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BLACKBERRY maker Research in

Motion yesterday reported a betterthan expected $235m (144m) secondquarter loss as it builds a cash warchest ahead of the make-or-breaklaunch of its new operating systemnext year.The Canadian company, which said

it had shipped 7.4m BlackBerrys overthe quarter, improved on its netincome loss of $518m in the quarterending 2 June but could not matchthe $329m profit recorded this timelast year. The company said it expect-ed to report a further operating lossin the next quarter.

However the firm once againimproved its cash pile to $2.34bn upfrom $2.23bn at the end of lastAugust as it builds up to the launchof its new operating systemBlackBerry 10, expected in January.

Markets sent shares in the RIM soar-ing 15 per cent in after hours trading

as investors looked favourably on thefirms position

Chief executive Thorsten Heins,said: Make no mistake about it, weunderstand that we have much morework to do, but we are making theorganisational changes to driveimprovements across the company.The firm has managed to build its

BlackBerry subscriber base to 80mglobal subscribers over the quarter.

RIM builds upwarchest aslosses slow

BY MICHAEL BOW

THE break-up of loss-making anddebt-laden British sporting goodsretailer JJB Sports is set to beginwith market leader Sports Directyesterday sealing a deal to buy 60 ofits stores.JJB, based in Wigan, said on

Monday it was close to appointingKPMG as administrators to sell itsassets and brands after failing toreceive an offer for the entire com-pany, which trades from about180 stores and employs about4,000.A source said Sports Direct,

controlled by NewcastleUnited soccer clubowner Mike Ashley,will pay about30m for the 60stores and theirstock and willlook to safe-guard the jobsof 1,000-1,500JJB employees.

Sports Direct,which owns

Sports Directset to snap up

60 JJB storesBY HARRY BANKS Sports Direct.com and Lillywhites

stores as well as brands includingSlazenger, Dunlop and Lonsdale, willtake 20 JJB stores immediately, withthe balance of 40 stores held sepa-rately as their purchase will be sub-ject to approval from Britain's Officeof Fair Trading.The firms shareholders will not

get any return on their investment.JJB shares, which were valued atabout 300p three years ago, were sus-pended at 0.4p on Monday.

It is understood other interestedparties in JJB stores include USshareholder Dicks Sporting Goodsand Irish firm Stafford Group.

Sports Direct declined to com-ment. A spokeswoman for KPMG

could not confirm a dealhad been signed.

Shares in the group,over two thirds of whichare owned by Ashley,have risen 56 per centover the last 12months.

Newcastle owner MikeAshley watches his team

INSTAGRAM, the arty photo-sharing app for smartphones, hasovertaken Twitter for the number

of daily visitors and time spentusing the app in the US for the firsttime following a summer boom inits popularity.

During August, users spent abouteight minutes a day adding filtereffects and looking at photos onthe app compared to about five-and-a half minutes spent readingand updating Twitter, according todata from analytics firm comScore.

Instagram, which was snappedup by Facebook for $1bn (616m) in

Instagram smartphone usersovertake Twitter for first time

BY MICHAEL BOW shares and cash in April, also beatTwitter for the number of daily

visitors, with 7.3m people visitingthe app last month compared to6.7m people accessing Twitter on

their phones.It follows a boom in Instagrams

daily usage by people over thesummer, with average daily visitornumbers increasing from 886,000in March to 7.3m last month. Usagespiked in June to 4.6m visits surging from 1.9m visits in April after the app was made available tothe Android operating system.

Instagram was founded in 2010by two Stanford graduates KevinSystrom and Mike Krieger. THE CAPITALIST: Page 12

FRIDAY 28 SEPTEMBER 20123NEWScityam.com

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GOLDMAN Sachs agreed yesterdayto pay more than $14m to settlefederal and state charges after itviolated pay-to-play rules, in acase involving campaign

contributions to formerMassachusetts governor candidateTimothy Cahill.

In what the SEC described as itsfirst pay-to-play case involvingcontributions other than cash,Goldman settled without admittingor denying the charges.

Pay-to-play refers to cash or othercontributions made to officials toinfluence the award of lucrativepublic contracts.

Goldman pays$14m SEC fine

BY CITY A.M. REPORTER

BANKS defended their customerservice reputation yesterday as fig-ures showed that complaints havesoared nearly two thirds in the lastsix months, fuelled by the paymentprotection insurance (PPI) scandal.The Financial Services Authority

received a whopping 3.6m com-plaints in the first half of the year,as grievances lodged about PPI morethan doubled to 2.2m.

Firms have so far paid out close to3bn to customers who were mis-sold PPI, out of around 10bn thathas been set aside.According to the FSAs figures, the

banks are upholding around two-thirds of PPI issues, a greater pro-portion than for other complaints.

Banks have already noted that theproliferation of claims manage-ment companies, which advertisehelp for customers claiming backpayments for mis-sold PPI, has sentthe number of complaints skyrock-eting.

Peter Vicary-Smith, chief executive

of consumer group Which, said thefigures confirm that PPI is now the

PPI fuels surgein complaintsabout banks

BY MARION DAKERS biggest financial scandal of alltime.

The banks must set aside moremoney for PPI claims and make iteasier for customers to get backwhat they are rightly owed, withoutany hassle, he added.

But the British BankersAssociation said core complaints,or those that involve currentaccounts, have fallen 13 per cent to323,955 in the last six months, andrisen around three per cent on ayear ago.

There will always be instanceswhen things go wrong: when theydo, banks are committed to ensur-ing all complaints are dealt with asfairly, swiftly and effectively as possi-ble, it said in a statement.

The banking brand that attractedthe most complaints was Barclays,with 442,266 lodged in the first halfof the year.

But Lloyds Banking Group, whichencompasses Lloyds TSB, Bank ofScotland and Halifax among others,received almost 800,000 complaints.Meanwhile complaints about invest-

ments rose from 69,089 to 82,124over the half-year.

Lawyer says trader atUBS did not act aloneTHE lawyer for accused UBS rogue

trader Kweku Adoboli said in courtyesterday that Adoboli did not actalone but in close cooperation withfellow traders who later stabbedhim in the back.

Adoboli, 32, denies charges offraud and false accounting that costthe Swiss bank $2.3bn.

His lawyer, Charles Sherrard, toldSouthwark Crown Court thatAdobolis three colleagues on thebanks Exchange Traded Funds desk

BY CITY A.M. REPORTER had taken part in some of thefraudulent behaviour of which he isaccused. Prosecutors have portrayed

Adoboli as an out of control roguetrader. His defence team have arguedthat UBS turned a blind eye to rule-breaking as long as it made the bankmoney.

Your team changed from beingthe four musketeers to threemusketeers, who decided just beforehe (Adoboli) confessed, collectivelyand individually, to stab him in theback, leaving him to bleed on theprison floor, Sherrard said.

THREE cross-party members of theFrench Senate have vigorouslydefended the mega-merger

between BAE and EADS, calling itthe best news the Europeandefence industry has received forsome time.

Writing in a French paper, Jean-Louis Carrre and Daniel Reiner ofthe dominant Parti Socialiste and

Jacques Gautier of the UMP calledthe announcement of a possible

French politicians stand up fordefence giants mega-merger

BY CATHY ADAMS merger a thunderbolt, but saidthat if the merger were to be

green-lit, it would be anextraordinary opportunity.

They added: We must not allowit to slip through our grasp.

The comments come as themerger is facing obstaclespolitically.

Germanys defence minister saidyesterday that the 10 Octoberdeadline should be extended,

suggesting there were still manyissues to thrash out.

FRIDAY 28 SEPTEMBER 20125NEWScityam.com

www.zegna.com

A New Scent for a New Day

3,577,599COMPLAINTS RECEIVED IN

FIRST HALF OF THE YEAR

2,232,294WERE ABOUT PAYMENT

PROTECTION INSURANCE

PPI

FIRMS PAID OUT

3.16bn

OF WHICH WAS FOR INSURANCEPRODUCTS SUCH AS PPI

TO RESOLVE COMPLAINTSIN THE LAST HALF OF THE YEAR

2.99bn

OF COMPLAINTSARE CLOSED

WITHIN

85.8%

8 WEEKS

!

ROYAL BANK OF SCOTLAND

SANTANDER

NAT WEST

MBNA

LLOYDS TSB

HSBC

CAPITAL ONE

BARCLAYS

FINANCIAL FIRMS WITH THE MOST COMPLAINTS* T OTAL COMPLAI NT S I NS URANCE RELAT ED

BANK OF SCOTLAND 362,869

442,266

291,821

280,358

116,688 145,943

170,064

431,708

278,555

295,934

240,597

195,801

226,481

209,361

66,362

156,258

391,272

102,482

*For first half of the year

SOURCE: FSA

PPI DOMINATES BANKING COMPLAINTS

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Todays statistics do not reflectthe real progress of the NewBuyGuarantee since they only coverthe first four months of theschemes operation.

As the H ome Build ersFederation have recentlyreported, 1,500 reservations havebeen made t hrough NewBuy andat least 25,000 additional new

homes will be built as adirect result.

able to benefit from the scheme.Jack Dromey, Labours

shadow housingminister, said thefigures show the vastgap between thegovernments rhetoricand the reality forthose who want torealise theirdreams ofowning theirown home.

A governmentspokesman said:

BRITAINS biggest companies shouldput their audit contracts out totender at least once a decade, theFinancial Reporting Council said asit set out a major overhaul of itsguidance today.

