitable stores.

Portfolios are simply too large atpresent...according to figures fromDeloitte, we could be seeing signifi-cant downsizing of between 30 to 40per cent over the next 3-5 years.

R3: Half of jobssurvive aftershops collapse

BY KASMIRA JEFFORD

PRIVATE equity-owned Iglo Group,the firm behind popular UK brandssuch as Birds Eye fish fingers, yes-terday posted half year core salesgrowth of 3.7 per cent led by a UKboom in frozen food sales.

The company, which was put upfor sale by owners Permira this yearbut taken off the market afterfailing to generate big enough bids,said a 6.1 per cent increase in fishsales and 5.4 per cent in poultry ledthe growth.

Figures from the firm also showtotal frozen food sales in the UKgrew faster than total foods for the

first time ever.Frozen food grew at 3.1 per cent

over the half year, ahead of the 2.9per cent growth of general food inthe UK.

Iglos Birds Eyefrozen range

beats gloomBY MICHAEL BOW

Chief executive Martin Glenn said:We are now investing in the busi-ness at record levels and up-scalingour core product production capa-bilities.

While we expect markets in thesecond half of the year to remainchallenging, we remain on track todeliver full year core category salesgrowth.

Iglo was the subject of a multi-billion pound bid by BC Partnersand Blackstone last month.

However, the offer didnt matchthe price Permira wanted and thecompany, which has owned Iglo forsix years, has decided to stick withthe firm for the next three years.

Iglo, which operates in 11 regionsacross Europe, also said in itsresults that it has seen strongperformance in Italy for its bake ina bag fish products.

Bovis leader calls for lendersto raise awareness of NewBuyTHE CHIEF executive of BovisHomes yesterday called for banksto take further action to promotethe governments NewBuyscheme as first-time home buyersremain left in the dark.

David Ritchie praised thescheme, which offers 95 per centloan-to-value mortgages, but saidreservations were still trickling inat three or four per week.

What would make it moreimpactful is a bit moreawareness... It is a mortgageproduct, not a housing productbut [banks] are not marketing it,

BY KASMIRA JEFFORD he said.Ritchie also said he was

unconvinced by governmentplans to remove social housingrequirements for propertyfirms, arguing that the lack ofmortgage availability wouldhelp undermine efforts to boosthousebuilding.

His comments came as thegroup reported that profitbefore tax for the six monthsthrough June jumped to16.2m from 8.1m in the sameperiod in 2011 as it continuedto shift its focus on moreeconomically robust regions.

Revenue rose 27 per cent to

170.3m. The average sale price overthe period rose to 164,400 from163,400 and it expects its averagesale price for 2012 to be six per centhigher than 2011.

Bovis Homes Group

20 Aug14 Aug 15 Aug 16 Aug 17 Aug

515 p 491.6020 Aug

510

505

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cityam.com

Building your house on government supportdoes not provide the firmest of foundations

BETWEEN a governmentpractically falling overitself to offer support andthe supply constraints

that continue to dog the UKproperty sector, there are worsethings to be, even in todaysdifficult marketplace, than ahousebuilder. As Bovis Homesproved yesterday, with adoubling of pre-tax profit in thefirst half of the year comparedto the same period in 2011.

Still, Bovis showed the limitsof what government help canachieve, with chief executiveDavid Ritchie blowingextremely cool on the idea thatloosening the requirements foraffordable housing wouldprovide much of a short-termfix, given that in a depressedmarket finding extra private

buyers with the requisitemortgage approval remains the

problem, not a solution. The groupis, however, already benefiting fromthe other schemes on offer. Itexpects NewBuy to provide furthersupport to the new homes market,and is already gaining three or fourNewBuy reservations a week. It alsoexpects to use its FirstBuy allocationin the third quarter.

Boosting the proportion of firsttime buyers risks skewing propertiesto the cheaper end of the market,but Bovis seems to be overcoming

that by proving location, location,location remains the property

BOTTOMLINE

MARC SIDWELL

watchword. By selectively sellingsome plots of land from itsextensive stock and acquiringothers, it is shifting towards havingtwo thirds of its business focused inthe south, with the higher pricesthat region can command. At thestart of the year, the builder had 59per cent of its sites in the south. Ithad grown that to 65 per cent bythe end of the half year. Moving toa two-thirds southern focus shouldhelp average sales price evenwithout material improvements inthe market.

But the biggest challenge forBovis may be staying ahead of thepack. When government reachesout the taxpayers hand to help awhole sector, an individual firmcant rely on that aid todifferentiate itself to investors. Thereal test for these results will be in

how investors weigh Bovissperformance against its rivals.

