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CREDIT rating agency Moodyslast night reiterated the UKstriple-A credit rating but

warned it would reassess itagain early next year in thelight of the slowing economy.

In its annual credit report onthe UK, Moodys said theeconomic recovery was likely totake longer than forecast as

both the private and publicsectors try to reduce their debt.

It warned the UKs mostsignificant policy challenge was

balancing the need to cut thedeficit against the need foreconomic stimulus.

It said it expected theupcoming Autumn statementon 5 December to clarify howthe government plans tomanage this balancing act,enabling it to better reassessthe UKs rating in early 2013.

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EMPLOYMENT continued to climbin the third quarter, officialstatistics showed yesterday, andthough the rate of growth wasdown, employment remained morethan a half a million up on theyear.

There were 100,000 more peoplewith work in the three months toSeptember, compared to theprevious three months, the Officefor National Statistics (ONS) saidyesterday, bringing employment toanother all-time high.

Details in the data highlightedthis optimistic picture. Total weeklyhours worked climbed 1.1 per centto 945.3m, and average weeklyhours worked edged up from 31.7 to32. Eleven thousand fewer werepart-time because they couldntfind a full-time job. Unemploymentfell 49,000 into the quarter, comingentirely from 16-24 year olds. Butthis figure was marred by the21,000 jump in unemploymentlasting more than 24 months,

Employment up

100,000 in thethird quarterBY BEN SOUTHWOOD bringing the total up 4.9 per cent to

443,000.But the growth in jobs was

drastically down compared toprevious months of above-200,000expansion, and ONS statisticianstold City A.M. the figures werecompatible with shrinkingemployment in September.

And October saw a 10,100 boost inthe claimant count, the biggest risein 13 months, and the second rise ina row since the end of the Olympics,before which the claimant countfell for six consecutive months.

The data also showed that despitemuch-heralded public sector payfreezes, state-employed workerswere still seeing pay rises.

Pay in September was on average488 per week 21 more thanprivate sector workers, and 2.2 percent more than a year earlier. Butthe ONS told City A.M. thatsomewhere between 0.6 and 0.8percentage points of this rise wasdown to moving poorly-paid furthereducation workers over to theprivate sector.

Star Londoners make partnerin Goldman promotion roundSEVENTY Goldman staff were

promoted to partner yesterday,and will take on the prestigioustitle and a share of the banksprofits in the new year.

The round was smaller than the110 seen in the last round in 2010as the bank downsizes. Twenty ofthe new partners are fromEurope, Middle East and Africa(EMEA), 40 from the Americas andnine from Asia-Pacific.

Three of the most high profile

BY TIM WALLACE London-based staff to make thejump are dealmaker AnthonyGutman, economist Huw Pill and

market analyst FrancescoGarzarelli.Gutman is joint head of the

banks UK investment bankingarm, alongside Mark Sorrell whomade partner in the last roundtwo years ago.

He is well known for hisinvolvement in high profile dealsincluding TNK-BPs sale to Rosneft,Betfairs float and Pret A Mangersacquisition.

Meanwhile the banks chiefexecutive Lloyd Blankfein calledfor businesses and rich individuals

to pay more in tax to avoid thefiscal cliff which threatens toderail the US economys recovery,with profound effects on the restof the world.

I believe that tax increases,especially for the wealthiest, areappropriate, but only if they arejoined by serious cuts indiscretionary spending andentitlements, he wrote in theWall Street Journal.Partners: Dealmaker Anthony Gutman, economist Huw Pill and analyst Francesco Garzarelli

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EMPLOYMENT GREW AND UNEMPLOYMENT DIPPED

UNEMPLOYMENT

DOWN49,000TO HIT 2.5m

EMPLOYMENT

UP100,000TO HIT 29.58m

BOTH FIGURES COMPARE JUL-SEP WITH APR-JUN

QUARTERLY CHANGE IN EMPLOYMENT TOTAL

JUL - SEP

2007

JUL - SEP

2008

JUL - SEP

2009

JUL - SEP

2010

JUL - SEP

2011

JUL - SEP

2012

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-100

-200

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Thousands

0

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UK banks have been told byregulators to ensure employeebonuses are kept down to reflect theindustrys recent mis-selling and

rate-fixing scandals, a sourceconfirmed last night.Letters sent last month by the

Financial Services Authority to allbank chief executives also told theinstitutions they should set anexample and claw back pastbonuses awarded to employees whowere involved in scandals such asthe abuse of the benchmark Liborinterest rate.

The FSA declined to comment.

Banks told tocut bonuses

BY JAMES WATERSON

PRUDENTIAL chief executive TidjaneThiam yesterday said the firm wouldkeep the option of breaking up thegroup on the table after its Asian andUS divisions posted solid gains forthe third quarter.Thiam, who has previously hinted

he wanted optionality over thefour separate divisions of the group,said he would keep the door open fora possible break up of the business toget the best value for each bit.

If a business can survive on itsown, then it becomes an option toseparate it from the group, he saidyesterday. Now, I have to say in thesame breath that it doesnt meanthat we aim to sell any part of thegroup.

We just want to create that option,because we think that as the marketgives us visibility and transparencyon the group and how the profits and

cash are generated, it will put a high-er value on each of the businesses.

Prudential splitoption remainsafter profit rise

BY MICHAEL BOW The business is currently made up ofAsian, American, and a British lifeinsurance company and a Britishfund manager M&G.Yesterday it posted a 15 per cent

increase in new business profits inAsia and a ten per cent increase in itsUS business.

If the Asian business were separatedand sold at market value analystshave said Prudential should be target-ting 1,355p a share. Yesterday itsshares closed at 871p a share.

Russian billionaire snapsup top investment bankDEALMAKER Stephen Jennings,who helped lead the privatisationboom of post-Communist Russia,

yesterday left the country behindafter selling his investment bankRenaissance Capital to billionaireMikhail Prokhorov.

New Zealander Jennings, whofounded the bank in 1995,yesterday sold his remaining 50per cent stake to ProkhorovsOnexim Group, who already ownedthe other half of the company.

Prokhorov is best known forowning the Brooklyn Nets

BY MICHAEL BOW basketball team, alongside hip hopmogul Jay-Z. He has been tagged asRussias seventh wealthiestindividual with a fortune estimatedto be $13bn.

Onexim also bought 89 per centof Renaissance Credit, the bankssister company, which makesconsumer loans in Russia. Theamount paid for the bank was notundisclosed.

Jennings will continue to run afar smaller Renaissance Group andwill instead focus on its assetmanagement operation whileseeking development opportunitiesin Africa.

MUSIC streaming service Spotify has been valued at $3bn (1.9bn) after completing anew round of funding yesterday. The loss-making Swedish company, led by 29-year-oldDaniel Ek (pictured), raised $100m from a group of investors including Goldman Sachsand Coca-Cola. The firm charges 9.99/month for unlimited access to millions of tracks.

SPOTIFY VALUED AT $3BN

Prudential PLC

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SANTANDER is set to be the firstbank to add a new industry stampof approval to a securitisation, asthe sector hopes to improve theimage of financial instrumentstarnished in the financial crisis.

Securitisations see portfolios ofloans in Santanders case, carloans sliced up and sold toinvestors.

The failure of supposedly safesecuritisations based on US sub-

Santander spearheads driveto rehabilitate securitisations

BY TIM WALLACEprime mortgages hit thereputation of the instruments so

banks now receive less moneythan they would expect for highquality securitisations.

A new Prime CollateralisedSecurities (PCS) label has beendesigned by bodies including the

Association for Financial Marketsin Europe (AFME) to reassureinvestors of the quality of theasset, in the hope that demand

will jump and banks will no longerlose out.

BOTTOMLINE: Page 13LL

THURSDAY 15 NOVEMBER 20124 NEWS cityam.com

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BARCLAYS groundbreaking newcontingent convertible bonds cocos received an enthusiastic wle-come from investors, in a very posi-tive sign for the market as banks willhave to increase issuance of theinstruments.The bank is raising $3bn (1.89bn)

in the 10-year instruments, with aface yield of 7.625 per cent. But withthe final book reaching over $17bnby last night, the pricing shouldcome in favourably for Barclays.

Cocos differ from usual bonds asthey give the bank a boost when it

gets into trouble.In this instance, if Barclays com-

mon equity core tier one capital fallsbelow seven per cent, the bondhold-ers lose their investment to thebank, shoring up its financial posi-tion when it needs help most.The hope is, this should never hap-

pen when the CRD4 capital rulescome in, probably by the middle ofnext year, Barclays will have to havecapital of above nine per cent, twohundred basis points above the trig-ger point.Analysts expect Barclays will have

capital of above 12 per cent on thismeasure by the end of next year.

Cocos are gogoas buyers flood

Barclays issueBY TIM WALLACE Still, the added risk means

investors demand a higher rate ofinterest than for more senior debt,on which they are less likely to loseout. As banks have to increase theirproportion of loss absorbing debt,this case is testing the waters for theindustry.