The regulator also calls on boardsto end the practice of trumpetingpositive news in annual reports,while keeping other figures hiddenamong the details.

These changes are something wehave been thinking about since thefinancial crisis, about whatcontribution we can make to helpimprove things, FRC chairmanBaroness Hogg said.

We have consulted widely on thisand there was large support for re-tendering rather than mandatoryrotation.

The Europeans are talking abouta mandatory rotation, but we thinkwhat we are proposing will makecompanies think about exactly whatthey are getting for their money.

Authorities in Europe areconsidering new rules to force firmsto switch auditor every 15 years.

Europe is also mulling a ban onauditors performing other servicesfor their clients, but the FRC hasstopped short of recommending this.

The Institute of Directors cheeredthe FRCs tighter new rules.

Auditors need

to pitch againevery 10 yearsBY MARION DAKERS

THE SIZE of the second quarter drub-bing to the UK economy was reviseddown again yesterday, as extra datashowed that manufacturing, con-struction and production fell lessthan previously thought.

GDP fell 0.4 per cent between thefirst and second quarters, the Officefor National Statistics revealed, 0.1percentage points down on the firstrevision, and 0.3 percentage pointsshy of the first estimate.This revision raises the possibility

that without the impact of theQueens Jubilee which is thought tohave cut around 0.5 percentage pointsfrom GDP growth in the second quar-ter the economy would have beenon the path to recovery.

The underlying trend was mostlikely one of very modest growth afterallowing for the lost working day dueto the Jubilee, said Chris Williamsonat Markit economics.

Many analysts now expect growth

Revised outputfigures suggestUK recovery ...

BY BEN SOUTHWOOD though modest to return in the sec-ond half of the year. A rebound is like-ly for the third quarter, Williamsonclaimed, Data such as retail sales,industrial production, tax receipts andexports have all suggested that theeconomy picked up again in July, andthe PMI surveys improved again inAugust.

Bank of England rate-setter PaulFisher agreed with this assessment inan interview with The Sun. The econo-my would rebound in the third quar-ter with a very strong GDP number,he said.

Despite this optimistic outlook,there is a widespread expectation thatthe Bank will extend its quantitativeeasing programme in November,when the current 50bn package ofasset purchases is completed.

More stimulus from the Bank ofEngland remains highly likely in thefourth quarter, said Howard Archer atIHS Global Insight, explaining hisjudgement with reference to the stillweak economy.

Finance regulators tell banks toissue equity to up capital ratiosBANKS need to raise capital

externally if they are to hitregulatory targets and increaselending, rather than shrinkingtheir balance sheets to hit incomingcapital requirements, according tothe Financial Policy Committees(FPC) minutes published yesterday.

In the past the key Bank ofEngland committee has told banksto retain earnings and cut pay toraise capital levels.

But the minutes show the FPC isnow concerned that earningsgrowth will be slow, limiting thecapital boost from this source.

BY TIM WALLACE Combined with the increasedpressure of weak economic activityand redress for mis-selling financial

products and other conduct issues such as PPI compensation it iscalling for banks to raise capitalexternally.

Recent improvements in marketconditions should help in thatrespect, with the options includingdebt conversion and the issuance ofsuitable contingent capitalinstruments as well as conventionalequity, the FPC concluded.

The Committee warned thatraising capital ratios would onlyhelp economic growth in themedium-term, as lending will likely

shrink, holding back the economy.However, by making banks

stronger and more stable in the

medium-term, it hopes the cost offunding will drop, boosting lendingand profits in future.

The long-term aim is to build upcapital buffers which can be rundown in economic downturns, thusboosting lending and so growth.

If the buffers existed, the FPC saidit would consider allowing them tobe used now, as the economy isflagging. But as the buffers are notyet in place, it favours pushingcapital levels higher in the nearterm to protect from the heightenedrisk from the Eurozone.

Grant Shapps said 100,000households could benefit

THE UK current account slumpedto its biggest ever deficit in thesecond quarter, data from theOffice for National Statisticsrevealed yesterday.

Rocketing to 20.8bn, thedeficit was not only the biggestrecorded in money terms, butalso, at 5.4 per cent of GDP, the

biggest relative to the size of theeconomy and the data series

began in 1955.This gap soaring even above

the first quarters 15.4bndeficit, which was then the worst

... but second-quarter current

account hits worst ever deficitBY BEN SOUTHWOOD ofall time seemed to make amockeryof chancellor GeorgeOsbornes wish for the UKto payits way in the world. The UKbeganin 2012 to receive lessincome on overseas investmentthan foreign investment earnedin the UK.

Most of the gap came from EUinteraction where the secondquarter saw the UKs second

biggest deficit, after its all-timerecord in the first. But the UKscurrent account outside the blocalso moved into a 1.3bn deficit,after years of surplus, including a7.3bn surplus last quarter.

NEW POWERS for the Bank ofEngland to control banks capital

buffers should be good forfinancial stability in principle,

ratings agency Moodys saidyesterday.But it warned the Financial

Policy Committees (FPC) jointmandate to promote stability and

growth could lead to friction.If the FPC lowered capital

requirements to stimulate growthin a recession, it would likelyconflict with the micro-prudentialregulators objective to mitigatesolvency risks of individualinstitutions, said the report.

Even if the overall effect on thefinancial system was positive, the

Moodys warns of policy clashbetween growth and stability

BY TIM WALLACE FPC lowering capital requirementswould be credit negative forparticular investors if the bank in

which they had invested becameundercapitalized relative to itscurrent risk profile.

The FPC also has tools to preventdamaging bubbles from growing infinancial markets but Moodyssaid the decision on when and howto use those could become political.

Only the next cycle willdetermine whether macro-prudential regulators such as theFPC can really take the punch

bowl away while the party is infull swing, it concluded.

It will also determine whetherthe FPC will succeed inencouraging banks to increase netlending in a downturn.

FRIDAY 28 SEPTEMBER 20126 NEWS cityam.com

The trade data will come as a blow to George Osborne, who said the UK should pay its way

Just 250 homes sold throughgovernments NewBuy schemeJUST 250 houses have been soldthrough the governmentsflagship scheme to help first-timebuyers onto the property ladder,figures revealed yesterday.

The NewBuy programme offersmortgage guarantees topurchasers of new-build homes,even if they can only raise a fiveper cent deposit. Then-housing

minister Grant Shapps had saidthat 100,000 households will be

BY JIM WATERSON

SPANISH power firm Iberdrola isnegotiating the sale of a minoritystake in its UK electricity grid,

valued at 4.5bn, as part of itsstrategy to cut debt.

Infrastructure and sovereignfunds are the main potential

buyers of the grid, owned byScottish Power, unnamed sourcesclose to the talks said.

The sale of up to 49 per cent ofScottish Powers electricitynetwork could raise between1bn and 1.5bn for its Spanish

parent.Iberdrola did not comment on

Scottish Power owner in talksto sell stake in electricity grid

BY CITY A.M. REPORTERwhat it described as marketspeculation, sparked by a reportin a Spanish financial newspaper

yesterday.Two Canadian pension funds

the Ontario Teachers PensionPlan and the BorealisInfrastructure Fund are both

believed to be in talks with theutility giant.

It is understood the talks withpotential investors are over aminority stake.

Sources close to the talks, saidthere are no plans to change the

way the distribution and

networks division of ScottishPower is managed.

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THE NHS should learn from the Citytakeover process and allow successfulhealth providers to take full control offailing public hospitals, according toresearch released today by the thinktank Reform.

Professor Paul Corrigan, the reportsauthor and a former health adviser toTony Blair, told City A.M. that the cur-rent ad-hoc policy of merging failingNHS hospitals with each other is notan effective way of raising standards.

One of the lessons from the City isthat a considerable number oftakeovers fail to add shareholdervalue, because there is insufficientchange by the new management, hesaid.

Were trying to learn from the Cityso a successful takeover needsto be tough, using expertiseto bring about the amountof change required to turna hospital around.

Newly appointed healthsecretary Jeremy Hunt willhave to deal with more than20 NHS hospitals that arecurrently classed asboth finan-cial and clini-cal failures,

while push-

NHS hospitals

urged to copyCity takeoversBY JAMES WATERSON ing through politically sensitive

reforms and finding 20bn in savings.Corrigan claims politicians are reluc-

tant to actively encourage takeovers ofhospitals but says medical profession-als may soon refuse to work in sub-standard environments.

The NHS promises every single serv-ice everywhere all the time. That is apromise that modern medicine can-not keep your local village hospitalcannot do brain surgery. We have notexplained that to the public.

For the first time weve got doctorsgoing out and telling the public theycannot provide the required cover.Doctors will say that hospitals areunsafe and [will not put their person-al] reputations on the line, causingbits of the NHS to crumble.

In response health minister LordHowe said: There isnt a one-size fits

all answer to this problem. Each NHSTrust will need a tailored solutionand different levels of support. Weare working closely on this basis

with the Trusts we have identified ashaving problems to ensure they can

provide high quality services for theirpatients in future.

Labour did not provide a com-ment.

DO YOU AGREE WITH THE REFORMRECOMMENDATIONS?Interviews by Amelia Brust

They should be turned over to better hospi-tals. I think they do a better job than people

give them credit for but it could be improved more.

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

MARTIN WHITEFREELANCE CONSULTANT

I think failing hospitals would be betteroff put into the hands of other NHS

hospitals that are doing well. I believe in the NHS.