RETAIL FAILURES IN 2011/ 2012

PRE INSOLVENCY

POST INSOLVENCY

STORES STAFF

784

400

PRE INSOLVENCY

POST INSOLVENCY

8,000

4,500

PRE INSOLVENCY

POST INSOLVENCY

STORES STAFF

3

3

PRE INSOLVENCY

POST INSOLVENCY250

135

PRE INSOLVENCY

POST INSOLVENCY

STORES STAFF

146

60

PRE INSOLVENCY

POST INSOLVENCY2,600

1,300

PRE INSOLVENCY

POST INSOLVENCY

STORES STAFF

313

224

PRE INSOLVENCY

POST INSOLVENCY3,885

2,750

PRE INSOLVENCY

POST INSOLVENCY

STORES STAFF

614

388

PRE INSOLVENCY

POST INSOLVENCY

7,500

4,320

PRE INSOLVENCY

POST INSOLVENCY

STORES STAFF

610

333

PRE INSOLVENCY

POST INSOLVENCY

6,000

3,896

7/31/2019 Cityam 2012-08-21

10/19

Mortgage lending jumps aheadof Funding for Lending SchemeMORTGAGE lending jumpedsharply in July, according to

industry data published yesterday,with the governments newFunding for Lending Schemeexpected to boost loans furtherthrough August.

Gross lending rose eight per centto 12.7bn in the month, reversingthe fall to 11.7bn in June, theCouncil of Mortgage Lendersrevealed.

However, analysts warn themarket overall remains relativelyflat, with large monthly variations.On the year, lending is only up 1.68

BY TIM WALLACE per cent from 12.49bn in July 2011.The real estate sector has

struggled in part because buyersrequire increasingly large deposits

to qualify for a mortgage, hittingfirst-time buyers particularly hard.But analysts also believe

uncertainty caused by the Eurozonecrisis and double-dip recession havedampened the market.

It might be too early to call theend of the mortgage famine butthere are certainly encouragingsigns, said SPF Private ClientsMark Harris.

The Funding for LendingScheme should deliver morecompetitive mortgage rates in

coming weeks and these are alreadyfiltering through weve seen five-year fixed rates fall to historic lowsand expect more jostling for

position in this marketplace.

Mortgage lending bounced back in July

Jul 11 Jul 12Apr 12Jan 12Oct 119,500

14,000

13,500

13,000

12,500

12,000

11,500

11,000

10,500

10,000

m

TUESDAY 21 AUGUST 201210 cityam.com

LONDON REPORT

Investor Relations SocietyThe professional body for theinvestor relations professionhas appointed John Gollifer asits new general manager. Hesucceeds Michael Mitchell, whoretires at the end of 2012.Gollifer is a former head ofinvestor relations for theSingapore Exchange, and was involved in establishingthe Investor Relations Professionals Association inSingapore. He started his career at Barclays, and has alsoheld senior roles at BNP Paribas and ABN Amro.

Marex SpectronJack Allen has been appointed as a senior precious

metals trader at the financial products brokerage. He hasover 30 years experience in the precious metals industryand joins from Societe Generale, where he set up andmanaged its precious metals sales desk. Allen has alsopreviously run the gold dealing books at Deutsche Bank,AIG and Natixis.

AG BarrThe soft drinks group has appointed John Nicolson to itsboard as a non-executive director, effective January2013. He is currently president of Heineken Americas,and has also been deputy chairman of CompaniaCervecerias Unidas since 2009. Nicolson has a longcareer in consumer goods, and has previously heldsenior management positions at a variety of Russianbreweries.

Ashcourt RowanThe wealth management firm has appointed AlanScrimger as head of its funds research division. He willreport to Ashcourt Rowans chief investment officer ToniMeadows. Scrimger joins from Standard LifeInvestments, where he was co-head of funds research. Inhis new role, he will be responsible for enhancing thefirms research proposition.

SavillsCharlie Walsh has been appointed head of exhibition andoverseas sales in the real estate advisory firms Londonresidential development team. He originally started atthe firm in 2003, and he will continue to work with theexisting London team in marketing UK developmentsoverseas.

WHOS SWITCHING JOBS Edited by Tom Welsh

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

Wall Street flatafter six weekrallying boom

U

S stocks were flat yesterday, onsigns of fatigue after a six-weekrun of gains, as the EuropeanCentral Bank quelled

speculation about the form ofmarket intervention that may betaken to stem the regions debt crisis.