It is only the 10th coco ever issuedby a bank, and the third largest inthe instruments short history.According to Dealogic figures, onlyLloyds $11.5bn coco in 2009 andCredit Suisses $6bn issuance in 2011are larger.

Deutsche Bank, Credit Suisse,Morgan Stanley, Barclays and Citi all

ran the book, drumming up demandfor the loans in a global roadshowseries.

THE jury in the London trial of

former UBS trader Kweku Adoboli,who is blamed for a loss of $2.3bn,retired yesterday to consider itsverdicts.

Adoboli, 32, denies two chargesof fraud by abuse of position andfour charges of false accounting,covering the period from October2008 to his arrest on 15 September2011. His trial started on 10September this year. There was noway of knowing how long the jury

BY CITY A.M. REPORTER would take to reach verdicts on allsix counts.

There are 11 jurors in the case,

meaning that if they cannot reacha unanimous verdicton one or morecounts, a 10-1majority decisionwould be acceptable.

Adoboli isaccused ofcarrying outunheededtrades farin excess of

his authorised risk limits,concealing his true risk exposureby booking fictitious hedging

trades, and concealing some of hisprofits so that he could ploughthem back into the officialaccounts when it suited him.

In order to convict him of thefalse accounting charges, thejurors have to be sure that heintended to make a personal gainfor himself.

Barclays PLC

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Kweku Adoboli deniesall charges

FIRMS and equality groups yesterdaywelcomed the EuropeanCommissions decision to waterdown its quotas plan, saying thevoluntary approach was working.

The European Commission (EC)decided to scrap its original plan toimpose 40 per cent quotas on firms,replacing it with a 40 per cent target.The EC will require member states topenalise firms that both fail to meetthe objective, if they also fail tofavour equally qualified women.

These proposals are not a quota assuch, explained Clodagh Hayes atLinklaters, Companies who dont

meet the target just need to ensuretheir recruitment processes are

Firms hail new watered downapproach to EU board quotas

BY BEN SOUTHWOOD transparent and give preference toequally qualified female candidates.

Helena Morrissey, founder of the30% Club, which aims to bring morewomen onto corporate boards, hailedthe decision, pointing out that UKfirms were rapidly adding qualifiedwomen to non-executive rolesalready, under the voluntaryapproach. There has been a decisiveshift in the pace of change towardsbetter gender balance in Britainsboardrooms, Morrissey said. In thepast six months, 30 out of 62 FTSE100non-executive directorships havegone to women, a pace of changethat surely cannot be bettered if youbelieve in appointment by merit.

THE managing director of retail chainJohn Lewis last night called on the gov-ernment to examine the way foreignmultinationals pay tax in the UK.

Andy Street said the Treasuryneeds to do more to prevent the likesof online retailer Amazondestroying the UK tax base andpotentially putting Britishcompanies out of business.

Street said international firmsoperating in Britain but based inlow-tax countries posed a threat tothe long-term future of British

John Lewis boss urges action

on foreign firm tax paymentsBY KATIE HOPE companies.

You have got less money to investif you are giving 27 per cent of yourprofits to the exchequer than if youare domiciled in a tax haven, he toldSky News. So they will out-investand ultimately out-trade us and thatmeans there will not be the tax basein the UK. So I do think it is an issuethat needs to be examined.

Street was echoing concerns raisedby MPs on Monday who criticisedAmazon, Google and Starbucksexecutives for not paying more tax inBritain.


Jury retires to consider verdictin trial of ex-UBS trader Adoboli

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BLAME for the collapse of derivativesbroker MF Global lies with formerchief executive Jon Corzine,according to a US congressinvestigation released today.

It concludes poor managementdecisions were to blame for theOctober 2011 failure of the firm,which left $1.6bn (1bn) ofcustomer funds missing. MF Globalcollapsed after disclosing it hadmade large bets on Europeansovereign debt.

The report says Corzine, a formerco-chair of Goldman Sachs andsometime US senator, was guilty ofa dereliction of his duty.

CEO blamedfor MF Global

BY JAMES WATERSON

J SAINSBURY boss Justin King saidthe supermarkets Nectar data andcoupon-at-till scheme would give itthe edge over rivals ahead of anothercompetitive christmas, as it reporteda rise in half-year profit.

Britains third largest supermarketbeat forecasts with a five per centrise in first-half profit to 373m, driv-en by convenience store growth anda 20 per cent uplift in online sales.

Like-for-like sales rose 1.7 per centand total sales were up 4.1 per cent,thanks to its Brand Match campaignand Nectar card data that allows it toprint targeted coupons, helping tolure shoppers under pressure fromhigher living cost.The supermarkets performance

puts pressure on rivals Morrisons,which reported a 2.1 per cent drop inlike-for-like sales last week and Tesco,which is attempting to turn aroundits UK business after a profit warningearlier this year.

The latest industry data shows

Sainsbury winsshoppers overwith coupons

BY KASMIRA JEFFORDSainsburys marketshare now at 16.7per cent of the grocery market, itshighest in almost 10 years.

Commenting on next monthsAutumn Statement, King reiteratedhe would like to see the governmentreduce the barriers to employment.

It is up to the government todecide the best way to achieve it, butone option could be a national insur-ance holiday on new jobs for 12months, he said.

Last month, King criticised chan-cellor George Osbornes plan to allowemployees to swap workplace rightsfor shares in their firms.

Glencore and Xstrata dealedges closer to approvalTHE 56bn mega-merger betweenGlencore and Xstrata is edging clos-er to reality, after shareholders lookset to give it the go-ahead.

Qatar Holding, Xstratas second-largest shareholder, was last nightreported to be on the verge ofapproving the bid from Glencore,although Qatar itself refused tocomment.

The reports came as investmentbank Macquarie also said itexpected Xstrata shareholders toapprove the deal.

Analysts at the bank said thatthe merged firm would present

BY CATHY ADAMS investors with an even morecompelling opportunity to play thenext leg of the commodity cycle.

Additionally, Macquarie said themerger will strengthen Glencoresbalance sheet, so that by the end of

2014, the merged firm would have$18bn (11.3bn) of cash to fundfuture M&A activity.

Trust in management andpatience may be required, butGlencore can drive a multiple re-rating through its merger withXstrata, the note concluded.

Xstrata shareholders are due tovote on the deal which offers 3.05Glencore shares for each Xstratashare on 20 November.

FACEBOOK shares closed up 12.6 per cent yesterday, stunning Wall Street, as hundredsof employees were able to sell their stock for the first time. The latest in a series of sharelockup periods expired flooding the market with 800m shares owned by staff andearly investors. But the $22.36 closing price was still well below Mays $38 IPO price.

FACEBOOK SHARES STAGE SHOCK RALLY

J Sainsbury PLC


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338.8014 Nov

MANCHESTER United last nightannounced record revenues,allowing the football club to paydown some of the debt that has

bedeviled it since 2005.The team play away at Norwich

City this weekend but yesterdaystrading update was issued in the

very different world of Wall Street,following the clubs August IPO on

the New York Stock Exchange.Total revenue grew from 73.8m

Man United nets record incomeafter growing sponsorship cash

BY JAMES WATERSON to 76.3m in the three months to30 September, boosted by a 32 percent lift in sponsorship income.But a relative lack of televised

games during the period meantbroadcasting revenue slipped.

United have been lumbered withsubstantial debts since the Glazerfamily bought the club in aleveraged takeover seven yearsago. Yesterdays announcementrevealed that gross debt has now

dropped to 359.7m, down almosta fifth on last year.


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AG BARR, the Scottish Irn Bru-maker,and rival Britvic yesterday revealed theterms of an all-share merger that willcreate one of Europes largest softdrinks companies with more than1.5bn of annual sales.The new company will be called Barr

Britvic Soft Drinks and will be run byAG Barrs chief executive Roger White,while Britvic finance director JohnGibney will take the role of financedirector for the new company.

Paul Moody, who has led Britvic foreight years, said he will step down afterthe merger, which is due to be complet-

ed early next year.The deal will see the Robinsons

squash-maker owning a 63 per centstake in the new firm while family-owned AG Barr will hold the remaining

AG Barr agreesto 1.4bn tie-up

with rival BritvicBY KASMIRA JEFFORD stake. Barr Britvic will be registered at

AG Barrs headquarters in Lanarkshirebut run through Britvics offices inHemel Hempstead.The merger will amount to 40m of

revenue and cost savings over the nextthree years, although this will come atthe expense of between 315 to 500 jobstaken out of its 4,000 work force.

Britvic PLC


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AG Barr

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BRITVIC AND AG BARR MERGER

BARR BRITVICMANAGEMENT TEAM

DEPUTY CHAIRMAN

Ronnie Hanna

(Chairman of AG Barr)

CHAIRMAN

Gerald Corbett(Chairman of Britvic)

FINANCE CHIEF

John Gibney(CFO of Britvic)

CHIEF EXECUTIVE

Roger White(CEO of AG Barr)

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making Christmas more comfortable

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DOZENS of Barclays staff could bedrawn into the Libor-fixing row, astheir names are likely to bepublished as part of the legal battle

with Guardian Care Homes (GCH).GCH claims it was mis-sold an

interest rate swap product, andthat by fiddling its Liborsubmission Barclays unfairly

BY TIM WALLACE influenced the interest rate onwhich the product was based.