DANIEL DUPERSUMITOMO MITSUIBANKING CORPORATION

Better-performing NHS hospitals is thebest option privatisation has worked for

people who can afford it, but the NHS isnt for that.

BEN WOODLEYORIEL SECURITIES

CITYVIEWS

Jeremy Hunt has been told

to encourage NHS takeovers

FRIDAY 28 SEPTEMBER 20128 NEWS cityam.com

INSIDETRACK

DAVID HELLIER

WHEN Bob Diamond quitBarclays in July, there weremany, myself included, whopredicted that the banks

investment business would strugglehere on in.

Longer-term that may indeed be thecase, but the message so far from theworld of UK corporate broking is

showing a different story. Two bigbroking mandates, that of SevernTrent and most recently TUI Travel,have moved to Barclays sinceDiamonds demise, taking the banksUK client list up to 30.

Corporate broking in itself is not ahugely profitable activity to be in; itsraison detre for investment bankers,though, is that it begins a relation-ship with corporates which oftenleads to advisory positions in merger

and acquisition deals, restructurings,flotations and the like, which areprofitable, sometimes seriously so.When TUI Travel changed its bro-

kers a few days ago, it turned to Bankof America Merrill Lynch (BAML),another bank that has had its trou-bles but which now seems to be recov-ering its mojo.

New recruit Jonathan Bewes playeda principal hand in winning the TUI

mate for BAML but it is some of theold stagers at the bank, such asSimon Mackenzie-Smith and RupertHume-Kendall, ably supported byFederico Aliboni, who have beenkeeping its UK corporate broking andequity capital markets businesses topof the UK league table (witness therecent convertible bond issue for

Capital Shopping Centres as well as ablock trade in Reckitt Benckiser earli-er in the year).

On the negative side BAML will havebeen disappointed to have been keptoutside two recent deals from CairnEnergy despite being its broker.

Elsewhere there is much interest inthe performance of Jefferies, follow-ing its acquisition of Hoare Govettearlier in the year.As expected many of Hoare Govetts

largest clients have deserted the newset-up, as TUI has just done, butJefferies has been successful in pick-ing up other clients such as Sirius,Nordgold and Hummingbird.The banks strategy has been to

build on its deep sector specialisationin areas such as healthcare, technolo-gy, media and telecoms, oil and gas

and metals and mining.It has been active on the deal front,and recently scored a major successin the f lotation of Manchester Unitedwhere it was the lead adviser.

Getting the Manchester Unitedflotation over the line in the US mustcount as a triumph for Jefferies sincecountless other banks had tried to dothe same and failed. Some argue thebanks achievement was all thegreater since it overcame tremendous

cynicism, even from the book-run-ners on the deal.When analysing the current corpo-

rate broking scene in the UK it is alsoworth noting that HSBC appears to betesting the water with a view to mak-ing its presence felt. It has recentlyhired Simon Alexander to be a seniorfigure in corporate broking and there

are suggestions that headhunters arein place to try to resurrect the expert-ise at the bank which it once had inspades after buying James Capel.

Some say HSBC has also run theslide rule over Oriel Securities, towhich it has lent a tranche of money.

Although times are extremelytough in investment banking, thereare signs of life in some corporatebroking departments.

david.hellier@cityam.com

Dont write off the big guns of corporate broking yet

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TATE & LYLES shares were lifted yes-terday after the company sawimproved performance at its specialfood ingredients arm and said halfyear profit will be similar to lastyears level.

The groups first half ending 30September is being held back by thecost of re-opening a second plant forits zero-calorie sucralose sweetenerSplenda and the absence of bumperprofits from the high prices gainedfor its animal feed by-products theprevious year.Analysts said these two hurdles will

disappear in the second half of theyear. They expect Tate & Lyles annu-al earnings to rise three per cent forthe full year to March 2013.

In last years first half, the company

Tate & Lyle eyesSplenda profits

BY KASMIRA JEFFORD made a profit before tax of 241m onsales of 1.54bn.

Overall, while recognising the cur-rent level of uncertainty around thewider economy and volatile cornmarkets, we continue to expect tomake progress this financial year,the company said in a trading state-ment yesterday.The group said volume of sucralose

returned to growth in its secondquarter, but would still be lower thana year ago mainly due to tough condi-tions in Europe as well as strong com-paratives with the previous yearwhen a series of new sweetener prod-ucts were launched.The company reopened its McIntosh

sucralose plant in Alabama earlierthis year as its sole plant in Singaporewas struggling to cope with demand.

Shares rose 2.4 per cent to 670p.

Out of the threepoint pl

THERES nothing candy-coated incurrent European economicconditions, and Tate & Lyle has atrading update to prove it. But

the erstwhile sugar giant, now asweetener and starches supplier, stilllooks on track for its global plan.

Tate & Lyle sold its EU sugar

refining business back in July 2010, allpart of its Focus, Fix, Grow plan.Having completed its exit from sugarsby selling its Vietnamese sugarinterests in 2011, it is now very muchin fix mode so serious growth maybe just around the corner.

The firm now has two interlinkedbusiness units bulk ingredients isintended to drive cash generation forinvestment in the speciality foodingredients business, which already

BOTTOMLINE

MARC SIDWELL

10 NEWS FRIDAY 28 SEPTEMBER 2012

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ame forth sweetness11NEWScityam.com

provides more than half its operatingprofit, and a play on income growthin urbanising developing markets.

All this hasnt come without cost some 100m in all, including thereopening of the McIntosh sucraloseplant in Alabama and the creation ofa new global innovation centre in

Chicago. Perhaps more importantlyfor the long term, as these resultsshow, Tate & Lyle remainsundiversified. While its markets areglobal enough to offset a short-termdwindling of Europes sweet toothand its product range is relatively

wide, it is essentially in the corn-refining business. Getting out of sugaravoids its high and volatile prices, butcorn can face similar problems. A poorUS harvest has driven prices to thepoint where margins are being hurt.

Yet even that isnt all bad news. AsTate & Lyle moves up the value chain,

prices for its corn-derived productswill be increasing accordingly.As Tate & Lyle gets into growth

mode, the next question is who itwants to buy. Its plan is to accelerategrowth through acquisitions. So keepan eye out for sweet deals.

Javed Ahmed has led Tate & Lyle since 2009

Tates second quarter represents something of an amuse-bouche ahead offeasts to come. But with the first half now in the bag, this reads as an upbeat

statement to us, subject to the proviso that we are at the bottom end of consensus.

ANALYST VIEWS

HOW DID TATE & LYLE FAREIN THE FIRST HALF?Interviews by Kasmira Jefford

MARTIN DEBOO INVESTEC

Difficult market conditions in Europe and tough comps in Sucralose have hurtspecial food ingredient profits ...While this is clearly disappointing, we are

encouraged by the comments about strong demand and pricing in bulk foods.

ALICIA FORRY CANACCORD GENUITY

After a rather cautious first quarter, we believe this statement has a slightly morepositive tone as special food ingredients is back on track with a solid second quar-

ter... and it seems bulk has performed slightly better than we were anticipating.

DIRK VAN VLAANDEREN JEFFERIES

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RED faces at the Michelin guide yes-terday as the publications websiteinadvertently revealed which restau-rants have been awarded its famousstars a week earlier than planned.The list shows that London foodies

are spoilt for choice, with eightrestaurants receiving theirfirst star this year, includingAlyn Williams at the

Westbury Hotel, St. John Soho,Tom Aikens and Trishna.

Other eateries in thecapital that got thenod were Medlar,Launceston Place,Dabbous andHedone.

It was a particu-larly enjoyableexperience forKaram Sethi, headchef at Indian

Michelin starleak is perfectbirthday gift

restaurant Trishna in Marylebone vil-lage, who turned 29 yesterday.

He told The Capitalist: I am surprisedand honoured to be amongst suchgreat company and to hear the newson my birthday couldnt have madefor a better present.

Meanwhile Heston Blumenthalgained his fifth star in total as hisHinds Head pub in the Berkshire vil-

lage of Bray makes the list for thefirst time.

This is the third time in fiveyears that the Michelinguides awards have beenleaked online ahead ofschedule.

Perhaps the publishershave enjoyed a few toomany long lunches...

RIM vice presidents Martyn Mallick (left), Alec Saunders (centre) and Chris S mith (right)

Karam Sethi, 29, runs Trishawith his sister Sunaina, 24

RESEARCH in Motion (RIM) is in

something of a funk, with its shareprice more than halving this yearand customers switching over tothe iPhone, a trend not helped bythe delay of the next generation ofBlackBerry phones until next year.

However, the companys slidedoes not appear to have dampenedspirits. RIMs management have gottogether to record a cover of REOSpeedwagons seminal Keep OnLoving You to encourage appmakers to develop software for the

BlackBerry bosses jam in effortto win love from app developers

new devices, altering the words in

the power ballad to fill it withprogramming jargon.

The Because its the only thing Iwanna do line has been changedto Our updated SDK is really cool,

while I dont wanna sleep is nowThe APIs complete.

The accompanying music video,featuring product vice presidentsChris Smith, Martyn Mallick and

Alec Saunders on guitar, keyboardand vocals has become anovernight YouTube sensation.