Despite the lethargic trading,Appleshares hit a new high, becoming themost valuable public company of alltime, with the combined value of itsshares exceeding a previous record setbyMicrosoftin 1999. Shares closedup 2.6 per cent at $665.15.The S&P 500 remains close to a four-

year high, rising nearly five per centin the past six weeks. Investors hadbeen waiting for the EuropeanCentral Bank (ECB) to take steps tocontrol the euro crisis in September.Last week, the index broke away fromthe 1,400 level where it had stalled formuch of August.

German magazine Der Spiegel said

over the weekend the ECB is consider-ing setting interest rate thresholds forany purchases of a strugglingEurozone countrys bonds. A bankspokesman said it was misleading toreport on decisions that still had notbeen taken.

Germanys central bank, theBundesbank, also reiterated its oppo-sition to bond purchases. Aspokesman for the German financeministry said it was not aware of anyplans for the ECB to target bondspreads.The slight losses on US exchanges

compared with much steeper declinesin Europe and a fall in the Shanghaiindex to its lowest level since 2009.

Over there, the crisis is clearlymuch more real for them, said KenPolcari, managing director at ICAPEquities in New York.

Facebook shares briefly fell more

than 50 per cent from its issue priceto hit a new low of $18.75.

BRITAINS top share index fellyesterday, easing further fromfour-month highs hit last week,weighed by a slide in banks and

commodity stocks as expectations forstimulus measures in China and Europetook a slight knock.The European Central Bank sought to

quash speculation about the shape of itsnew bond-buying plans and theBundesbank kept up its opposition tothe programme, even after Germanleader Angela Merkel voiced support forthe ECBs crisis-fighting strategy lastweek.

British bank shares had initially firmedon reports but later fell, reflecting thesectors heavy exposure to Eurozonebonds. Global lenderHSBC shed 1.2 percent.At the close, the FTSE 100 index was

down 28.05 points, or 0.5 per cent, at5,824.37, just holding above the 5,800level after having reached a session lowof 5,802.91.

Commodity stocks were weak inLondon, tracking falls in Brent crude

and copper prices after a rise in Chinesehome prices dented investor expecta-

tions for further interest rate cuts byChina, the worlds largest consumer ofcommodities.Among the miners,Xstrata shed 3.4

per cent, with investors cautious aheadof results due today from the minerspredator, commodities trader Glencore.

Xstrata also suffered from its exposureto Lonmin after a week of violence at themid-cap platinum miners Marikanamine in which 44 people died. Xstrataowns a 24.6 per cent stake in Lonminafter an aborted bid back in 2008.

Lonmin slid for a sixth day, losinganother 4.6 per cent.

FTSE slides lower as commoditiesand banks hit by economic worries

BESTof the BROKERS

FTSE

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NEW YORKREPORT

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

Invensys PLC

14 Aug 15 Aug 16 Aug 17 Aug 20 Aug

247.50

250.00

252.50

255.00

257.50255.4020 Aug

pINVENSYSUBS has maintained its buyrating on the software group,but upped its target price to280p from 240p after re-assessing the firms valuation.The broker says a few monthsago the companys share pricewas over-discounting but nowappears fairly valued.

Compass Group PLC


707.50

710.00

712.50

715.00

717.50

720.00

722.50719.5020 Aug

pCOMPASS GROUPPanmure Gordon has a buyrecommendation on the foodand support services group andhas raised its target price from785p to 820p, after consensusforecasts rose. The broker saysCompass is attractive due to itsdefensive, predominantly non-UK earnings.

IG Group Holdings PLC


440

445

450

455

460

465437.5020 Aug

pIG GROUPNumis has kept its addrating on the derivatives traderbut cut its target price from552p to 539p having updatedits forecasts to reflect the lowvolatility in all of IG's key assetclasses. The broker expects

first quarters revenue to bedown 20 per cent on last year.

BRITISH technology firms aredefying the recession accordingto an industry survey published

yesterday, with businessesplanning on expanding through

the economic downturn.The sector has performedstrongly in recent months with51 per cent of company bossessaying their business prospectsimproved over the past sixmonths, and 34 per cent sayingprospects were unchanged.

That led to 60 per cent of firmsin the sector increasing theirlevel of investment, according tothe study from industry bodyIntellect UK.

Similarly 67 per cent expect to

Technology firms look to hiremore staff despite double dip

BY TIM WALLACEexpand their businesses, with 43per cent saying there are verylikely to recruit new staff.

A total of 81 per cent ofbusiness leaders back GeorgeOsbornes aim to make the UKthe technology centre of

Europe, the study found, but 66per cent said the governmentdoes not understand the sector.

There is clearly a dividebetween how confident businessleaders feel about the prospectsfor their own business comparedto the economy as a whole, saidIntellect UKs deputy director

general Anthony Walker.However, if the storm clouds

gather again across the widereconomy these gains could bequickly lost.