Barclays disagrees, arguing thatGCH is a sophisticated investor andthat its punishments for Libor-manipulation largely related to USdollar Libor, not the sterling Libor

which GCHs product was based on.In case management hearings

GCH secured access to up to 1.2memails Barclays uncovered in its

internal investigations.And of the 208 names on those

emails, the judge said 42 staff nowhave 14 days to argue their case toremain anonymous, or their namescould come out in the trial.

However the staff may not havebeen directly involved in ratefiddling, but simply mentioned inrelevant emails and now risk

being linked to the scandal anyway.

MATHS graduates confused bankbosses with extremely technical anddetailed risk analysis, leading to amisunderstanding of bankspositions and contributing to thefinancial crisis, the ParliamentaryCommission on Banking Standardsheard yesterday.

There was a feeling that we

understood risk, but it was anillusion created by an influx ofpeople with different skill sets maths and physics graduates whofell on the data like a pack of dogs ona dead cow, said Andrew Hiltonfrom the Centre for the Study ofFinancial Innovation.

But the models they made were toosimple and did not manage risk well,partly leading to the crisis, he said.

Maths graduates blamed for

poor loan risk managementBY TIM WALLACE


Mark Kleinman is City editor of SkyNews. Twitter: @MarkKleinmanSky

BRAVERY is not a qualityconventionally attributed to thebosses of business lobbyinggroups but step forward, John

Cridland. The CBI director-generalsdecision to lob a grenade into the rowover payment protection insurance(PPI) mis-selling is in danger ofsplitting his bodys membership.

Cridlands argument that thereshould be a time limit on compensa-tion claims plants his feet firmly in thebanking industrys camp a potential-ly discomfiting position for the head ofan organisation whose industrialmembers demand studious objectivitywhen their interests and those offinanciers collide.

More predictably, the British BankersAssociation has been lobbying regula-tors for the same outcome, with littlesuccess so far. Now, Antnio Horta-Osrio, Lloyds Banking Group chiefexecutive, has waded into the row too.

Having set aside more than 5bn for

INSIDETRACK

MARK KLEINMAN

Banks and a brave industry boss square up to claims firms

PPI compensation, the bank wrote lastmonth to the Financial OmbudsmanService (FOS) urging for an overhaul ofthe charging structure for claims: eachbogus or duplicate application shouldbe paid for by the claims managementcompanies (CMCs) responsible for sub-mitting them. The case is a logical one.For the CMCs, each submission repre-sents a no-lose gamble.

I understand that the FOS respondedto Lloyds plea earlier this week, buthas remained unpersuaded. Peoplefamiliar with its reply said it agreedthat CMCs required tougher regula-

tion but pointed out that that was amatter for parliament and that it hadno legal power to charge ambulance-chasers. Thats a problem for Horta-Osrio, but its also an issue for thewider economy: every 100m of fraud-ulent PPI claims could otherwise sup-port 1bn of bank lending.That leaves CMCs as the only real

winners from this debacle. Right now,a more appropriate definition of theirname might be Creaming Money(from) Consumers.

BANKING WAR GAMESInclement weather has dealt NewYorkers a raw deal recently, so for theroughly 175 financiers at theArrowwood Hotel in Westchester lastweek, the Hurricane Sandy-hitbackdrop was fitting.

Bankers, lawyers and regulators werethere to contend with an equally por-tentous storm: a bank collapse orches-trated within the new Dodd-Frank Act.

banking reforms, an event to road-testthe ringfencing structure being takenthrough parliament should be held atthe earliest opportunity.

SCICLUNA TO JOIN RSAIn the insurance industry, revenge is adish best served lukewarm.

Last year, Lloyds Banking Group

poached finance director GeorgeCulmer from RSA Group. That journeywill be reversed next week when RSAlands Martin Scicluna, a formerDeloitte partner, as its next chairman.

It means yet another boardroomheadache for a state-backed bank. Iunderstand that by dint of its insur-ance operations, Scicluna will beobliged to step down as a non-execu-tive director and chair of Lloyds auditcommittee. It will not be an easy job tofill.

Organised by The Clearing House, aUS-based banking association and pay-ments processor owned by commer-cial lenders, the war-game includedheavy City representation. Among theparticipants were John Whittaker, asenior risk executive at Barclays, andThomas Huertas, a former FSA officialnow at Ernst & Young.

The participants objective, accord-ing to people involved, was to act outthe safe wind-up of a global systemical-ly-important bank (G-SIB) headquar-tered in the US and which owned aUK-based broker-dealer.The results, which are expected to be

disclosed this week, provided encour-agement to regulators if not to thebank shareholders and creditors whosuffered vast losses: the conclusionwas that a G-SIB failure would be possi-ble using recovery and resolutionplans overseen by the ominously-named Orderly Liquidation Authority.

Given British taxpayers interest in

Barclays set to reveal 42 Libor names as legal

row over care homes derivative gets personal

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ICAP boss Michael Spencer yesterdaywarned markets were facing theirtoughest period for 36 years after theinterdealer broker issued a starkprofit warning due to falling tradingvolumes.

The company, which was relegatedfrom the FTSE 100 in September aftersix years on the index, saw pre-taxprofits slump by a quarter and rev-enues drop 14 per cent in six monthsas it gave an insight into the parlousstate of the broking environmentyesterday.

Spencer said: This has been one ofthe toughest periods in my 36 yearcareer in the wholesale financialmarkets.

Trading volumes this year havefallen significantly across nearly allasset classes and geographieswhether equities, futures, FX (foreignexchange), commodities, fixedincome and also OTC (over thecounter).The firm warned pre-tax profits for

the full year would come in at closer

Icap warns of

toughest timein over 36 years

BY MICHAEL BOWto 300m, around ten per cent lowerthan some analyst estimates.

Spencer told reporters on a confer-ence call the firm had been cuttingstaff as part of an overall 60m costcutting exercise set to finish in March2013.

He said: Roughly nine per cent ofstaff have left the firm, five per centhave come in but we are not planningany more cost cuts.

He added bonuses at the businesswould fall 14 per cent across theboard, in line with the drop in rev-enue. The dividend was up 0.6p.

ISRAEL launched a major offensive against Palestinian militants inGaza yesterday, killing the military commander of Hamas in an airstrike and threatening an invasion of the enclave. The operation,dubbed Pillar of Defence by the Israeli military, followed five daysof Palestinian rocket attacks and Israeli strikes at militant targets.

TENSIONS ESCALATE IN GAZA

ICAP PLC


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Given the continued low interest rate environment and structural uncer-tainties, related to impact of central clearing on over the counter derivativesvolumes, competitive threats from futures exchanges, there may be adownside pressure on consensus full year 2014 estimates as well.

ANALYST VIEWS

Recovery will come at some point and now investors are being paid towait. With the price to earnings below the expected dividend yield we believe itis too late to sell ICAP even though we struggle to see where the next bitof good news will come from.

Full-year guidance seems to reflect a mix of the first half year, someone-off impacts such as Hurricane Sandy, and the company taking a miserableview on the first quarter of next year. Management is assuming that it isno better than the first quarter of last year, which was dull.

ICAP IS SUFFERING AT THEMOMENT BUT WHAT IS THE

OUTLOOK?By Michael BowHALEY TAM CITI

JAMES HAMILTON NUMIS

PHILIP MIDDLETON BANK OF AMERICA

NEIL Woodford, one of the worldsmost successful investors, yesterdaypublicly welcomed the collapse ofBAE Systems merger with EADS for

the first time.Woodford, who runs money atretail fund manager InvescoPerpetual and first warned againstthe merger in October, said theaerospace defence firm wouldremain just as good an investmenton its own now the deal was off.

In an outlook statement forEdinburgh Investment Trust, a FTSElisted fund run by Woodford, hesaid: The deal did not look

Woodford welcomes BAE-EADSdeal collapse as boost for fund

BY MICHAEL BOW particularly beneficial toshareholders.

Woodford said BAE, which is 4.4per cent of the funds portfolio,would be a valuable futurecontributor for the fund on its

own.Results from the fund showedWoodford beat the market again,posting a net asset value increase forof 3.4 per cent compared to a 1.9 percent rise in the FTSE All Share index.

Woodford said he had shied awayfrom mining stocks but givenstronger weighting to thepharmaceutical and tobacco sectorsand bought into support firmCapita to deliver the results.


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Asian ambition risks aPrudential departure

P

RUDENTIAL boss TidjaneThiam failed in his bid forAIGs Asian insurance arm AIA

in 2010, but yesterdays thirdquarter numbers show the insurerhas not turned its back on Asiasopportunities.