Got A Story? Emailthecapitalist@cityam.com

12 cityam.com

cityam.com/the-capitalistTHECAPITALISTIts tough working in the City early starts and late nights

entertaining clients can make for arather long day. However, airlineCathay Pacific is offering the perfectshort-term solution for City workers

perennial tiredness. It is invitinganyone working in the area to visit theroof terrace at City shopping mall OneNew Change to test out the comfort ofits new flat bed airline seats. The offer,which coincides with the launch of itsnew business class cabin on the LondonHeathrow to Hong Kong route, is onlyopen on 2 to 4 October between11.30am and 5pm. So get in quick if youfancy a well-deserved midday nap. Ifthats not enough to tempt you, lightrefreshments are on offer too.

And if you want more than acatnap, then South Place Hotel

the Citys first ever independentluxury boutique hotel could be justthe place. Located between Moorgateand Liverpool Street, the hotel openedjust after the Olympics on 3

September. Last night, however,marked its official launch party. Cityfolk were there in force includingHenry Angest, the chairman and chiefexecutive of Arbuthnot, and ExpressNewspapers chairman RichardDesmond. Besides the free-flowingMoet there was plenty to keepattendees entertained with cabaretand circus acts as well as spy-themedcocktails in keeping with the partysvintage spy theme.

FRIDAY 28 SEPTEMBER 2012

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COMPASS, the catering and servicesgiant, yesterday announced aggres-sive measures to shrink operations inSouthern Europe by a quarter in theface of worsening economic condi-tions in the crisis-hit region.The group, which is providing

catering at this weekends Ryder Cupgolf competition in Chicago, report-ed a positive fourth quarter overall,led by strong growth in NorthAmerica and in emerging markets.

But conditions in Europe, particu-larly in Italy, Portugal and Spain, con-tinued to deteriorate in the secondhalf and suffered like-for-like volumedeclines of five per cent.

Compass did not disclose howmany people are likely to lose theirjobs as a result of the restructuringbut said revenues from its southernEuropean operations will be cut toabout 600m from 800m to pro-tect profitability.

It will take exceptional cash costs of100m in 2012 and 50m in 2013,

Compass to cutback in Europeto stem losses

BY KASMIRA JEFFORDand said it will generate savings of75m a year by 2014.

Chief executive Richard Cousins saidthe group will exit a series of non-prof-itable contracts such as motorwayservices in Portugal, where the intro-duction of tolls by the government haspriced some drivers off the roads.Aside from Europe, Compass said

expectations for the year to 30September remained unchanged,with underlying revenue expected togrow by around 5.5 per cent and oper-ating profit by about eight per centfor the year to the end of September.

HENNES & Mauritz yesterday posted third quarter profits of 4.9bn Swedish krona (460m),missing expectations, as grim economic conditions, bad weather and costly currency transactionshit margins. The retailer has also postponed the launch of its US online shop until next summer.

H&M DELAYS LAUNCH OF US ONLINE SHOP

Compass Group PLC

27 Sep21 Sep 24 Sep 25 Sep 26 Sep

700

705

710

715

720

725 p 704.5027 Sep

13NEWScityam.com

`TUI TRAVEL said yesterday it wason track to meet full yearexpectations after almost sellingout its summer holidayprogramme and recordingencouraging early winter holidaysales.

The travel giant behind Thomsonand First Choice said year-on-yearsummer holiday sales were up six

per cent in Northern Europe, fiveper cent higher in central Europe

TUI Travel posts strong summerand winter holiday bookings

BY KASMIRA JEFFORD and increased by two per cent inWestern Europe.

Tui said that while it wasrelatively early in the bookingcycle, winter booking sales had

been encouraging, particularly inNorthern and Central Europe.

The group also said UK summerholiday bookings for 2013 areoutperforming market rivals likeThomas Cook, with sales up 10 percent, driven by the sale of exclusive

holiday packages that cannot bebooked through another company.

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IN BRIEFRotork adds Citi as adviser Citigroup has added a newFTSE 250 mandate to its brokingbusiness, after joining UBS as financialadviser and corporate broker tomanufacturing group Rotork. Citi haspicked up clients includingGlaxoSmithKline and G4S in the lastyear, and is one of an army of banksworking on the Glencore-Xstratamerger, which is set to present a newdeal within the next week.

Daniel Stewart profits halve Daniel Stewart Securities yesterdayreported a five per cent rise inrevenues to 8.8m for the year to 31March. The investment bank saidprofit after tax fell to 0.5m, from1m last year. The group had 53clients in 2012 compared to 60 in2011, with 37 completed transactions.Daniel Stewart is in good shapedespite the prevailing economicmalaise, chief executive Peter Sheasaid yesterday.

Rift over Bumi probe deepens

Indonesias Bakrie family is facing apotential split with business tycoonSamin Tan, who invested $1bn inLondon-listed miner Bumi aninvestment now worth $140m.Tensions have risen since Bumilaunched a probe over financialirregularities into Indonesian coalproducer PT Bumi Resources Tbk, inwhich it has a 29 per cent stake. Sincethe probe was announced, the firmsshare price has fallen 80 per cent.

BRITISH insurers paid out almost200m a day in claims during 2011,according to industry figures releasedyesterday.

The Association of British Insurers(ABI), whose members represent 90per cent of the UK industry, revealedthe sum in its annual review of thesector.The motor insurance industry made

an underwriting loss for the seven-teenth successive year, with one claimmade for 14 in every 100 private carsinsured and an average payout of4,527.The average pay-out for a household

fire claim was 10,200, while for atheft claim it was 1,500. As heavyrain continues to affect large parts ofthe UK, insurers will be concerned tosee that the typical household bill fol-lowing a major flood hit 30,000.

Although 26.2m travel insurancepolicies were bought last year at anaverage of 35 for a single trip just700,000 claims were made for acci-

UKs insurance

claims costing200m per dayBY JAMES WATERSON dents that occurred on holidays.

Fraud remained a major issue, withan estimated 983m in illegal generalinsurance claims during the year,although the ABI claims that an addi-tional 2bn went undetected, which itsays adds around 50 to the insurancepremium costs of each UK household.The figures also confirm the indus-

trys position as one of the countrysmajor investors, managing assetsworth 1.8 trillion, as well as paying10.4bn in tax.

Otto Thoresen, the ABIs director gen-eral, said: From protecting millions ofcustomers to being a major contribu-tor to the UK economy, the insuranceindustry plays a key role in society. TheUK is the largest insurance market inEurope and third largest in the world.

Insurers are rising to the challengesof issues such as the increasing floodrisk, tackling the pension savings gap,reforming the compensation culture,and responding to UK and Europeanregulatory change to ensure that theindustry maintains its position as aworld leader.

FIRST Quantum, the London andCanada-listed copper and nickelminer, yesterday said it was raising$350m through the issue of

interest-bearing notes.The coupon will be determinedthrough a bookbuilding processled by Jefferies, the bank whichnow owns the UK corporate

broker Hoare Govett.First Quantum was one of the

long-standing clients of JefferiesPeter Bacchus, the firms globalhead of metals and mining, from

Jefferies advises First Quantumon its $350m high-yield issue

BY DAVID HELLIER when he used to work for MorganStanley.

First Quantum recently becamea broking client for Jefferies.

Philip Pascall has been chairmanand chief executive of First

Quantum since November 1996.Jefferies has lost some of thelarger clients it inherited fromHoare Govett but it has won anumber of other clients includingSirius, which is listed on the

Alternative Investment Market,First Quantum and Nord Gold, the

gold producing company spun offby the Russian group Severstal.

FRIDAY 28 SEPTEMBER 201214 NEWS cityam.com

The newjobs websitefor London

professionalsThenewjobswebsiteforLondonprofessionals

C

ITYAMCAREERS.com

THE SHIPPING division ofbroking giant Icap yesterdayconsolidated its position in the

giant Indian market by acquiringthe shipbroker CTI.

Icap paid $2.5m (1.5m) to takefull control of the firm, whichhas offices in New Delhi andMumbai and employs 28 people.Its core business is in dry, tankerand sale and purchase broking.

Former part-owner CaptainJaideep Kapoor will stay on aschief executive.

Henry Liddell, chief executiveof Icap Shipping, said that thepurchase meant the firm was

well positioned to takeadvantage of the booming Indianmarket.

We are delighted to havecompleted this acquisition. Icap

Icap Shipping buys Indian firmto expand its Asian presence

BY BEN SOUTHWOOD Shipping will now be able to takeadvantage of the excitingopportunities and increasingshipping demand in India, hesaid.

CTI Shipbrokers wasestablished in 2004 by MumbaisTradex, Singapores IslandShipbroker, and LondonsCapital Shipbroker now Icap.

Island Shipbrokers was itselfbought by Icap in Februar y asthe London-based firm looks toincrease control overlongstanding Asian affiliates.

Icap Shipping has 195 staffworldwide , with off ices in majorshipping centres such asHamburg, Gibraltar andSingapore.

Shares in its parent firm,which recently fell out of the

FTSE 100, closed yesterday down0.7 per cent at 330p.

INVESTMENT firm 3i saidyesterday that its European assetswere delivering solid returnsdespite the difficultmacroeconomic climate.

The firms Eur opean portfoliobrought in 30.8m for the sixmonths to September, a decreaseof 6m on last year, mainly due toa lower divided from AnglianWater Group.

European assets continue toperform well, while adversemacroeconomic conditions andforeign exchange movementscontinue to have a negativeimpact on the valuation of the 3iIndia Infrastructure Fund, saidchairman Peter Sedgwick.