7/31/2019 Cityam 2012-08-21

11/19

THERES something odd aboutmy local Tesco. Since April,the kiosk at the entrance haslooked incredibly dull. As Iwas recently trying to work

out why, I saw a sign saying that allcigarettes and tobacco-relatedproducts must now be hiddenbehind closed doors to complywith UK regulations.

As an economist, I have littleexpertise into whether suchmeasures prevent people fromsmoking. Given that one of tobaccosprimary appeals to teenagers iscultivating rebellion, I suspect thatmore secrecy wont help. But I couldbe wrong. And Im not aware of anystudies that have attempted to

understand the costs that this policy

WITH European politiciansstill nursing their holidaysunburns, speculation hasalready returned to theEurozone crisis.

Unsurprisingly, the focus is again onEuropean Central Bank (ECB)intervention, not least because itspresident Mario Draghiscommitment to do whatever it takesto save the euro may now require himto follow through.The main plan being mooted is for

the ECB to cap the difference in bor-rowing costs between stronger andweaker Eurozone nations. The logic isthat growing yield spreads driveinvestor fear, do not represent the truestrength of these economies, andthreaten a self-fulfilling bond run.Germany is naturally wary.The plan would place the ECB direct-

ly in the realm of fiscal policy andpolitical decision-making a danger-ous and almost untenable position foran unelected, independent centralbank. Bond spreads are ultimately themarkets judgement of the fiscal policyand domestic politics of each

Spread betting, CFDs Trade today atwww.cityindex.co.uk

FACT OF

THE DAY

The last time the S+P 500 Index traded at 141

the Index fell 10% in the space of 1 month.

cityam.com/forum

The ECB has already

bought the Eurozonetwo years which werepromptly wasted

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.

12TUESDAY 21 AUGUST 2012

RAOUL RUPAREL

The Eurozones new quick fix riskspapering over much deeper cracks

Eurozone country. Any failure oruncertainty in either area would seethe level of ECB bond-buying directlyinfluenced by national governments

decisions. This is even more concern-ing given that, if borrowing costs havean effective cap, the incentive for gov-ernments to reform quickly and effec-tively would be severely reduced.The oft-cited upside is that the ECBs

unlimited commitment would beenough to deter investors from chal-lenging the ceiling on borrowingcosts, meaning that the ECB may notbe required to intervene much at all.But this impact may be overstated.Take the peg between the Swiss franc

and the euro, equipped with its ownunlimited backstop from the SwissNational Bank (SNB). The SNB has had

to defend the peg, causing it to accu-mulate reserves equal to 65 per cent ofSwiss GDP. Clearly markets didnt takethe bank at its word. Its not clear thatthe ECB would be any more successful,especially in the face of similar safehaven flows into northern Eurozonecountries, and investors desire tooffload risky assets at a decent price.Dont forget that the ECB has also seenits own credibility dented over the pasttwo years.

Its been contended that current bor-

rowing costs are irrational and there-fore warrant ECB intervention. Whileyields may not accurately representthe economic fundamentals of eachnation, they are a result of markets try-ing to price in the domestic andEuropean political risk, as well as thestructural flaws in the Eurozone.Using the ECB to try to correct theseissues would damage the price deter-mination mechanism in markets.This leads us to another area of

potential political controversy. TheECB would be taking a huge steptowards risk and debt pooling byallowing an EU institution to redistrib-

ute problems around the Eurozone since all Eurozone members standbehind the ECB. Such a huge decision,integral to the future of the Eurozoneand Europe, should not be taken by anunelected apolitical institution.The fact that such a decision cant be

made at the intergovernmental level isa sign that the Eurozone is not ready

for such a move. Using the ECB to forcethe pace of integration may well back-fire. It seems many have forgotten theproblems caused by pushing aheadwith an unfinished economic andmonetary union, lacking clear politi-cal will, in the first place.

On top of all of this, such a movestands on incredibly shaky legal

ground (thanks to its clearly definedstatute, which stops it from financingsovereign states). It also fails to offer asolution. This is why intervention haslittle support in Germany.The spreads in borrowing costs are a

symptom of the crisis rather than acause, although they have admittedlymade things more difficult. However,artificially forcing them together willonly paper over deeper problems. Thebest such a move can do is to buy time.

With the ECB already having bought

Eurozone leaders two years, whichwere promptly wasted, we must askwhether this latest proposition isworthwhile.