Far from it, with the Asian part ofthe business showing 828m newbusiness profit in t he year to date,as against 683m for the US and227m for the UK. Sales also grewfastest and brought in mostrevenue in Asia over the year todate: 1.328bn, up 16 per cent yearon year. Increasingly, with thebenefit of hindsight, it seems theCity was wrong to block ThiamsAIA deal.

Prudentials acquisition ofThanachart Life in Thailand,announced at the start of themonth, is also a small indication ofits commitment to growth in theregion, even though, at $590m(372m), it is a minnow next to the

leviathan $35.5bn plan for AIA.Even without the assistance of a

mega-merger, Thiams approachlooks like a smart strategic call. Itgives exposure to economies likeIndonesia and Malaysia, which arenot only fast-growing but alsocurrently have low insurancepenetration. That means Prudentialcan make the most of expandinginto virgin territory rather thansimply fighting for market share asin Europe or the US.

An Asian focus, together with t helooming impact in Europe ofSolvency II regulation, makes thecase for Prudentials relocationfrom London to a base such as HongKong stronger by the day. WhileThiam had appeared to blow cooler

on any move of late, yesterday hesaid that contingency planning fora move would continue until therewas clarity on Europes new rules.Lets hope the regulators clear thisup. The firm and his visionaryleadership would be badly missed.

SAINSBURY DELIVERSStrong online growth of over 20 percent helped send Sainsbury to thehead of the queue with its latest set offigures. General merchandise andclothing grew three times faster thanfood, as the supermarket continued to

extend its reach beyond groceries.Even with a small jump in market

share from 16.6 per cent to 16.7 percent, Sainsbury remains well behindmarket leader Tesco, which has 30.5per cent of the UK market. Yet intough conditions Sainsbury isperforming impressively, thanks to aclear strategy, well-executed.

Christmas may have come early forSainsbury, however. Forget peace andgoodwill to all and think brutal pricecompetition. Only yesterday,Morrison unveiled a 10 per centdisloyalty discount card designed totempt yuletide shoppers away fromrival stores. If such tactics multiplyand press down on margins, the endof the year will be more bleakmidwinter than season to be jolly.

IN BRIEFStarbucks snaps up Teavanan Starbucks plans to acquire tea storeoperator Teavana Holdings for $620m(391m) in cash, furthering its pushbeyond its flagship coffee business.Starbucks, the worlds largest coffee shopoperator, said it will pay $15.50 per sharein cash for Teavana, a 54 per centpremium to the firms closing price on theNew York Stock Exchange on Tuesday.

Finsbury Food invests in caken Cake and bread maker Finsbury Foodsaid yesterday it would use 3.9m raisedvia a placing of around 10.4m new sharesat 38p each to invest in its cake business.It said it would invest the money in newmachinery, thus reducing the cost ofmanufacturing. It forecasts annualsavings of around 2m as a result of theimproved efficiency.

BOTTOMLINEMARC SIDWELL

13NEWScityam.com

The new jobs website for London professionals

CITYAMCAREERS.com

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MATCHES WINS 20M TO FUND GROWTH

MATCHES, the fashion chain, has received 20m of funding from private equityfirms Scottish Equity Partners and Highland Europe to drive its online growth.

The firm, which was founded in Wimbledon in 1990 by Ruth and Tom Chapman,launched online six years ago and sells over 250 luxury brands to 120 countries.


MWB, the hotel operator, is saidto have lined up accountantsfirm Deloitte as potentialadministrators as it struggles todeal with a financing crisis.

The owner of the Malmaisonhotel chain and Hotel du Vin islocked in battle with MWBBusiness Exchange, its 75 percent owned subsidiary, over therepayments of millions ofpounds worth of loans.

The dispute centred on an 8mloan owed to Business Exchange

by MWB and 4.8m ofcontractual payments thatBusiness Exchange was due tomake to MWB in six monthlyinstalments from September2012.

MWB two weeks ago orderedthat its shares and loan stock besuspended from trading on theLondon stock exchange afterBusiness exchange said itplanned to offset its 4.8mliability against the 8m loan.

It is now reported that the

group has lined up Deloitte tofind a solution for the group.

MWB lines upadministrator

BY KASMIRA JEFFORD

Credit Suisse and J.P. Morgan Cazenoveacted as joint bookrunners on the shareplacing while Lazard is a long-standingfinancial adviser to the property group.

The Credit Suisse team was led by UKchief executive James Leigh-Pemberton,who worked on Great Portlands 175mfundraising in 2009. Leigh-Pemberton isthe son of former Bank of England gover-nor Robin Leigh-Pemberton. He first

joined Credit Suisse First Boston in 1994after 15 years at S.G. Warburg Securities.In 2009, he acted as main adviser to thegovernment on the banking bailout andits aftermath. Stephane Gruffat, manag-ing director of European equity syndicateand Tom Edwards-Moss, a director at thebank investment banking division workedalongside him on yesterdays placing. J.P.Morgans team included Jonathan Wilcox,head of UK equity capital markets.

ADVISERS

JAMES LEIGH-PEMBERTONCREDIT SUISSE

Great Portland Estates PLC


455

460

465

470

475 p

458.0014 Nov

BARRATT Developments yesterdaysaid it was on track for higher profitsthis financial year as its focus onhigher-margin sites, rather thanvolumes, pays off in a tough market.

The UKs largest housebuilder saidmarket conditions had remainedstable since July, but it highlightedthat recent government schemesaimed at easing mortgage lendinghad yet to filter through to help thecountrys housing market gaintraction.

In a trading statement coveringthe first 18 weeks of the year, thegroup said weekly net privatereservations per site averaged 0.54,marginally up from 0.53 a year ago,while the cancellation rate inchedup to 16 per cent from 15.5 per cent.

Forward sales rose 21.1 per cent to768.5m while the governmentsNewBuy scheme now made up nineper cent of private reservations.

Barratt eyeshigher profits

BY A CITY A.M. REPORTER

Great Portland raises 140m forshopping spree in the West EndGREAT PORTLAND Estates yesterdayannounced it had raised 140.6m

from a placing of shares that willhelp fuel another shopping spree inLondons West End.

The London-focused developer,which already owns swathes of WestEnd property, said it plans to use theproceeds to buy unloved assets, leton cheap rents which it canrefurbish and boost the rentalincome from.

Chief executive Toby Courtauldsaid demand for property in CentralLondon outweighed supply by morethan four times, driven by overseasbuyers flocking into the capital.

Since the summer, we haveidentified an increasing number ofinteresting acquisitionopportunities, predominantly liquid

BY KASMIRA JEFFORD lot-size, complex properties let offlow rents in the West End and whichare difficult to debt finance,Courtauld said.

We expect to identify furthersuch opportunities in the comingmonths, he added. The groupestimates that the number ofbuildings up for sale in the West Endhas doubled since May to 2.6bn.

The company, which now has400m to spend on acquisitions, saidit is in detailed talks to buy threeproperties with a value of about110m, of which two are in the WestEnd and the third in central London.It also has another three in thepipeline.

News of the share placing came asthe company announced a robust setof half-year results, with its net assetvalue increasing by 5.2 per cent to424p a share in the period to 30

September. Rental value grew by twoper cent, driven by a 2.4 per centgrowth in West End offices and a 2.7per cent rise in West End retail.

Courtauld said: Although the rateof leasing was below the long runaverage around the time of theOlympics, we are witnessing a solidpick-up in demand from prospectiveoccupiers.

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IAN Ferguson, the managing director of theUK investment arm of Bank of AmericaMerrill Lynch, was the head adviser to BT onits 64m agreement to buy Tikit.Prior to working at Bank of America,Ferguson was a senior managing director atEvercore Partners for several years, joiningthe company five years ago as it set up itsEuropean business. Ferguson made a returnof sorts to Bank of America Merrill Lynch inMarch after having worked for Merrill Lynchas managing director and European head ofdefence and aerospace before he joinedEvercore. Ferguson previously advised avia-tion giant EADS on its collapsed mega-merger with BAE Systems. The 30bn deal

was called off last month after failing to win

German government backing. He had previ-

ously worked on EADSs buyout of BAEsAirbus stake. Ferguson, who joined Bank ofAmerica Merrill Lynch in March, also advisedMartin Sorrells advertising giant WPP as itrecently redomiciled to the UK after movingto Ireland partly thanks to its favourablecorporation tax situation. Ferguson workedwith Paul Bundred, the banks director ofUK investment banking, and Ken McLaren,the managing director of EMEA mergersand acquisitions, on the deal.Tikit was advised by Investec on the dealthat values the company at 18 per centabove Tuesdays closing share price.Investecs director of investment bankingfor technology, media and telecoms AndrewPinder was Tikits lead adviser on the deal,working with associate Junya Iwamoto andbroker Carlton Nelson. Pinder has a strongtechnology background having previouslyworked at Soundview Technology Groupand Dresdner Kleinwort Benson.