As of Wednesday the firm had

169.7m in cash, up 25.5m fromthe last interim statement.

3i Europeanassets strong

BY BEN SOUTHWOOD

Aviva sells Sri Lankan unit asdisposal strategy acceleratesBRITISH insurer Aviva yesterdayagreed to sell its stake in a Sri

Lankan joint venture for 31m, thelatest step in a bold plan tostreamline the firm.

Hong Kongs AIA Group, formerlypart of American insurance giantAIG, paid cash for the 58 per centstake in the business, which was runin co-operation with local financialgroup NDB Bank.

John McFarlane, who took over as

BY JAMES WATERSON Avivas executive chairman on atemporary basis in May, intends tosell 16 underperforming units in anattempt to release capital and shore

up the firms share price.Yesterday he said the sale is anexample of further progress towardsnarrowing the groups focus whichwill allow the firm to focus onbusinesses where we can produceattractive returns with a highprobability of success.

Meanwhile AIAs chief executive,Mark Tucker, called Sri Lanka

compelling because of its stronggrowth prospects and low existinglevels of insurance penetration.

Aviva was advised by Morgan

Stanley and the deal is expected tocomplete this year, subject toregulatory approval.

This week it was reported thatAviva has set a 29 October date forbids for its Malaysian business, whileits US and South Korean units arealso on the block. Earlier this yearthe firm sold half of its stake inDutch insurer Delta Lloyd for 318m.

HOW MUCH DO UK INSURERS PAY OUT ON A DAILY BASIS?

HOUSEHOLDINSURANCE

9m 3.7m 19.4m 6m

7.1m 8.8m 5.9m 1.1m

33.1m 53.6m 36.8m

9m

BUSINESS PROPERTYINSURANCE PRIVATE VEHICLEINSURANCE BUSINESS VEHICLEINSURANCE

PRIVATE HEALTHINSURANCE

ACCIDENTINSURANCE

LIABILITYINSURANCE

TRAVELINSURANCE

ANNUITYPAYOUTS

ENDOWMENTPOLICIES

to householders whose homes havebeen damaged or contentsstolen or destroyed.

LIFEINSURANCE

HOUSEHOLD NESS VEHICLEVATE VEHI LE BUSI

TRAVELNSURANCE

SURANCE

.

IABILITYRANCE

.

D

.

ANNUITYPAYOUTS

E

ESS PROPUSI ERTY PRI

m

PRIVATE HEALNSURANCE

. m

A CCIDE TNSURAI

H

DAILY INSURANCE PAYOUTS:

TOTAL PAYOUTS: ALMOST 200M A DAY. .

.

LIFENSURANCE

WMENTOLICIES I

CE

tob

t

UK INSURERS:Manage investments of

1.8 trillionand paid 10.4bn in taxesin 2010/11

SOURCE: ABI

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MIZHUO Financial Group and Mitsubishi UFJFinancial Group, the two main lenders to Sharp,

have approved a 210bn yen (1.6bn) bailout ofJapans troubled TV maker, sources said yesterday,clearing a major obstacle to firms survival.

The two banks have been orchestrating Sharpsfunding plans in exchange for drastic changes atthe century-old firm, including selling overseas TVassembly plants and shutting solar panelbusinesses in Europe and the US.

Sharp, which produces air conditioners,microwave ovens and TVs, expects to lose morethan 100bn yen this business year, sources say,savaged by competition from rivals led by Samsung.

Lenders offer Sharpa 210bn yen lifeline

BY CITY A.M. REPORTER

NIKE last night reported first quarter earnings 12per cent lower than the same period last year as thehigher cost of raw materials took its toll on thesportswear giant.

For the three months to the end of August,Nikes net income fell to $567m (349.2m), or$1.23 per share. That compares with net income of$645m, or $1.36 per share, last year. Revenue rose10 per cent to $6.67bn from $6.08bn last year.

Future orders, or orders of Nike branded shoesand clothes scheduled for delivery fromSeptember 2012 until January 2013, rose six percent. Last year, future orders were up 16 per cent.

However, orders in the China region, whichincludes Taiwan and Hong Kong, fell five percent worst than anticipated and confirming aslowdown in one of its main markets.

The shares fell almost four per cent in after-hours trading.

Nike results marredby slowdown in its

key Chinese marketBY KATIE HOPE

15NEWS

CARMAKER Toyota plans to ramp upproduction of its Auris models in the UK, itsEuropean head Didier Leroy said yesterday.

He pledged new work for Toyotas Derbyshirefactory while speaking at the Paris Auto Show,

where car firms have been trying to brush off agloomy European market to flog models tomarkets in the rest of the world.

Some firms warned that the slowdown inEurope will keep sales flat for the next two

years, while several launched no-frills cars in anattempt to lure price-conscious shoppers.

There were no such qualms for Jaguar,however, as it roped in singer Lana Del Ray tounveil its new F-type model.

Toyota pledges moreUK work at car show

BY MARION DAKERS

ARSENAL bucked the trend in the typically loss-making world of top flight football yesterday,announcing a 36.6m pre-tax profit for financial

year 2011-12.Londons biggest clubs pre-tax earnings were

up from 14.8m the previous year, although therise was considerably boosted by player sales.

Retained profit came in at 29.6m. Revenueswere down from 255.7m to 243m, yet this wasdue to lower property sales. Turnover fromfootball activities rose from 225.4m to 235.3m.

Two thirds of Arsenal is owned by Americanbusinessman Stanley Kroenke, while billionaireAlisher Usmanov owns nearly 30 per cent.

Arsenal shoot way to37m pre-tax profits

BY JULIAN HARRIS

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IN BRIEFPetrofac nets $200m contract Oil services firm Petrofac yesterdayannounced it had been awarded a

$200m (123m) deal by Kuwait OilCompany for a new power distributionnetwork. The engineering,procurement and constructioncontract, which will take 24 months tocomplete, involves FTSE 100-listedPetrofac building substations andimproving power supplies to Kuwaitsonshore oil fields.

Production up at Atlantic Coal Pennsylvania-focused Atlantic Coalyesterday unveiled increasedproduction and revenues over the firstsix months of 2012. The AIM-listedcoal production firm reported a 17 percent increase in coal production to69,415 tonnes, up from 59,533 tonneslast year. Revenue spiked 19 per centto $8.9m (5.4m), up from $7.5m inthe first half of 2011. As a result, profitjumped 79 per cent to $1.5m.

Frontera Resources reports loss Frontera Resources swung to a lossin the first half of this year, reporting anet loss of $4.4m (2.7m) from $11.2mover the first half of 2012. The oil andgas exploration and productioncompany, whose core operations arein Georgia, reported increased crudeoil sales of $3.3m, up from $3.1m lastyear. The oil and gas company iscurrently expanding its ventures in theBlack Sea.

THE GOVERNMENTS Tech City proj-ect has seen its first successful exit,with Shoreditch-based Facebookapplication developer iPlatform soldto Irish marketing firm Betapond.

iPlatform was founded by entrepre-neurs Joshua March and Dan Lesterin 2008, shortly after Facebookallowed outside developers to createsoftware on the website. The firmdesigns social apps for the likes ofMcDonalds and TheEconomist, and was thefirst British firm togain Facebooks recog-nition as a preferredmarketing developer.

Its sale, the value ofwhich was not dis-closed, is a success forNumber 10s Tech Cityinitiative, which haschampioned iProspectand other technologystartups in London.

Tech City first as

Facebook appdeveloper sold

BY JAMES TITCOMB March, who is leaving iPlatform tofocus on his other startupConversocial, told City A.M. that thesupport of Tech City has given thescene credibility, and its becomingeasier and easier to set up companies,its less of a risk.

Benjamin Southworth, deputy chiefexecutive of Tech City, said: To see ahome-grown Tech City company suchas iPlatform achieve such successshows the potential of our tech com-munity here in the UK. Its goingfrom strength to strength.

Betapond, which has offices inDublin and San Jose, willemploy around 30 people in itsLondon office.

In a separate deal, Londonemail security firm Mimecastraised $62m (38m) from USinvestors in a funding round

valuing it at $300m.

WANdisco PLC

27 Sep21 Sep 24 Sep 25 Sep 26 Sep

310

320

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340

350

360

370 p 360.0027 Sep

Joshua March is leaving iPlatform,which he co-founded four years ago

TUBE union the RMT yesterdaysaid it will ballot drivers forindustrial action over plans tointroduce driverless trains to theLondon Underground.

The union is angry at imminenttests of driver-free Tube trains onthe Jubilee line, which it arguescould lead to unstaffed stationsand ticket offices.

Every train must have a driver,to ensure the safe and effectiverunning of the Underground,said the RMT general secretary

Fresh Tube strike looms as RMTballots over driver-free trains

BY MARION DAKERS Bob Crow.Plans to scrap drivers or

reduce their driving duties arerisking safety, services and jobsand are motivated by savingmoney and undermining tradeunionism.

Mayor of London Boris Johnsonsaid during his reelectioncampaign that entire lines could

become automated.The RMTs ballot comes just

months after transport unionsthreatened to walk out duringthe Olympic and Paralympic

games in a dispute over bonuses.

FRIDAY 28 SEPTEMBER 201216 NEWS cityam.com

RMT general secretary Bob Crow is squaring up to Boris Johnson over automated trains

EU steps up antitrust fight withMicrosoft over Internet ExplorerMICROSOFT moved closer to ashowdown with the EU yesterday

when the European Commissionsantitrust chief said it was close tocharging the tech giant over itsfailure to comply with competitionlaw.