There is, as of yet, no definitiveanswer. But the first move must be atthe intergovernmental level. Untilprogress is made there, any move bythe ECB would simply jeopardise itsfundamental mandate, putting moremoney at risk and dragging the crisison further, all without any clear endin sight. The ball is firmly in Eurozoneleaders court and should stay there.Raoul Ruparel is head of economic research

at Open Europe.

imposes on retailers. I note that mylocal newsagents have not fitted anydoors yet they can wait until April2015. But the owner laments thisbarrier to honest commerce.

My problem with the ban is thethreat it poses to the liberty ofmarketers.

Like any art form, reactions to

advertisements are often subjective.

Many see them as crass, but theyreart nevertheless. Indeed, sometobacco adverts are iconic. Marlboroman is a legend, and I stillremember the Hamlet cigartelevision adverts from mychildhood. They had little impact onme because I do not smoke and itisnt allowed in my house. But,while I dont tolerate smoking onmy property, I am happy to tolerateit elsewhere. Thats called society.

I must confess that the smokingban was in my personal interest,since I enjoy not stinking of smokeafter a night in a pub. But it wasconcern for the liberty of othersthat meant I opposed it. Now,though, my liberties are being

directly impinged. I want any

company to be able to express itsidentity, and I see this law as a finalnail in the coffin of a particularfreedom of expression.

The big issue in this debate on thecigarette display ban is how thepolicy has been received in businessschools. You might expect aneconomist to be against it after allwe tend to take individual libertiesquite seriously, and we dont likeimposing regulatory costs onbusinesses. But it is doesnt reallyhave much to do with economics.What I find odd is that marketingprofessors do not seem as troubledas I am, especially when this is adirect suppression of theirdiscipline.

When governments arbitrarily

decide that certain products cannotbe advertised even to the pointthat the producer must give upcontrol of their packaging, andcannot even be seen publicly wehave an attack on the science ofmarketing. Even if marketingprofessors are personally opposed tosmoking, and dont feel ashamed toinflict that opposition on others, atwhat point is enough enough? Itshouldnt be left to free marketeconomists to protect the freedomof expression upon whichmarketing relies.

Anthony J. Evans is associate professorof economics at ESCP Europe BusinessSchool. Website: www.anthonyjevans.com

Email: [email protected]

Twitter: @anthonyjevans

FRONTLINEECONOMICS

ANTHONY J. EVANS

The cigarette display ban is a smoking gun in the war on free expression

In association with

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Universities work[Re: Release our business schools from thedead hand of state regulation, yesterday]Professor Len Shackletons proposedshake-up of UK higher education is wrongon a number of fronts. For a start, he fails torecognise the success of our world classuniversities which, despite years of under-investment, continue to deliver for thisnation. UK universities generate 59bn ayear for the UK economy and, with just 1 percent of the global population, the UKproduces 7.9 per cent of the worldsresearch publications and 12 per cent of allcitations. Secondly, it is far from a nationalscandal that universities maintain their artsand humanities departments. It is essential.At a time when students are being asked topay record sums to study at university, it is

crucial that institutions offer a broad rangeof courses not just those that will turn thebiggest profit. The UK has a thriving culturaleconomy that relies upon a steady supply ofarts and humanities graduates. Thirdly,Shackelton is wrong to single out educationcompanies like BPP as a model for futuresuccess. For-profit business schools anduniversities have been a disaster forstudents and taxpayers in the US. Accordingto the US Education Trust, only one in fivestudents at for-profit colleges complete afour-year course and 20 per cent of thosewho finish will default on their loans withinthree years. That is not the kind of shake-up I want to see in Britain.

Sally Hunt, general secretary of the Universityand College Union (UCU)

AFTER little more than ahundred days in power,French President FranoisHollandes popularity isdropping fast. Recent polls

show that 54 per cent of Frenchcitizens are dissatisfied with hisperformance, compared withapproximately 40 per cent in July.Its little wonder taxes on the rich,which initially attracted voters, arein danger of pushing business

people out of France to countries,like the UK, which are more open torewarding success.

Pierre Moscovici, Frances prag-matic finance minister, has commit-ted to a budget deficit target of 3 percent of GDP by 2013. So far, most ofthe deficit reduction has been doneby raising taxes on wealthy house-holds and large corporations.Hollande will outline further meas-ures next month, aimed at reducingthe deficit by another 33bn (25bn)in 2013, the savings calculated asnecessary in July by the cour descomptes, Frances national auditor.The most contentious of these is

the 75 per cent tax on top Frenchearners. This would lure some ofFrances most talented executivesand risk-takers to where there alighter tax burden. And Hollandesvictory has given the Socialists con-trol of almost every political institu-tion the presidency, the upper andlower houses of parliament, all buttwo of the regions and most of thecountrys big cities, communes anddepartments. There is no reason todoubt that the government couldpush through these budgetarymeasures, however unpopular.