Alex Croell

ADVISERS

IAN FERGUSONBANK OF AMERICAMERILL LYNCH

WH Smith PLC

14Nov8 Nov 9 Nov 12 Nov 13 Nov

600

605

610

615

620 p 617.0014 Nov

Carphone Warehouse Group PLC


180.0

182.5

185.0

187.5

172.5

175.0

177.5

190.0 p 184.0014 Nov

BT Group PLC


225

226

227

228

222

223

224

229 p 225.0014 Nov


WHSMITH insisted yesterday that itwould continue to grow profitablydespite marking the start of itsfinancial year with a three per centdrop in total sales.

The high street retailer saw like-for-like sales, which strip out theeffect of new store openings, fallfour per cent in the 10 week periodfrom 1 September 2012 to 10November 2012, compared to thesame period last year.

WHSmith Travel, the divisionthat runs the groups newsagentsin airports, stations and bus depots,continued to outperform with flattotal sales compared to a five percent drop in total sales at its highstreet stores.

Like-for-like sales were down fourper cent in the travel division andfive per cent on the high street.

Nonetheless, WHSmith said ithad managed to increase its grossmargins, and that its store openingplan was going according to plan.

WHSmith on

track despitedrop in sales

BY KATIE HOPE It also said its share buyback planwas on track, with 6m of the 50mtotal it pledged to return in Augustso far returned to shareholders.

Whilst the current climatecontinues to be challenging, weremain a resilient business and arewell positioned for continuedprofitable growth, it said.

Panmure Gordon analyst PhilipDorgan maintained his holdrating on WHSmith, noting thatprofits are driven by gross margingains and cost control, rather thansales growth.

BT buys legal tech firm Tikit inbiggest acquisition for yearsBT yesterday announced its biggestacquisition in more than four years,agreeing to buy legal IT servicesfirm Tikit for 64.2m in cash.

The deal, made through thetelecoms giants retail division, willallow BT to sell its own ITcommunications services to Tikitsclients, which include more than 90of the UKs top 100 law firms.

Tikit said it would recommendthe offer to shareholders, who willreceive an 18 per cent premium onthe companys share price before

the deal was announced, and 29 percent up on the six-month average.

BY JAMES TITCOMBThe joint statement from BT and

Tikit yesterday sent the IT firmsshares up 16.5 per cent.

BTs head of retail Gavin Pattersonsaid: Tikit represents a highlycomplementary fit with BT Retailsexisting IT strategy and strengthensour position in the provision of ICTservices to legal firms in the UK.

The Offer will enable us tocombine Tikits expertise, portfolio,relationships and deepunderstanding of the legal sectorwith BT Retails scale and breadth ofproducts.

Tikit will now hold a general

meeting, with the deal expected tobe completed by 18 January.

The move is a rare acquisition forBT, which has not made a purchaseof this size since it boughtconferencing specialists Wire OneHoldings in May 2008.

Carphone Warehouse prospectsbrighten as it considers buyoutSHARES in Carphone Warehouse hittheir highest level since January

yesterday as the mobile phoneretailer said it may raise dividendsnext year, thanks to a sunnieroutlook for handset sales.

The companys chief executiveRoger Taylor also said thatCarphone Warehouse could buyBest Buys stake in the two firmsjoint venture if a takeover plan forthe US retailer succeeds. Best Buyfounder Richard Schulze is tryingto push through a deal to take BestBuy private, and the terms of theCPW Europe joint venture would

BY JAMES TITCOMBallow Carphone Warehouse to takeBest Buys 50 per cent stake at adiscount. CPW Europe is thecompanys key retail business,

spanning 2,400 stores in the UK andmainland Europe.Shareholders would expect us to

explore [the purchase], so we would,chief executive Roger Taylor said.

Shares in the company rose morethan eight per cent yesterday, asCarphone Warehouse said pre-taxprofit rose 30 per cent to 8.6m inthe first half of the financial year,much higher than analyst forecasts.

The other significant part ofCarphone Warehouse, beyond itsretail operation, is its 46 per cent

stake in Virgin Mobile France,which saw relatively flat trading.

The company said it expectsbetter trading this Christmas,

thanks to lower smartphone prices.

SET-TOP TV box maker Paceupgraded its sales forecast

yesterday, saying it expectsrevenue to be flat this year, havingpreviously predicted a decline on

2011.The company said partnershipswith US TV networks had boostedsales since July, and that thecompany expects to make up the$181m (114m) in lost revenuefrom the first half.

However, shares in the companyfell yesterday as analysts warnedthat the uptick in sales wouldcome as a cost to margins.

Despite the increasing mixtowards newer products, grossmargins continue to trend

US contracts drive TV box makerPace to recovery in second half

BY JAMES TITCOMB downwards, Nick James at NumisSecurities said, reiterating a sellrating on the stock.

Pace put the anticipated growthin the second half down to strongdemand for set-top boxes sold byUS pay-TV providers Comcast and

DIRECTV. The pay-TV marketcontinues to show resiliencedespite the uncertain economicconditions, the company said.

It added that it had finallyrecovered from the issuessurrounding hard drive shortagesthat had forced former chiefexecutive Neil Gaydon intostepping down last year.

The company said the hard drivedisruption had not had any impacton revenues in the second half ofthe year to date.

IN BRIEFCentaur hit by advertising trendsn Business publishing group Centaursaw sales fall by more than expectedwhen acquisitions were stripped out,

the firm said yesterday, putting theslump down to market weaknessaffecting advertising revenues.Centaur, which publishes businessmagazines Marketing Week and TheLawyer, and runs business data andexhibitions divisions, said underlyingsales fell four per cent year-on-year inthe four-month period to November.

Interserve close to 100m dealn Construction firm Interserve is topin the running for a deal worth 100mto provide repairs and maintenanceservices to properties across EastLondon and Essex. Interserve ispreferred bidder for the deal with EastThames Group which runs over sevenyears. The contract also has thepotential to be extended for a furthereight years. Interserve said the dealwould expand its residentialmaintenance portfolio.

London top spot for start-upsn London is the top spot forentrepreneurs in the UK, according tothe latest data from CompaniesHouse. The capital accounts for morethan three quarters of the total firmsstarted up in the year to 31 October.In total 359,640 of the 481,195 totalnew businesses registered were basedin London. The release of the figures,coincided with yesterday beingmarked as National Start-Up Day ina bid to encourage entrepreneurship.

SAMSUNG MAINTAINS LEAD IN SMARTPHONE RACE

PHONE SALES BYMANUFACTURER

Samsung 23%,Nokia 19%,Apple 6%,ZTE 4%,LG 3%,Huawei 3%,RIM 2%,others 40%

Data released yesterday from Gartner showed that Samsung retained its positionas the world's bestselling phone company in the third quarter of 2012. Meanwhile,as smartphones spread in developing countries, Google's Android software

featured in 74 per cent of smartphones sold, up from 53 per cent last year.

Third-quarterphone saleswere

428m3.1% downon last year

Smartphonesmade up

40%of sales,up from 26%last year.

SMARTPHONE SALESBY SOFTWARE*

Android 72%,iOS 14%,

RIM 5%,Bada 3%,Symbian 3%Microsoft 2%

*does not include non-smartphone sales

Source: Gartner

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IN BRIEFBanco Popular rights issue debutsn Spains Banco Popular receivedorders for 11 per cent of a 2.5bn(2bn) rights issue on its first day, the

bank said yesterday. The rights issuewas an attempt by the bank to avoidseeking state aid after an independentaudit of Spanish banks found itneeded an extra 3.2bn to weather aserious economic downturn. Thebanks shares rose three per centyesterday, not counting thesubscription rights.

Hangar8 shares take offn Private aircraft operator Hangar8was the biggest riser on theAlternative Investment Marketyesterday, as its shares soared 25 percent following a strong tradingupdate. The firm said it had enjoyeda very strong start to the year asprofits quadrupled in the quarter to461,000. Hangar8, which listed in2010, said full year profits for 2013 arenow expected to be materially aboveexpectations.

BHP Bil liton to up iron ore outputn BHP Billiton expects to expand itsiron ore capacity by nearly a fifth justby working its mines, rail lines andport harder as it looks to control costsin a softer iron ore market, the globalminers iron ore chief said yesterday.Caught out by escalating costs, a slidein iron ore prices and a strongAustralian dollar, BHP shelved plans inAugust to build a $20bn iron oreharbour in Australia that would havedoubled its iron ore capacity.Colin Matthews hopes for

a bigger Heathrow


HEATHROW has used new research tolobby the government to consider asingle hub airport as the answer to theUKs air capacity shortfall.The airport commissioned a report

by Frontier Economics that claims alack of capacity is already costingthe UK up to 14bn a year in losttrade, potentially rising to28bn a year by 2030.This includes potential growing

trade with a string of emerg-ing powerhouses suchas Guangzhou inChina, which hasconnections toother Europeanhubs but is notserved byHeathrow.The report warns

that the UK has nodivine right tohave a major hub,with passengers fromAsia equally happy

Heathrow says

hub is the onlyway to growth

BY MARION DAKERSchanging planes at Amsterdam orDubai on their way to the Americas.The airport also rubbished the idea

of having two hub airports in thesouth east, arguing that it would takepassengers almost two hours to trans-fer between Heathrow and Gatwick.