Joaquin Almunia, the EUscompetition commissioner, said itwould soon lodge formal objectionswith Microsoft over its failure tooffer a choice of web browsersother than its own InternetExplorer software, opening thedoor for the company to be fined.

The next step is to open a

BY JAMES TITCOMB formal proceeding into thecompanys breach of an agreement.We are working on this, Almuniasaid.

Microsoft was told to offer arange of browsers on its Windowsoperating system in 2009, but hasfailed to do so on millions ofcomputers, according to the EU.Microsoft has put its failure downto a technical glitch related to asoftware update, and declined tocomment yesterday.

An EU spokesperson told City A.M.yesterday that the supposed glitchis not the point, because whatmatters is that [Microsoft] hasbreached the agreement.

The EU will now make clear itsobjections to Microsoft, giving it achance to respond before it levies afine. The company could face a fine

of up to 10 per cent of its globalrevenues, although this is believedto be unlikely. Chipmaker Intel washanded a 1.06bn (842m) charge in2009 over anti-competitivepractices 4.15 per cent of turnover.

Internet Explorers market sharein Europe has roughly halved since2008 to 29 per cent this year, as ithas lost out to Googles Chrome.

Chrome controls 29.3 per cent ofthe market, while Mozillas Firefoxhas 30.3 per cent, according to webresearch firm Statcounter.

WANdisco eyes new investmentafter landmark technology IPOBRITISH software firm WANdiscosaid yesterday that it would spendthe cash from its summer initialpublic offering (IPO) onsignificantly expanding its staff asthe company invests in the fastgrowing big data market.

Sheffield-based WANdisco haspocketed $26m (16m) from itsfloat on Aim in June and has seenits shares rise 75 per cent since thefloat. In its first earnings report asa public company yesterday, it saidrevenue had risen 53 per cent in

the first half of the calendar year to$2.92m.

BY JAMES TITCOMB WANdiscos float has been one ofthe few successful technology IPOsin recent months, with the offeringmore than three timesoversubscribed.

Chief executive officer DavidRichards said: We laid out clearobjectives when we listed on Aimincluding sales growth and productexpansion. I am delighted that weare meeting and exceeding thosegoals so rapidly following flotation.

The firm provides collaborationsoftware, which allows customersincluding Barclays, Hewlett Packardand Intel to work together. Richards

said WANdisco had added 23 newclients in the first half of the year.

The firm continues to make aloss, posting a $3.6m deficit overthe period, although growthimpressed investors, sending sharesup more than 14 per cent yesterday.

VODAFONE will have to spend500m on integrating Cable &

Wireless Worldwide (CWW)sinfrastructure into its ownnetwork, the firm announced

yesterday, as it counted the cost ofthe 1.3bn acquisition.However, Vodafone said the

benefits of the purchase werebetter than many analysts hadexpected, leading to cash

generation of 150m-200m by2016.

CWW was sold in July asVodafone aims to bolster itsnetwork to cope with the growthin data usage and improve its

business sales. CWWs 12,400miles of fibre cables around the

Vodafone will have to fork out500m to make most of CWW

BY JAMES TITCOMB UK will also relieve Vodafonesdependence on renting lines fromsuppliers such as BT.

CWWs newly-appointed chiefexecutive Nick Jefferey said thefirst priority was to stabilise thetelecoms firm and stem the

declining revenues. It just takes along time for this ship to turnaround, and its that we see taking18 months to two years, he said.

Jack Rich at Espirito Santo saidthe length of time for the deals

benefits to accrue was adisappointment.

March 2016 is more than threeand a half years after the dealcompleted, he said, adding thatthe delay was a reflection of thepoor state that the CWW businesshad descended into.

FOUR companies are believed tohave submitted bids for the EssexThameside rail route by

yesterdays deadline.The Department for Transport

received proposals from NationalExpress, which currently runsthe route under the c2c name, as

well as FirstGroup, Abellio andLondon Overground operatorMTR.

All four f irms were shortli stedlast March.

The winner, to be announcedby the department in January,will run the route betweenFenchurch Street and Southend

for 15 years from the start dateof 26 May 2013.

Bidders line up to take on the

Essex Thameside rail franchiseBY MARION DAKERS The government wants the

eventual operator to upgrade tosmart-ticketing such as theOyster card, improveaccessibility and keep up theroutes punctuality record.

National Express trumpeted itsbid with new f igures thatshowed a punctuality rate of 98.7per cent in the four weeks to 15September on the c2c route.

We believe the bid for the newfranchise that weve submittedtoday builds on c2cs currentindustry-leading performance,provides a high quality service tocustomers, and delivers excellent

value to both farepayers andtaxpayers, said Andrew Chivers,

managing director for rail atNational Express.

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IN BRIEFLack of lending hurting retailers The lack of mortgage lending tofirst time buyers is not only hurtingthe housing market, but also retailersselling tools, homewares, andfurniture, data revealed today.Boosting lending would have a knock-on effect on these markets, the datareleased jointly by Genworth, theBritish Retail Consortium and KPMGshowed. A lack of lending leads to alack of productive spending, saidGenworth boss Angel Mas.

UK consumers less downbeat UK consumer confidence grew inSeptember, an index from marketresearch firm GfK revealed today, buthouseholds were still gloomy. Theirheadline index grew from minus 29 inAugust to minus 28 in September,putting the index two points aboveSeptember last year. Even a onepoint increase...will offer somegrounds for optimism to thegovernment after such a stagnantsummer, said Nick Moon at GfK.

Under 40s plan to leave the UK A growing proportion of UK citizens

under the age of 40 are seekingadvice from wealth managers aboutmoving overseas, the deVere groupclaimed yesterday. The third quartersaw a 36 per cent upturn in thenumber of under 40s seeking adviceon emigrating, the firm said. But chiefexecutive Nigel Green said the countrycould ill afford to lose these peoplesince they were key [to] driving theUKs economy forward.

US GROWTH estimates for the secondquarter were slashed yesterday whiledurable goods sales slumped, butAmerican unemployment continuedon its steady downward trend.

Real GDP increased at an annualisedrate of 1.3 per cent in the second quar-ter, the Bureau of Economics thirdestimate revealed, lowering its secondestimate by 0.4 percentage points.

On the quarter, the US economyexpanded by just 0.3 per cent in thethree months to June.The revision was due to a $5.3bn fall

in farm inventories, after their $1bndip in the first quarter, due to the

worst drought for decades, as well asweaker consumer and businessspending than previously estimated.Adding to this less optimistic pic-

ture was the 13.2 per cent collapse innew durable goods orders in August,according to Commerce Departmentdata, the biggest fall since the heightof the recession in January 2009.

However analysts said this data wasextremely volatile due to commercialaircraft component sales. Dontpanic, said Paul Ashworth, top US

Second quarterUS GDP growth

revised downBY BEN SOUTHWOOD economist at Capital Economics,Commercial aircraft orders fell by astunning 101.8 per cent month onmonth. Excluding transport from thedata, new orders were down just 1.6per cent, a small reversal of the 3.3 percent July increase.The labour market was a lone source

of good news. The headline seasonallyadjusted measure of new unemploy-ment benefit claims declined 26,000,dropping from 385,000 to 359,000 lastweek. And total claims also declined,although the data is for a week earlier.Seasonally-adjusted insured unem-ployment declined 4,000 into theweek ending 15 September, while theunderlying figure dived 94,416.

SOURCE: US DEPARTMENT OF LABOUR

Fewer and fewer claim unemployment benefits in the US

Sep12Sep10Sep08Sep06

1m

0

2m

3m

4m

5m

6m

7m

Insuredunemployment

Notseasonallyadjusted

Seasonallyadjusted

HOUSE BUILDING continued toslump in 2012, a lobby forhomeowners revealed today,

continuing the chronicundersupply in the UK market.

New home registrationsdeclined to 9,553 in August, fourper cent below last years figureof 9,978, according to data fromthe National House-BuildingCouncil (NHBC). This brought thetotal for the year-to-date up to72,740 meaning the first eightmonths of 2012 saw some 15 percent fewer applications than thesame period last year.

Industry body says new houseundersupply is getting worse

BY BEN SOUTHWOOD Viewing new homeregistration figures in absoluteterms, year to date, underlinesthe real scale of the challengefacing the whole house building

industry at the moment, saidRichard Tamayo at NHBC.

Tamayo said governmentintervention was needed, butthat it could only be successful ifstate and industry workedtogether.

The continued undersupply ofnew housing means the UK ismissing out on a potential sourceof much needed economic

growth this obviously needs tobe addressed, Tamayo added.

FRIDAY 28 SEPTEMBER 201218 NEWS cityam.com

Thousands fewer new homes are being registered in 2012 than were during 2011

| PROMOTION

Terms of Prize: Prize is valid for stays on a Sunday Friday evening, excludes Saturday evenings and bank holidays. The prize is valid for stays up until 30th April 2013 and will not be extended after this date. The winner is respon-sible for any extras during their stay. Prize is subject to availability and prior booking. Foxhills Club & Resort will never share data with third parties, and will time to time keep you up to date with news and exclusive offers from the

Club, should you wish not to be included please let us know by adding no after your answer. Dont worry you will not be bombarded.