Risks to the French economy aresevere. The countrys banking sys-tem is one of the most exposed toperipheral Europe, while the Frenchproperty market, particularly inParis, looks worryingly overpriced,

TOP TWEETSSince BAA is selling Stansted, I hope thismeans that Virgin will branch out intoairport management.@CarinaSecker

Three years after the maths told us euroexits were inevitable, is the EU finallycoming to the same conclusion?@DouglasCarswell

I wonder if there is any evidence that playingfields help sporting excellence more than thenew facilities their sale funds?@ericjoyce

Alistair Darling says George Osborne hasgiven up on growth. He should know theeconomy was growing when he handed over.@D_Branchflower

As David Cameron relaxes in Mallorca, is theUK a better place to go on summer holiday?

YESWhats not to love! Consistently in the worlds top 10 most visited

destinations, last year saw around 31m overseas visitors come hereto enjoy what we have to offer. From West End theatre to cuttingedge art, from castles to stately homes, Britain is renowned for itsdiverse culture and the depth of its heritage right across the country,including three of the top five most visited museums in the world.Alongside that there is a fantastic range of shopping, a live musicscene second to none and a wonderful array of sport to savour whether a Premier League match, the tennis at Wimbledon, a roundof golf at St Andrews or coasteering in Wales. Our climate is alsoideal for many people not too hot in summer and perfectly mildfor most of the winter. Whether its the natural beauty of theHighlands, the miles of beaches along the Cornish coast or thevibrancy of London, theres something here for everyone.Patricia Yates is director of VisitBritain.

Patricia Yates

NOMark Hall

Having endured the rainiest summer on record, its no surprise that

Brits want to go abroad for their holidays to enjoy some sunshine.As a result, the decision to stay in Britain or go abroad is not madeon price alone. However, foreign travellers have a fantastic choice ofholidays abroad, many of which are cheaper than holidaying athome when you compare like for like. With food and petrol pricesrising, and the high costs of attractions like theme parks and daytrips in the UK, a family holiday abroad can work out far cheaper particularly if you go to all-inclusive resorts where food, drinks, kidsclubs, watersports and other sports activities are included in theprice. All-inclusive holidays really do offer great value for money.Case study research we conducted last year showed that a family offour could save around 500 on a holiday by booking all-inclusive,over a bed and breakfast alternative.Mark Hall is head of product for First Choice.

RAPIDresponses Hollandes raid on

rich is the wrongkind of revolution

having failed to correct from 2007highs.And 2013 will bring further chal-

lenges. After three consecutive quar-ters of flat GDP data, thegovernments growth forecast of 1.2per cent in 2013 looks unrealistic.

So far, the government has beentrying to increase domestic con-sumption through such measuresas increasing the minimum wage,and capping rent, petrol prices andutilities bills. But given the persist-ent high unemployment and thecontinued depreciation of the euro,Hollande should instead be pushingpolicies that help boost exports tomajor trading partners, especially inAsia and the US.

And this can only be achieved bymaking labour less costly, whichmeans reducing taxation on labourand making it more flexible tointernational competition espe-cially vis--vis United Kingdom,which remains an important com-petitor in both manufacturing andservices.

So, at such a crucial time whenHollande needs the support of thosecontributing the most to the Frencheconomy taxes that alienate theaffluent are unwise. David Cameronand the UK might not need to rollout the red carpet. Hollande is busypulling the carpet from underneathhis own citizens.

Yannick Naud is a portfolio manager atGlendevon King Asset Management andhas worked in convertible bond trading in

France, Japan and the UK.


YANNICK NAUD

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WHEN things godisastrously wrong,the market is alwaysready to obliterate a

stock. It could be because ofmistakes made in acompanys operations, as inthe case of Carnival earlierthis year when one of its

liners ran aground off Italyswest coast. It could be likeFacebooks IPO, where theprice rose on its debut

Beware of a cat that bounces back

TUESDAY 21 AUGUST 201214 cityam.com

TRADINGMANAGEMENTWEALTH

DAVID MORRISON

fx360.com

THE Dow and S&P 500 are bothwithin spitting distance of the highsachieved earlier this year. It will onlytake a small push for both indices tosurmount these heights. After that

hurdle, the bulls will have their sights on thepre-financial crisis levels of 2007 around

14,200 and 1,575 for the Dow and S&P 500respectively. But there are question marksover this latest bull run, which has takenequities back up to very high levels. Tradingvolumes have been particularly light thanksto the Olympics, and there is little reason toexpect them to pick up significantly now thatwe have the rest of the summer to getthrough. On top of this, stock marketvolatility is languishing at five-year lows.While this may suggest that investors arecomfortable buying equities at current levels,it is also a warning of a high level of marketcomplacency.