The new work we are publishingtoday shows that only a single hubairport can meet the UKs connec-tivity needs and the choice istherefore between adding capaci-

ty at Heathrow or replacing it witha new UK hub airport, saidHeathrow boss Colin Matthews.

The Davies Commission,which the government hastasked with examining theoptions for UKs capacitycrunch, is looking at severalideas including a newThames Estuary hub or anenlarged regional airportsuch as Birmingham.

City figures say homophobia isstill a problem at London firmsGAY employees at City firms stillhave to deal with homophobia inthe workplace, according toleading executives.

A new advocacy grou p namedOut In The City has beenlaunched to combat the problem,with a range of successful gaybusinesspeople saying prejudiceis still a problem.

Lord Browne, who was forcedto resign as boss of BP after lyingin court to hide his sexuality,said executives must take the

lead on the issue.I wish I had been brave

BY CITY A.M. REPORTERenough to come out right at thebeginning o f my tenure as CEO ofBP, he said at the launch.

I regret it to this day. The tonefrom the top is the number onething.

Ashley Steel , vice chair ofprofessional services firm KPMG,told the BBC that in her earlyyears at t he fir m she did not feelable to tell colleagues about hersexuality: You werent certainwhat it meant. There was a lot o fhomophobic conversations goingon and you just didnt want toout yourself in that kind of

environment.You didnt know whether that

would har m your career. Whyshould who you sleep with haveany impact whatsoever on yourcareer or your career prospects?she explained.

Out In The City is based on asimilar group in New York thatsought to shake-up thetraditional world of Wall Streetby campaigning against oldprejudices.

One survey presented at thelaunch showed that just onethird of KPMG workers werewilling to discuss t heir sexualityon an internal survey, even

though the results wereconfidential and anonymous.

Olympics and US elections pushvideo search engine Blinkx upEXCITEMENT over the US electionsand the Olympics propelled video-

search engine Blinkx to an 84 percent rise in half-year revenues, thecompany said yesterday.

Blinkx, which searches contentfrom websites such as YouTube,beat City forecasts and its ownpredictions to report turnover of$82m (51.6m) in the six months toOctober, up from $44.6m a yearago. Pre-tax profit rose 67 per centto $2.5m.

During the period, we benefitedfrom increased advertising spendallocated to specific events the

BY JAMES TITCOMBsummer Olympics and the USpresidential elections, chiefexecutive S. Brian Mukherjee said.These one-time events provided us

with a better-than-expected boost torevenues during the traditionallyslower summer months.

As traffic to Blinkxs websiteimproved over the summer, itmanaged to sign up high-profile adclients including Google, Microsoftand Gillette.

And despite the one-off nature ofthe boosts it received in the period,Blinkx said it was seeing powerfulsecular trends that provedpromising, such as the worldwidegrowth of high-speed internet

connections and smartphone sales.Shares in Blinkx, which had

jumped 25 per cent last monthwhen the firm flagged the boost

from the Olympics and election,rose another three per centyesterday.

Citi analyst Thomas Singlehurstsaid the statement proved thatBlinkx was in rude health, andadded that it gives comfort in thesecular drivers of growth for onlinevideo advertising and therefore themarket as a whole.

As comfort in Blinkxs ability tomeet forecasts goes up, we thinkthere is scope for a significantrerating of the shares, he said.

FASTJET, the low cost Africanairline that counts aviationentrepreneur Sir Stelios Haji-Ioannou and Lonrho among its

backers, yesterday sold its firsttickets as it tries to introduce

budget air travel to the continent.The firm will offer $20

domestic flights in Tanzania, withthe routes officially opening atthe end of the month.

The launch comes just sixmonths after the airline wasfounded, when listed investment

vehicle Rubicon took over

Stelios-backed Fastjet startslow-cost flights in Tanzania

BY MARION DAKERS regional carrier Fly540.Fly540, previously owned by

African conglomerate Lonrho,remains the brand for flights inKenya, Ghana, Angola, SierraLeone and Cote dIvoire.

Our first three Airbus A319swill be arriving in Tanzaniashortly and we are very muchlooking forward to providingreliable airline services to aninternational standard for thepeople of Africa, said executivechairman David Lenigas.

Shares in Aim-listed Fastjetclosed down 1.4 per cent at 3.43p

yesterday.

Fastjet was set up by a cash shell backed by EasyGroup boss Sir Stelios Haji-Ioannou

PRICE comparison websiteMoneysupermarket.com said

yesterday that it had not seen anymeaningful impact from Googleencroaching on its business with

the search giants launch of rivalofferings.The company, which compares

prices on savings, loans and otherfinancial instruments, said grouprevenues had risen around 11 percent year-on-year in the thirdquarter of the year, which was inline with expectations. Profits

were up around 12 per cent.The firm has recently boosted

its bottom line with theacquisition of personal finance

website MoneySavingExpert.

Google competition does notworry Moneysupermarket.com

BY JAMES TITCOMB Moneysupermarket.com wassubjected to analyst downgradesearlier in the year as Googlestarted offering price comparisonservices integrated into its search.

However, this does not seem tohave affected the companys

performance, with visits to itswebsite rising 15 per cent on lastyear, and seeing improved tradingin each of its departments.

Were continuing to invest inour digital marketing skills and intechnology to keep us at theforefront of price comparison inthe years ahead, chief executivePeter Plumb said, adding thatrevenues were up 20 per cent sincelate September, when MartinLewiss MoneySavingExpert wasintegrated into the company.

RYANAIR remains confident ofsecuring European Unionapproval of its bid to take overIrish rival Aer Lingus, despitereceiving a statement ofobjections from its competition

watchdog, the budget airline saidyesterday.

Ryanair said the EuropeanCommission submitted itsobjections on Tuesday, but it hasnot made them public.

The airline still has theopportunity to make moreconcessions before a finalcommission decision that is dueearly next year.

Ryanair... remains confidentthat its offer for Aer Lingus will

Ryanair is confident on Lingus

bid despite objections from EUBY CITY A.M. REPORTER receive competition clearance

following any fair assessment bythe commission, the airline saidin a statement.

The issuing of a statement ofobjections is a standardprocedural step, Ryanair said.

It said it expected theCommission to market test itspackage of competitionremedies.

Ryanair, which already owns 30per cent of Aer Lingus, had aninitial bid turned down by theEuropean Commission oncompetition grounds in 2007 anddropped a second offer in 2009.

Analysts and investors view itslatest 700m bid as a long shot

reflected in Aer Linguss sharestrading well below the bid price.

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IN BRIEFDartys revenues lose their sparkn Electrical goods retailer Darty,formerly known as Kesa, yesterdayreported a 2.2 per cent fall in revenuefor the six months through Octoberand said business conditions wouldlikely remain challenging. Darty had topay a 50m dowry to a private equityfirm last year to take its loss-makingUK business Comet off its hands. InLondon its shares ended down six percent at 43.28p.

Thumbs up for AZ diabetes drugn Anglo-Swedish pharma giantAstraZeneca (AZ) said yesterday,alongside Bristol-Myers Squibb, thatBrussels regulators have approved anew treatment, Forxiga, for type 2diabetes. The news is a boost for thestruggling firm after it was dealt ablow by the federal patent court inGermany on Tuesday. The court ruledthat a key patent on the anti-psychotic

drug Seroquel XR was invalid.

AngloGold mine resumes outputn Operations have resumed atAngloGold Ashantis Mponeng mine inSouth Africa, following the suspensionof operations last week after minersstaged a sit-in. Talks between regionalmanagement and unions weresuccessful, AngloGold said, and allparties have now agreed principles forsafe working conditions. AngloGoldsaid yesterday it can focus on rampingup production at its operations.

EXPLORER Tullow yesterday hailedits financial and operational per-formance in the second half of theyear as strong, as it ramped upoperations at the Jubilee field inGhana.

Production capacity at the field ofwhich Tullow owns 35.48 per cent is expected to exceed 90,000 barrelsof oil per day by the end of the year.The FTSE 100 explorer said yester-

day it remained on track to meetaverage net production of 80,000 to84,000 barrels of oil equivalent a dayfor the full year.

Earlier this month, Tullow said ithad struck oil at the second well ithad drilled in northern Kenya, andyesterday confirmed that drillingresults from its assets in Kenya andEthiopia were expected before theend of the year.

Drilling results are also expected inthe coming weeks from a well off thecoast of French Guiana.

Growing production and cashflow

Tullow on track

as it ramps upGhana output

BY CATHY ADAMSfrom the Jubilee field continues tostrengthen Tullow's financial base, aswe look forward to further signifi-cant exploration and developmentprogrammes in 2013, the FTSE 100explorer said in a statement yester-day.

Shares in the company have morethan tripled in value over the last fiveyears since exploration success inGhana and Uganda, where the com-pany is working on a huge new oilproject.Tullow Oil shares closed down one

per cent at 1,371p yesterday.