FOXHILLS, SURREY GET BEHIND EUROPE FOR 2012 RYDER CUP

CHANCE TO WIN A GOLF BREAKAT THE LEGENDARY GOLF RESORT FOXHILLS, SURREYCity AM readers have the chance towin an overnight stay for four people atthe luxury Golf Resort in Surrey find-ers of current golfing star Paul Casey.

The quintessentially English ResortHotel is conveniently located in theheart of a 400 acres estate withinSurreys best countryside; just 40 min-utes from central London & 15 minutesfrom Heathrow.

Foxhills Club & Resort is proud toboast 2 championship Golf Courses former home to The European TourSchool, a challenging Short Course (

Par 3), State of the Art 14 bay Drivingrange, a luxury Elemis Health Spa, 11tennis courts hosts of InternationalLadies Tennis, purpose built childrensclubhouse, 3 restaurants, 9 conference

rooms, 70 bedrooms and home to 13categories of private and corporateMembership.

Foxhills pride themselves on theirGolfing history;10 times Ryder Cupplayer and twice captain, former HeadProfessional Bernard Hunt MBE, found-ed Foxhills prestigious Golf Foundationand after 25 years service Foxhills wenton to rename one of the ChampionshipCourse The Bernard Hunt.

This year has seen Foxhills investover 5 million in their brand new sisterclub Farleigh. Farleigh Club &

Restaurant is located only 35 minutesfrom Foxhills and plays host to 27 holesof championship golf designed by JohnJacobs Associates ( Course Designersfor the Edinburgh Course at

Wentworth), a destination restaurantNineteen at Farleigh where Head ChefLuke Mills trained under Gary Rhodescreates daily masterpieces satisfyingnot only the Golfer but the foodiesamongst us; a games room includingstate of the art Golf Simulator, widescreen HD TV, American Pool Table andfour function suites catering for busi-ness and parties. Watch out next weekforCity AMs exclusive Reader offer tobecome a Member for the day atFarleigh and enjoy Free Golf whenaccompanied by up to three full paying

guests. Guests will be charged at theMembers rate.

Follow in legends footsteps andanswer the following question:

WHERE DID FOXHILLS NAME ORIGINATE FROM?

For a clue visit: www.foxhills.co.uk & search our Club history.

Prize includes:

A One Night Break for up to four people (two guests Sharing) in one of our luxury rooms Dinner on the night of arrival, breakfast the following morning Two round of championship golf on one of the available courses during their stay. Buggies

Entries must be by midnight 30th of September and sent to: Marketing@foxhills.co.uk Telephone: 01932 704465

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19FRIDAY 28 SEPTEMBER 2012cityam.com

LONDON REPORT

Smith & WilliamsonNick Murphy has been appointed

as investment managementdirector in the professional andfinancial services firms Londonoffice. He joins from Quilters,where spent 13 years and wasmost recently co-manager ofgross funds. Murphy also sat onthe asset allocation and charitycommittees at Quilters, and he isan associate of the Chartered Financial Analysts (CFA)Society of the UK.

Sberbank CIBRobert Hagon has been appointed as managing directorand co-head of equity sales trading at the Russian bank. Hehas over 25 years experience in equity sales trading, andwas most recently head of the London-based emerging

market sales trading team at Renaissance Capital. Hagonhas also held senior roles at UBS.

UBSJasper Tans has been appointed as a managing director inUBSs Europe, Middle East and Africa equity capital marketsdivision. Based in London, he will have specificresponsibility for Scandinavia and the Benelux. Tans joinsfrom Goldman Sachs, where he was a partner managingdirector in its European financing group. Tans was alsopreviously head of its Japanese financing group.

Jones DayThe law firm has appointed Jules Quinn as an employmentpartner in its London office, effective 5 November. She joinsfrom Nabarro, where she is head of employment. Quinn isexperienced in advising on both contentious and non-contentious employment matters, and specialises inadvising US companies based in the UK.

Towers WatsonDan Perrett has been appointed to the role of senior

consultant in the professional services firms executivecompensation team. He was previously a partner at HewittNew Bridge Street. Perrett has 17 years experience insimilar roles.

Abercrombie & KentThe luxury travel company has appointed Robert Green asgeneral manager of A&K International Estates, its new realestate division. He joins from Six Senses Private Residences,where he was director of sales and marketing. Green wasalso previously a director of Cluttons Resorts.

BLPThe law firm has announced the appointment of Nick Jonesas a senior associate in its commercial dispute resolutionteam. He specialises in financial services litigation, andpreviously worked at Addleshaw Goddard.

WHOS SWITCHING JOBS Edited by Tom Welsh

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

Spains reformplans help easeWall Sts pain

THE S&P 500 snapped a five-daystring of declines in a broad-based rally yesterday, as Spainsplans for economic reform

eased some worries about one of theEurozones most troubled countries.The benchmark S&P 500 rose one

per cent, its biggest percentage gainsince the Federal Reserve announcedits plan for a third round of stimulus

on 13 September.Spain announced a detailed

timetable for economic reforms forthe fiscally troubled nation and atough 2013 budget based mostly onspending cuts.

Any information that gives someunderstanding about whats going tohappen is good for the market. Itssmall news, but more certainty isgood, said Giri Cherukuri, headtrader at OakBrook Investments.The EUs Economic and Monetary

Affairs Commissioner, Olli Rehn,said Spains detailed timetable foreconomic reforms goes beyond whatthe European Commission has askedof Spain. Rehn said it is an ambitiousstep forward.

Gold stocks ranked among thedays bigger gainers in the wake ofSpains news; the PHLX gold/silverindex jumped 3 per cent.Adding to the rally was a last-

minute push by investors toreposition portfolios ahead of thequarters end, with the S&P 500 ontrack for a gain of 6.2 per cent in thethird quarter. Friday will be thequarter's last trading day.

What weve seen is broadly aconsolidation, but also an attempt byfund managers to position properlyfor the rest of the year, to be in thebest sectors, said Bruce Zaro, chieftechnical strategist at Delta GlobalAsset Management in Boston.

The Dow Jones industrial averageshot up 72.46 points, or 0.54 percent, to 13,485.97 at the close. TheStandard & Poors 500 Index rose13.83 points, or 0.96 per cent, tofinish at 1,447.15. The NasdaqComposite Index gained 42.90points, or 1.39 per cent, to close at

3,136.60.While the Nasdaq led Thursday'sgains, it also led the marketsdeclines earlier this week itsvolatility possibly reflectinginvestors nervousness about the USeconomic outlook, analysts said.Apple, up 2.4 per cent at $681.32,

gave the biggest lift to the Nasdaq.The semiconductor index gained 2.3percent, bolstering the Nasdaq 100.Intel was up 1.9 per cent at $23.09.After the bell, US-listed shares of

Research In Motion (RIM) surged 15per cent to $8.21 after the Canadianmaker of the BlackBerry reported asmaller-than-expected quarterly loss.In the regular session, the stockclosed at $7.14 up two per cent.

On the deal-making front, Tempur-Pedic International agreed to buyrival mattress maker Sealyfor about$242m and assume about $750m in

debt. Tempur-Pedic shares jumped14.4 per cent to $30.64.

GAINS by bank and mining stockshelped lift Britains benchmarkshare index yesterday, althoughinvestors said worries over the

Eurozone could limit further moveshigher and favour more defensive sectorssuch as food or health stocks.The blue-chip FTSE 100 index, which

fell 1.6 per cent on Wednesday to a three-week low, recovered slightly to close up0.2 per cent, or 11.33 points higher, at5,779.42 points.Traders said talk of new central bank

stimulus measures from the likes ofChina or the Bank of England waspreventing equity markets from slidingon worries over the global economicslowdown and the Eurozone sovereigndebt crisis.A revision of second-quarter GDP (gross

domestic product) data showed the UKeconomy contracted less than forecast,but most economists expect the Bank ofEngland to extend a programme ofquantitative easing to help the economy.

Financial and mining stocks, whichcarry the most weight on the FTSE, alsobenefited from talk that China, which

injected a net $58bn into money marketsand is the worlds biggest metalsconsumer, might take new steps to boostits economy.

Gains on bank stocks such as HSBC andBarclays, and on miners such as RioTinto andAnglo American, added themost points to the FTSE 100.

Ive bought some of the miners, suchas Lonmin. The price of copper is stillstrong, and theres expectation of morestimulus measures from China, whichwould help the miners, said HartmannCapital trader Basil Petrides.

However, Petrides said he was spurningbank stocks for now: Theres too muchvolatility in them. I think theresprobably more downside to come.Technical charts painted a mixed pictureon the FTSE 100, with traders seeing themarket remaining in a range from 5,600-5,800 while uncertainty remains over theEurozone crisis, with Spain under

pressure for a bailout and Greecestruggling to meet the terms of its rescue

package.Petrides said that if the FTSE ended

today above the 5,800 level, it could pushon to reach 5,865 points.However, Securequity sales trader JawaidAfsar saw further declines on the FTSE100 potentially pushing it down to the5,600 mark.

Nevertheless, several investors saidmoney was still f lowing into equitymarkets, away from cash or bonds, sincethe central banks injection of liquidityhad pushed benchmark bond and cashyields to such historically low levels.

Traditionally defensive equity sectors,such as food, healthcare or utility stockswhich are less dependent on theeconomic growth cycle, offer betteryields than cash or bonds via theirdividends.According to Thomson Reuters

Starmine data, the FTSE 350 indexcurrently has an average dividend yieldof 3.5 percent above yields of around1.7 percent on UK 10-year governmentgilts.