US economic data releases continue topaint a mixed picture. The latest non-farmpayroll number was better than expected,although an increase of 163,000 jobs is stillsome way below the 200,000-plus readingsthat we saw in the first quarter of the year.Last weeks retail sales number convincedmany analysts that the US consumer is back,

and that a pick-up in spending will feedthrough to stronger GDP growth. But thelatest data has also reduced the likelihood offurther intervention from the Federal Reserveat its September meeting. All of this,however, has done nothing to halt the equitymarkets rally investors are once againanticipating a US recovery, whilesimultaneously expecting the EuropeanCentral Bank (ECB) to grab hold of thestimulus baton. The ECB is viewed as havingthe available firepower, together withenough reason, to hose more liquidity intothe financial system.

Not only that, but investors also expect thePeoples Bank of China to ease further. At thebeginning of last week, Chinese Premier WenJiabao said that China faces headwinds, but

that the recent moderation in inflation datagives the government more room formonetary easing. Yet while the Chineseconsumer price index and producer priceindex have slowed significantly over the past12 months, there should still be concernsabout the outlook for inflation, as food andfuel prices push higher. While the soaringcost of oil, corn and soyabeans may, forwhatever reasons, fail to impact the officialdata, there is little doubt that it is alreadyaffecting consumers.

In the US, shoppers have beencommenting, for some time now, on howfood and other consumables are being sold insmaller packages while the purchase priceremains unchanged. The effects of rising softcommodity prices has also not goneunnoticed in China, where the proportion ofincome spent on food is greater than indeveloped countries. China Daily reportedthat the authorities are set to release cornand rice from state reserves to help tamefood price inflation and reduce imports fromthe drought-hit US. It is also worth notingthat the Peoples Bank of China resumedreverse repo transactions last Thursday. Thisindicates that there are no immediate plansto cut the Required Reserve Ratio. So the

expectation of imminent monetary stimulushas been dampened, despite the rhetoricfrom the Chinese authorities.

Yet speculation over the likelihood offurther central bank intervention remainshigh. Investors are looking ahead to theJackson Hole Economic Symposium at theend of this month. Despite doubts that the USeconomic outlook is bad enough to warrantfurther Fed action, many investors still hopefor a repeat of events in 2010, when BenBernanke signalled that a second round ofquantitative easing was imminent. But, in theabsence of a financial catastrophe, and withthe US presidential election less than threemonths away, the Fed may prefer to hold offfrom a third round of quantitative easing andlet Operation Twist take the strain.

twitter.com/fx360facebook.com/fx360

SENIOR MARKET STRATEGIST, GFT

THE TIPSTER Diageo set to toast sales

THE international spirits makerand brewer, Diageo, will reportearnings on Thursday. Currentlyon the cusp of buying JoseCuervo tequila, the share price

has increased by 13 per cent over the lastsix months and 50 per cent year-on-year.As with its last earnings report, it appearsthat the majority of revenue for thecompany will emanate from emergingmarkets. Operating profit beforeexceptional, one-off costs should be morethan 3.1bn against nearly 2.3bn lastyear. CMCs price for Diageo is 1694.65-1698.36p.

UK retail darling, Marks & Spencer,

has seen its share price close higher forThe contents of t his column are provided for general information purposes only. One should consider the appropriateness

of the information in light of their own objectives, financial situation or needs before trading. CD11UK.074.010612

offering, prior to hitting the floorand bouncing in early June, beforeresuming its journey southward. Or,as Standard Chartered shows, acompany can feel the wrath ofmarket bears after regulatorsexpress concerns about thecompany.Whatever the reason for the

decline, there is a certain macabrefun in watching a stock getting ham-mered. But when its all over, youmay see a dead cat bounce in the

stocks price. Much like an expiredmoggy, even a seemingly demisedstock will see a small bounce when ithits the floor.Technical analysts describe a dead

cat bounce as a continuation patternthat appears to be a reversal pattern.It begins with a downward move andis followed by a significant price

retracement. The price falls again,exceeding the prior low.