Centamin posts record quarterearnings amid Egypt legal fightEGYPTIAN gold miner Centaminyesterday posted record earningsover the three months toSeptember, up 43 per cent quarteron quarter, as its court battle overthe right to mine at its flagshipasset Sukari showed no sign ofweighing on its results.

Earlier this month, Centaminsaid it would appeal an Egyptiancourt ruling that said its right tooperate Sukari was invalid. Theappeal date is yet to be set.

The miner said yesterday that its

expansion plan at Sukari had beenpushed back due to issues with

BY CATHY ADAMScontractors and equipment. Thebulk of commission activities willstart in the second quarter,although Centamin stressed that itwas not expected to impact onproduction guidance.

Once the expansion is completed,it will double capacity at Sukarifrom 5m tonnes a year to 10mtonnes.

Gold production over the quartersank 20 per cent year on year to60,922 ounces. Junior stockmarket-listed Centamin was hit by a six-daystrike earlier this year, whichweighed on output.

Centamin added that it was ontrack to meet full-year guidance of

250,000 ounces of gold.Kate Craig, analyst at Liberum

Capital, said that the delay toexpansion plans shouldntovershadow todays solid results.

Strong oil and gas activity liftsAMEC amid mining slowdownOIL engineer AMEC yesterdayreported trading in-line with

expectations, just two days afterfellow energy services provider Capeissued a profit warning.

Strong oil and gas activity in theNorth Sea, Gulf of Mexico and westAfrica boosted AMEC in the year todate, although mining activityslowed. The oil and gas divisionaccounts for about 30 per cent ofAMECs business.

The oil and gas infrastructurefirm said it remained on track todeliver double-digit underlyingrevenue growth for the full year,

BY CATHY ADAMSand growth is expected to continueinto 2013.

Chief executive Samir Brikho saidyesterday that demand for AMECs

services remained good, despite theongoing economic uncertainty.As at 31 October, the order book

stood at 3.6bn, up slightly from3.3bn last October. Since June,AMEC has won contracts in theNorth Sea, Kuwait and Slovakia.

Net cash for the group dropped to124m from 430m last year, afteracquisition-related outflows, as thecompany completed twoacquisitions in the first half of 2012.

Kevin Lapwood, industrial goodsand services research analyst at

Seymour Pierce, said AMECcontinued to benefit from stronggrowth in Brazil, and being BPsglobal engineering partner in the

North Sea and the Middle East.

Amec PLC


1,050

1,060

1,070

1,080

1,030

1,040

1,020

1,090 p 1,056.0014 Nov

Tullow Oil PLC


1,380

1,390

1,400

1,410

1,370

1,420 p 1,371.0014 Nov

Centamin PLC


73

74

75

76

72

71

77 p 70.5014 Nov

TOYOTA admitted yesterday that itwill recall 2.77m vehiclesworldwide, including some of itspopular Prius hybrid cars, forsteering and water pumpproblems in the carmakerssecond multimillion-vehicle recallin a little over a month.

The defects, which Toyota saidhad caused no accidents and couldeach be fixed in an hour or so,could cost hundreds of millions ofdollars to repair, accordingDeutsche Securities autos analystKurt Sanger.

Toyota to recall millions of carsafter discovering new defects

BY CITY A.M. REPORTER Sanger said the extent of therecall suggested a more aggressivestance by the company to addressdefects after its recall crisis a few

years ago. They seem to continueto be obsessively monitoring thesethings and looking for potentialproblems before they arise.

Toyota is recalling 2.76mvehicles worldwide to fix asteering component that could bedamaged by wear and tear, and630,000 gasoline-electric hybrid

vehicles to replace water pumps,company spokesman JoichiTachikawa said. Many vehicles aretargeted by both recalls.


The car giant was forced to take back vehicles in 2009 and 2011 due to serious faults

GERMAN power group RWE saidits outlook for the year is rosierafter losses from its energytrading unit were less thanthought.

The owner of Npower said it hadhalved the loss at its trading andmidstream unit to 403m (324m)for the first nine months of the

year.The group has made progress

with renegotiating wholesalecontracts, limiting the losses, itsaid.

The firm sold seven per cent lesselectricity at 208.3bn kilowatthours of electricity in the ninemonths, while gas sales dropped 11per cent to 203.6bn kilowatt hours.

RWE starts to stem wholesalelosses and cut back expenses

BY MARION DAKERS But the group said operatingprofits rose eight per cent to4.6bn, as cost burdens linked toan exit from nuclear power inGermany last year flattered tocomparative figures.

Our performance over the first

three quarters of the currentfinancial year has been quitegood, said chief executive PeterTerium.

RWE has cut its capitalexpenditure by 1bn in the firstnine months of 2012, while therecent sale of assets, including itsstake in British nuclear joint

venture Horizon, has gainedmomentum.

RWE is now slightly moreconfident than it was in August ofthis year, it said yesterday.

DEBT-LADEN Russian steelmakerEvraz yesterday asked the holdersof a $750m (428m) bond maturingin 2015 to approve the removal ofa covenant, sending its sharestumbling.

The company is seekingapproval by way of anextraordinary resolution of theholders of the notes to remove acovenant requiring the companyto maintain the net leverage ratioat or below a specified level, itsaid yesterday.

The FTSE 100 steelmaker, part-owned by Chelsea football clubowner Roman Abramovich, said it

wanted to align the covenantsunder this issue with those of its

Evraz falls as it seeks to make

changes to its bond covenantsBY CATHY ADAMS other bonds.

Evraz, which earlier this yearreported a net debt of $6.07bn asof 30 June, down from $6.44bn atthe end of 2011, said in June that ithad agreed amendments to its$950m syndicated structuredcredit facility, which was due tomature in 2015.

Russian steelmakers, whoinvested heavily in production

before the 2008 recession, had toborrow cash to support theiroperations, after economicslowdown crippled steel markets.

Last month, Evraz posted a threeper cent drop in steel productionover the third quarter.

Evraz shares closed 7.01 per cent

down at 217.4p, as investorsreacted negatively to the news.

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ALMOST every politician Imeet asks me one question.Often with a hint ofmenace, they demand:why are banks refusing to

lend to small businesses? They saytheir postbags are full ofcomplaints from small to medium-sized enterprises (SMEs) that banksare refusing to approve or renewloans or overdrafts. In reply, bankspoint out that they make money bylending, and insist it is a demandissue that fewer SMEs are comingto borrow

But this drives politicians to fury:if SMEs didnt want to borrow, theywouldnt be complaining about thebanks. From enterprise guarantees

to the Funding for Lending scheme,

THIS weeks barrage ofeconomic figures confirmed agloomy picture for Britain. TheBank of Englands inflationreport suggests sluggish

growth into next year just 1 per centin 2013. Jobs figures show high(though falling) unemployment stillat 7.8 per cent of the workforce. AndTuesdays rise in inflation confirmeda squeeze on living standards.

But what lessons can we take fromthe past? During the 1930s, economic

policy was failing, GDP was falling andunemployment soared. John MaynardKeynes reinvented economics, andexplained how deficit financing couldbe used to help restore the economy.His General Theory of Employment,Interest and Money revolutionised eco-nomic thinking and transformed poli-cy.

During the 1970s, the problem wasinflation. Milton Friedman challengedeconomic orthodoxies by arguing thatgovernments should be determined toreduce it, even at the cost of lost out-put and a rise in long term unemploy-ment. Despite this, the cost was less

cityam.com/forum

Better forecasts will

allow the governmentto fine-tune its deficitreduction strategy

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.

22THURSDAY 15 NOVEMBER 2012

DOUGLAS MCWILLIAMS

The Bank of England needs a newmethod for predicting UK growth

than many had feared.But can we reinvent economic theo-

ry again like Friedman and Keynes to help Britain cope with its current

economic problems?We shouldnt be overambitious. As

the West loses its monopoly over theproduction of sophisticated products,growth in Western living standardswill fade at best, and theres a real riskthat they will fall. If someone opens ashop next door to you and sells thesame things more cheaply, you have toassume that you will not be as well offas you were before.Worldwide shortages of primary

products will also create inflation,even as labour costs fall. Total worldgrowth will be constrained by rises inthe costs of commodities and energy.

We therefore need a different theoryof economic growth to take account ofthese factors. We need to look at howinflation and the balance of paymentsinteract to constrain growth. This newtheory shows significantly forBritain that growth does not auto-matically bounce back to some tradi-tional rate after an economicperturbation.The Centre for Economics and

Business Research has used this theo-ry for some years, and we believe it

explains why we have been the best inthe UK at forecasting GDP. Both theOffice for Budget Responsibility andthe Bank of England could improvetheir forecasting if they adopted ournew theory and our approach.

More important than getting theforecasts right, however, is howimproved forecasting could improvegovernment economic policymaking.The government needs a better under-standing of what drives and what con-strains economic growth. Taking thisnew theory into account, the govern-ment could fine-tune its deficit reduc-tion strategy and make it less painful

and more successful.First, it should stop using tax rises to

reduce the deficit. The rise in VAT andthe potential future rise in fuel dutiesare a shot in the foot.