Bonds are yielding around 1.5 per centwhile cash yields are at 0.5 per cent, so

relative to that, the equity market lookspretty interesting, said FranklinTempleton fund manager Colin Morton,whose UK equity income fund is uparound 10 per cent so far this year.

Morton said he was sticking withweighting his portfolio towardshealthcare, utilities and tobacco stocks.

Regardless of the index levels, wethink there are opportunities out there,he said.

FTSE edges up as banks and miningshares find favour with investors

BESTof the BROKERSCineworld Group PLC

21 Sep 24 Sep 25 Sep 26 Sep 27 Sep

p254

252

250

248

246

244

246.0027 Sep

CINEWORLDPanmure Gordon has downgraded the multiplex chain to sell fromhold, and has cut its target price to 220p from 230p. Cineworld sawlow admissions during the Olympics. The coinciding releases ofblockbuster franchises such as the Hobbit and James Bond are expectedto bring the strongest trading in the last two months of the year buttoo late to improve Cineworlds full year figures, the broker adds.

FTSE

21 Sep 24 Sep 25 Sep 26 Sep 27 Sep

5,900

5,875

5,850

5,825

5,775

5,800

5,779.4227 Sep

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ICAP PLC

21 Sep 24 Sep 25 Sep 26 Sep 27 Sep

p345

340

335

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ICAPSinger Capital Markets lowered the voice and electronic dealer brokerstarget price from 385p to 345p, while downgrading shares from buy

to fair value. Singer said Icap will remain a relatively low rated stock,citing a muted voice and electronic business over the summer. Icapexpects a more seasonal bias in the second half of the year, in theabsence of Jubilee and Olympics influence on the industry.

Firstgroup PLC

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p256

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FIRSTGROUPLiberum rates the transport company buy with a 305p target price,ahead of its pre-close trading statement next Tuesday. The brokerexpects falling numbers in the firms US bus business to bottom out inthis half, with earnings and margin improvements in the future. However,

growth in UK buses is set to slow further, Liberum adds, and says theongoing West Coast franchise dispute is weighing on Firsts shares.

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FACTS arent what they used tobe. When I started school,Pluto was a planet and carboncame in just three flavours:diamond, soot and graphite.

By the time I left for university, afourth kind of carbon had beenannounced, football-shapedbuckminsterfullerene. And, thanksto Plutos reclassification six yearsago, there are now just eight planetsin our solar system, not nine. Itshard to keep hold of truth when itsbecome this slippery.

That, however, is the premisebehind Sam Arbesmans The Half-Lifeof Facts, which explores thepredictable ways in which modernknowledge is evolving. Its an

important subject, and vital, for

THE on-going Eurozone crisisproves all those whohighlighted the design flaws ofthe single currency were right.They said it would be

impossible to maintain commoncompetitiveness between disparateeconomies like Germany and Greecewithout fiscal transfers. The resultwould be significant and damagingimbalances. This was not inevitable,but it was always unlikely theSouthern European states would

achieve the lasting structural reformsrequired to make it work. So it proved.The Spanish austerity measures

announced yesterday, for example,highlight how the Southern countriesare now belatedly undertaking inter-nal devaluation policies to try torestore competitiveness. But the politi-cal failure to liberalise during the goodyears has meant that these are provingexcruciatingly painful. The scale of theadjustment required is economicallydamaging and politically toxic fornational governments and theEuropean project.

In this context, it has proven easy for

cityam.com/forum

Total spendingwas cut by 10 percent in just two years

THEFORUM

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

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

20FRIDAY 28 SEPTEMBER 2012

RYAN BOURNE

Estonia proves that its possible tocut spending and continue to grow

many Keynesian economists to use theexample of the Southern Europeancountries to suggest that austerity inthe wake of the downturn is always

self-defeating. We have a demandproblem, they say, and the publicfinances and ballooning debts canonly be sorted once growth returns.

But curiously, those who proposeKeynesian solutions neglect to high-light the examples of the Baltic coun-tries. Estonia, for example, is a clearcase-study of a country which has fullyembraced austerity within a fixedexchange rate structure.The Estonian economy had been

growing at an average rate of 8.2 percent per annum between 2004 and2007. As with the experience of otherEurozone countries, its open capital

account, decreased risk profile andcurrency board (the precursor to euroentry) facilitated substantial capitalinflows, which led to large booms incredit and real estate beyond its funda-mentals. It had a current accountdeficit of around 18 per cent of GDP in2007, and these huge capital inflowswere passed through into domesticloans, causing an explosion of privatesector debt and damaging inflation.When the artificial boom unravelled

the results were devastating. A tighten-

ing of lending conditions in 2007 bythe Nordic banks, followed by thefinancial crisis, led to credit andexports collapsing. GDP in the firstquarter of 2009 was 15.1 per cent lowerthan a year before.

Faced with shrinking revenues, theIMF forecast Estonias budget deficitwould be 10 per cent of GDP in 2009on unchanged policies which wouldmean delaying euro entry. Given thescale of the economic challenge facingthe government, many were con-vinced that devaluation of the kroonand traditional Keynesian remedieswere required to restore lost output.

But the Estonian government hadother ideas. Instead, it cut its spendingdrastically, explaining to the Estonianpeople that the surging revenuegrowth of the previous years had beendriven by illusory prosperity. Totalspending was cut by 10 per cent in justtwo years, with operational expendi-tures in the public sector taking the

biggest hit. Civil servants and ministe-rial salaries were slashed. VAT wasincreased from 18 per cent to 20 percent, but the country maintained itsflat tax at 21 per cent.This did, of course, come at a large

short-term price. From peak to troughoutput fell by 17.4 per cent, and unem-ployment spiked at 19 per cent in 2010.But since then, unemployment hasfallen back quickly to just over 10 percent today, and the economy grew by

3.3 per cent in 2010, 8.3 per cent in2011, and is forecast to grow by 1.6 percent in 2012 and 3.8 per cent in 2013.The budget was back in surplus by2011. Public debt as a proportion ofGDP is just 6 per cent and the currentaccount deficits have been quicklyreversed.

Of course, the country has chal-lenges. But Estonia proves that a turn-around through swift, sharp austerityis possible for a country provided it hasstable pre-existing conditions, or is

willing to undertake radical supply-side reform alongside curbing spend-ing. Its these conditions that arewrong in southern European coun-tries, which have excessive borrowing,unsustainable welfare states, highdebt burdens, unreformed and illiber-al labour markets, excessive and bur-densome regulation anddysfunctional banking sectors. Reformon these fronts is just as important asreining in spending.Ryan Bourne is head of economic research at

the Centre for Policy Studies. His paper,Estonia: a case study on how and why Estoniaembraced austerity, is published today.

example, in working out how to keepprofessionals expert in their ownfields when so much can be expectedto change after they qualify.

Given the steadily declining half-life of regulatory expertise infinancial services, the City and itsregulators would do well to thinkabout this more. Thomson Reutersreported in March this year that one

in three finance compliance

professionals now spends a full dayeach week just keeping up with thelatest rule changes.

Keeping up with the new cancome at the expense of thepermanent. David Cameronsperformance on the Late Show withDavid Letterman this week was bothdepressing and telling. Oursupposedly well-educated PrimeMinister, all-too-conversant withevery modish buzzword, appearedunaware what Magna Carta means.

Some things stay true, includingthe value of human freedom, habeascorpus and the consent of thegoverned. Thats because weourselves remain the same. IrisMurdoch once wrote that we

recognise good or decent people in

times and literature remote fromour own. [...] It is just as importantthat Patroclus should be kind to thecaptive women as that Emma shouldbe kind to Miss Bates, and we feelthis importance in an immediateand natural way in both cases, inspite of the fact that nearly threethousand years divide the writers.Old books, as well as new, can stilloffer lessons on everything fromkindness to leadership.

Happily, a very public reminder ofhuman natures persistence iscoming to town. Goldman Sachs willsponsor a British Museum exhibitionfrom Pompeii next year. Exhibits willinclude a wall painting of a smallbusinessman, the baker Terentius

Nero, and his wife, both holding

writing materials, indicating thevalue the pair placed in their owntime on being literate and cultured.

Most moving of all will be thecasts of the eruptions victims,frozen in the postures in which theymet their death. The casts inexistence are full of human storiesthat touch us as immediately as thetragedies of Greece or the comediesof Jane Austen. Two parents andtheir children crouching under thestairs. A man cradling a womanshead in his lap. Pompeiis mementomori warns that whatever newlessons we must learn, our commonhumanity endures and must not beforgotten.

Marc Sidwell is managing editor of

City A.M.

THE LONGVIEW

MARC SIDWELL

Facts may be slippery but the most important human qualities remain true

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21FRIDAY 28 SEPTEMBER 2012

The Forum is open for you to take part. Got a sharp comment onone of todays columns? Do you have another subject you wantto share your opinion on? We want to hear your views.Email theforum@cityam.com or comment at cityam.com/forum

Pensions fiasco[Re: Auto-enrolment will fail unless itfosters a broader savings culture,yesterday]The main reason why weve seen a declinein long-term savings is governmentinterference in the economy, and a similarlack of willingness to tackle the scourge ofinflation. Most savings have lost their realvalue over time, partly due to repeatedbouts of quantitative easing, and high costsare piled on pensions administrators. Britainused to have one of the most successfulpensions industr