CATS IN MOTIONRecently, citing the rebound of strug-gling BlackBerry producer, Researchin Motion (RIM), UBS warned of thedangers of reading too much intothe dead cat bounce. In a researchnote, UBS stated that the modestrebound in RIMs stock price reflectsincreased optimism about potentialM&A deals the most recent rumouris that IBM has taken an interest inRIMs network operations as well aspotential asset sales, cost cutting andpartnership opportunities. The notestated: Nevertheless, we see operat-ing losses and no major catalystsover the next two quarters andremain on the side lines as webelieve the companys future likelyhinges on a favourable BlackBerry 10product launch early next year.The problem with dead cat bounces

is that they tend to be observed inhindsight rather than spotted at thetime. This isnt to say that spotting adead cat bounce is a waste of time (orcats). But traders shouldnt be buyersjust because they see a retracement.Traders should ask whether themove might be a temporary retrace-ment before Tibbles heads backtowards terra firma.The physicist, Erwin Schrdinger,

devised a famous thought experi-ment to show the uncertainty ofmatter uncovered by quantummechanics (his cat was both deadand live at the same time). LikeSchrdingers cat, traders sometimeshave an equally tough decision indetermining whether the companythey are trading is dead or alive (or

both).

Even dead cats canbounce back to life

Dow Jones Industrial Average

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Reseach in Motion

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The dead cat bounce can be a useful indicator of a decliningprice, but traders still need to be cautious, writes Craig Drake

CHINA AND US DATA FAIL TOCORRODE QE SPECULATION

six consecutive weeks. This follows atorrid period from mid-March, where thestock fell from 390p to 310p in early July.Poor second quarter results showed adecline of 2.8 per cent in like-for-likesales, triggering the exit of Kate Bostock,the executive director of generalmerchandise. The recent rally in M&Sshares has been on speculation that a6bn bid is in the offing. However, theshare price has spent the majority of thelast three years trading in a range of 300pto 400p. GFTs latest price is 365.14-365.95p.

Virgin Rail may have lost its franchisefor the West Coast mainline, however itspartner, Stagecoach Group, has held

up well. A diversified services portfolio

means that it will still be in the railbusiness along with other transportventures. The upcoming interimmanagement statement may help propelthe share price beyond the 52-week high.Interactive Markets quotes 297.7-298.5pfor Stagecoach.

BSkyB is a company favoured byinvestors. The company recently learnedthat it does not have to offer its flagshipsports package at a discount, afterwinning an appeal against industryregulator Ofcom. The stock has ralliedever since News Corp dropped itstakeover bid and, at a price of 770p, thereis notable upside potential. Spread Coquotes 767.2-768.2p for BSkyB.

YOGESH CHANDARANA

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Theres more to trading inspiration than a technical chart and pizza

15

But it can work as part of a wider trading strategy, says Craig Drake


CURRENCY STRATEGISTCHRIS VECCHIO

My pick: Short Aussie-dollar and Aussie-Kiwi, buy dollar-yen dipsExpertise: Fundamental and technical analysisAverage time frame of trades: A few hours to a few days

I took profits on my core Aussie dollar-dollar short from$1.0585 last week, and the pair was reshorted at $1.0450 as itappears a top has been carved out. Meanwhile, a string ofbetter than expected US data has significantly curbed thelikelihood of more quantitative easing, as evidenced by priceaction seen in the precious metals markets and the dollar-yen. Accordingly, although profits were taken, the dollar-yenshould be bought on dips.

ANALYST PICKS

STRATEGISTILYA SPIVAK

My pick: Stay short Aussie-Canadian dollarExpertise: Global macroAverage time frame of trades: 1 week to 6 months

I sold Aussie dollar-Canadian dollar at Ca$1.0441 last week togain exposure to expectations of slower Chinese growth againstaccelerated US economic expansion. The trade was triggered asprices broke support at the bottom of a rising wedge chartpattern, after completing a bearish evening star candlesticksetup. The initial target is Ca$1.0281. Prices are makingdownside progress and I will continue to hold the trade. A stop-loss will be activated on a daily close above Ca$1.0598.

CHIEF STRATEGISTJOHN KICKLIGHTER

My pick: Short Aussie-dollar, long euro-Swiss francExpertise: Fundamental and technical analysisAverage time frame of trades: 1 day to 1 week

Range trading sterling-dollar proved ideal last week, andthere is a need for both range and breakout options thisweek. Sterling-dollar is still a strong candidate (between$1.5750 and $1.5550). I also like euro-dollar and sterling-Canadian dollar setups. I think risk aversion will prevail andAussie dollar-dollar below channel at $1.04 would be ideal.For non-risk dependency, I will stick with euro-Swiss francand I like Aussie dollar-New Zealand dollar below NZ$1.3050.

Technical analysis isnt infallible

IF YOU talk to particularlydogmatic technical analysts, youoften come away with thefeeling that their idea of the

perfect trader would have zerocontact with the outside world noCity A.M., no Bloomberg and noTwitter. The ideal trader

cityam 2012-08-21

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