Second, it should be honest with thepublic about how public spending hasspiralled out of control. Public spend-ing should be reduced, not because of

the deficit, but because it has risenbeyond the point when it yields signif-icant benefits. It now results in seri-ously damaging rates of taxation. Weneed a plan to reduce public spendingover at least ten years.Third, with a credible plan to reduce

spending, there would be some scopefor tax cuts, even at the expense of a

temporarily higher deficit.Finally, the government should give

up on dodgy accounting tricks toreduce the deficit. No one is fooled. Ifthe economic situation can stand ahigher deficit temporarily, it shouldsay so directly. The markets will showsome tolerance, provided it is clearthat wasteful public spending is undercontrol.This approach wont bring back the

world of the late 1990s, when we hadrapid growth and rising living stan-

dards. But there is no trick availablethat could do this. What it could do isedge GDP growth up a bit, however,and help accelerate the welcome fallin unemployment.The chancellors hand contains no

aces and few face cards. But there isstill scope to do better and this newapproach shows how.Douglas McWilliamss third lecture as

Gresham professor of commerce, given withCharles Davis and Oliver Hogan, will be heldin the Chartered Accountants Hall,Moorgate Place, at 6.30pm tonight. ProfessorMcWilliams is also chief executive of theCentre for Economics and Business Research.

making banks lend to businesses isa priority for the government. Sowhat is really going on?

Whichever way you look at theissue, there has indisputably beena decline in demand for financeamong SMEs. Over the past year,the number wanting loans oroverdrafts has dropped by about a

fifth. The trend is similar in the

number of SMEs that actuallyapply for these products. Approvalrates have stayed roughly stable,but fewer applications inevitablymeans lower lending.

But why do fewer SMEs want toborrow? Surveys suggest one mainreason: lack of confidence in theeconomy (followed distantly by lackof confidence that they would getthe loan). Like big companies andhouseholds, when small businessesare worried about the future, theydont take out new loans. They payoff old ones and build up savings.The entire SME sector has become amassive net depositor, with itssurplus over borrowing rising from8bn to 21bn over the past year

a massive cash stockpile.

But that doesnt explaincomplaints from SMEs. It alsodoesnt explain why the 40 per centof SMEs who exercise their right toappeal, after being turned down,get the decision reversed.

One reason is that, before thecrisis, a less risky economyencouraged a lot of lending tosmall businesses. SMEs weresometimes given overdraftfacilities almost as big as theirentire annual turnover, when bestpractice says that it should be nomore than 10 per cent. Banks arealso under immense pressure fromregulators to reduce high-risklending, and many SMEs arefinding the adjustment

understandably difficult. Too often

banks failed to sensitivelycommunicate the new situation totheir customers, took awayexperienced relationshipmanagers, and used blunt decision-making processes. This issomething they now recognise, andare working hard to change.

But is the lack of lending to SMEsundermining the economy? Overthe past year, just 1.5 per cent of allSMEs had a loan rejected. Whateverproblems the other 98.5 per centhad, it wasnt caused by a lack oflending.

If an SME wants finance, itshould apply. It might get theanswer it wants.

Anthony Browne is chief executive of

the British Bankers Association.

ANTHONY BROWNE

The real reason small businesses arent borrowing more from their banks

MORNING UPDATEA.M.

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23THURSDAY 15 NOVEMBER 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 [email protected] or comment at cityam.com/forum

Trust issues[Re: Scandals have made the UK adangerously low-trust society, yesterday]This article properly reflects how much of aproblem a lack of trust is for society, and notjust in the UK. The starting point of trust formany of the sectors mentioned was alreadyvery low. The question is, how low does ithave to get before it can get better?Stephen Rosling

The internet must play a role in this matter. Itis awash with comments that are critical ofleaders at all levels of society. Many changesthat are proposed are viewed as wrong orself-serving, making leadership much moredifficult. The pendulum has swung too fartowards lack of trust.Paul Sloane

[Re: What brands can learn from Obamasdatabased win, yesterday]The Obama presidential campaignhighlighted the critical role of good qualitydata in smart campaigning. A word ofcaution, however. Innovative research anddata analytics offer endless opportunities.But the rise of micro-targeting and thedata revolution which has made it possible also creates challenges, not least the need toensure that data is handled ethically andthat the right questions are asked. Marketresearchers and users of market researchhave a responsibility to society to ensurethis happens. We have a powerful tool at ourdisposal, we should deploy it wisely.Jane Frost CBE, chief executive, MarketResearch Society

EU COMMISSIONER VivianeReding has returned to herproposal for the boards ofEuropean companies to be atleast 40 per cent female. Her

suggestions may have been watereddown 40 per cent is now a target,not a quota but the initiative stillfails to address the real problem.

In the UK, enhancing board roomdiversity is not the big challenge.Over 40 per cent of the appoint-

ments to FTSE 100 boards in thepast year were already women, andthey now account for 17 per cent ofnon-executive directors. The realshortfall lies in the proportion ofwomen on executive committees. Itis now barely into double figures.This figure points to a broader

issue. Companies wont address gen-der imbalance by changing theirnon-executive directors. Instead,attention needs to be refocused onhow to accelerate female progressthrough the executive ranks.We recently published a research

study that explored this issue. Inlower and middle management, 38per cent of roles are filled bywomen. But in the same companies,the figure shrinks to 11 per cent onthe executive committee.This doesnt represent a glass ceil-

ing, however. Its more of a slip-pery ladder. Women do not rise toa certain point and then get stuck.Instead, female attrition is higher ateach step of the pipeline.There are two main causes. Firstly,

there are issues of supply, withmany women deciding that work-ing norms are incompatible withother demands. They thereforechoose to step off the corporatetreadmill to pursue alternativeoptions.

Secondly, there are issues ofdemand, whereby womenencounter unconscious bias in eval-

TOP TWEETSInflation always rises faster than the Bank ofEngland expected. Its one of the creditcrunch rules of thumb.@notayesmansecon

More quantitive easing is expected from theBank of England. Triple dip recession? Its agloomy forecast.@johnburrows91

Business will not accept the argument thatthere is nothing the government can do toboost growth.@britishchambers

Did Mervyn King just say Office of NationalStatistics methods for calculating inflationare obsolete? He should look closer to home.@Josh_CityIndex

Is Sir Mervyn King too optimistic about theoutlook for inflation in the medium term?

YESThe Monetary Policy Committees (MPC) projection that

growth will pick up towards 2 per cent in the medium term seems reasonable, assuming that there are no severe shocksfrom the Eurozone. But as the recovery becomes more sustained,its view that inflation will fall back to less than 2 per cent by theend of 2014 could prove to be optimistic. This will be especiallytrue if wage growth also picks up from its recent subdued levels,and workers seek to make up for the past squeeze on their realincomes. Additionally, a resumption of stronger growth in Chinaand other emerging markets in 2013-14 could lead to furtherhikes in global commodity prices. If growth recovers, whileinflation remains above target for longer than the MPC expects,there could be a strong case by the end of next year for interestrates to begin to rise.John Hawksworth is chief economist at PwC.

John Hawksworth

NOVictoria Redwood

The rise in near-term inflation is primarily due to temporary

factors, such as rising tuition fees and utility prices. The effect ofthese short-term forces should fade after a year or so. In themedium term, inflation is likely to come under downwardpressure from the weakness in activity and the spare capacitythat currently exists in Britains economy. Further, averageearnings growth is just 2 per cent and, with the labour markettentatively weakening, it is likely to stay low. The recentappreciation of sterling will also add to the deflationary pressureby pushing down import prices. Indeed, without further stimulusfrom the Bank of England, inflation is likely to undershoot itstarget going further ahead. We expect the Ba nk of England toinitiate another 50bn of quantitative easing in February, andpossibly more thereafter.Victoria Redwood is chief UK economist at Capital Economics.

RAPIDresponses We dont need an

EU target to placewomen on boards

uation processes or challenges in

acquiring the experience necessaryfor senior roles.

So even if quotas arent theanswer, there are reasons to imple-ment corporate changes to supportthe rise of female executives.Success requires three elements.

Firstly, those at the top of largecompanies must visibly championthe benefits of more diverse seniorteams. Secondly, companies need tocreate opportunities that givewomen the best possible chance toflourish. This could mean, forexample, competing aggressivelyfor the best mid-career female tal-ent or openly advertising the suc-cess of high-achieving women.Lastly, women who do succeedshould seek to become active rolemodels for the next generation; andcompanies should work to addressany unconscious issues that holdwomen back.

Getting more women into seniorexecutive roles is not a question ofmeeting targets to assuage diversitycritics. It is about enhancing thequality of management teams inmajor corporations. If companiesare to achieve the best, they have torecruit and retain the best.Louise Vttrup and Michael Reyner are

partners at MWM Consulting. Crackingthe Code: Getting More Women IntoSenior Executive Roles can be found at:www.mwmcons ulting .com/E xecuti ve-Search-Cracking-The-Code.html

LOUISE VOTTRUP &

MICHAEL REYNER

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