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repeat of the weekends frustrationswhen passengers waited hours forflights that were eventually axed.

Gatwick Airport has urged thegovernment to bring Londonsairports together to allow close-to-capacity Heathrow to divert sometraffic elsewhere when the weatherinterferes with its schedule.

Clearly in extreme winterweather conditions a level ofdisruption at airports is to beexpected but we should all be able tobe open for business whenconfronted with normal winterweather conditions as we saw thisweekend, Gatwick chief executiveStewart Wingate wrote to transport

secretary Patrick McLoughlin.The Institute of Directors added

that businesses have not been givenenough information aboutdisruption during the blizzards.

We appreciate that transportcompanies cannot control theweather, but in cases over the lastfew days communication with

customers has been poor, saidsenior economic adviser CorinTaylor.

Southern and Southeastern trainsran into widespread delays andcancellations yesterday due to the iceand snow, and both plan to runaltered timetables today.

PARTS of the capitals transportnetwork were left in disarray bysnow and ice yesterday, promptingbusinesses to call for more concertedplanning for cold weather.

Heathrow cancelled one in tenflights yesterday, hoping to avoid a

BY MARION DAKERS

Cold snap travel chaos prompts bosses to call for a rethink

BUSINESS WITH PERSONALITY

UK becomestop Germantrade partnerTHE UK has leapfrogged France to

become Germanys top tradingpartner, according to datahighlighted yesterday by a central

banking group.Trade between Germany and

the UK totalled 153bn (129bn) inthe first nine months of 2012, theOfficial Monetary and FinancialInstitutions Forum said in a note,according to data from theBundesbank. This puts the UKahead of France and the US bothon 150bn the Netherlands on146bn and China, with 115bn of

bilateral trade. Author DavidMarsh said this headline shiftunderlined a broader movementof German economic interestsaway from its partners in theEurozone, and towards countriesoutside the currency union.

German companies haverebalanced their relationships infavour of three diverse groups ofcountries beyond the euro bloc:the US, faster-growing non-euroEuropean countries and emergingmarket economies, he said.

Exports to Germany from theUK were up 20 per cent between

January and September of 2012compared to a year earlier, withcar parts and medical equipmenttopping the list of tradeable

goods. In total Germany did only37 per cent of its trade with the16 other countries that use theeuro, versus 45 to 46 per cent in1999 when the currency wascreated. Given trends in global

growth, the note suggests thatGermany is likely to carry out a

lower and lower proportion of itstrade with fellow bloc members,and more with emergingeconomies in China, India andBrazil.

THE POUND has sunk to its weakestlevel since early last year, with analystsfearful that it could crash even furtherin the coming days.

Sterling touched 1.1875 during yes-terdays trading, its weakest printagainst the euro since the middle ofMarch 2012. It has plummeted from apeak of around 1.29 last summer.Against the greenback, the pound

neared $1.58, down from $1.63 at thestart of this year.A weaker pound is likely to stoke

inflation in the UK, with the officialconsumer prices index (CPI) still stuckat 2.7 per cent. CPI has remained abovethe Bank of Englands two per centtarget for 37 straight months.The governments mammoth debt

pile and stubbornly high annualdeficit are believed to be partly toblame, along with the UK economyspersistently sluggish levels of growth.

On Friday the Office for NationalStatistics will publish its first estimateof Britains GDP in the fourth quarterof 2012. Any contraction in GDP which could signal the start of a tech-nical triple-dip recession would putmore downward pressure on sterling,analysts say.

Sterling is down 20 per cent since2007 on a trade weighted basis but thishas done little for export growth,commented Louise Cooper, founder of

Cooper City.A sterling crisis that does little forexports, imports inflation and resultsin few international buyers for ourgovernment debt gilts would be theworst of all worlds, she warned.

www.cityam.com

The latest public borrowing figureswill be published this morning.

In the last six months gilts have gonefrom yielding 1.5 per cent to over twoper cent. So even though gilt prices areheavily manipulated through the [Bank

of Englands] extensive quantitative eas-ing programme, there are signs thatlending to the UK state is less popularthan before.

Former Bank of England officialAndrew Sentance last night hit out at

the UKs benign neglect of sterling.The Bank governor talks down the

pound if the markets see that as theview of the authorities, then they needgood reasons to bet against it. And theydont have good reasons at the

moment, Sentance told City A.M.Itll take stronger growth and lowerinflation [for the pound to recover] andit doesnt look like were going to getthat, he added.

BY BEN SOUTHWOOD

FTSE 100 L6,180.98 +26.57 DOW 13,649.70 (CLOSED) NASDAQ 3,134.71 (CLOSED) /$ n 1.58 -0.01 / 1.19 unc /$ 1.33 unc

BY JULIAN HARRIS

STERLING DIVES TO

A 10-MONTH LOW

ISSUE 1,802 TUESDAY 22 JANUARY 2013

Tullet Prebons chief economist in the Forum, Page 18

THE FORUM: Page 18LL

THE DEBATE: Page 19LL

CURRENCY WAR CLAIM: Page 2LL

DEBT CEILINGHOPE: Page 3

LL

Certified Distributionfrom 26/11/12 to 30/12/12 is 127,678

OBAMA BEGINS SECOND TERM IN THE WHITE HOUSE

The pound has sunk from 1.29 to under 1.19

Jan 2013Sep 2012 Nov 2012

-1.22

-1.20

-1.18

-1.26

-1.24

-1.28

-1.30

BARACK Obamaset the tone for amore assertivesecond term withhis secondinaugurationspeech yesterdayafternoon. Beingtrue to ourfoundingdocuments does

not require us toagree on everycontour of life; itdoes not mean wewill all defineliberty in exactlythe same way,Obama said, as headdressed fewerthan half of2009s record1.8m crowd.

TIM MORGANTHE TRENDS THAT KILLED WESTERN GROWTH WINE TOWARM YOU UPNeil Bennetts column, See Page 22

FREE

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[email protected]

Follow me on Twitter: @allisterheath

OCADO chairman Michael Grade isset to announce his retirement aschairman of the online retailer asearly as today.

Lord Grade, formerly executivechairman of ITV, has been chairmanof Ocado for seven years, overseeingthe companys 800m float threeyears ago.

He is tipped to stand down atOcados annual general meeting inMay.

Last night Ocado, which suppliesWaitrose goods, declined tocomment. However a source close tothe company told City A.M.: LordGrade turns 70 this year and I dontthink this will be a huge surprise tothe City.

The retirement, and search for anew chairman, comes as loss-making Ocado facesmore headwinds.

It facesincreasingonlinecompetitionand Waitrosecould end itssupply contractas early as2017.

Ocado chair

Michael Gradepoised to retireBY JENNY FORSYTH

Bankers leave glamorousjobs for compliance roles

BANKERS are retraining in compli-ance in unprecedented numberseither to change career as their tradi-tional jobs are cut, or to make surethey are well prepared to cope withtough new regulations, according tofigures seen byCity A.M.The City has lost over 100,000 jobs

since the start of the financial crisisas banks and other finance firms cutcosts. But the only real growth areain jobs has been in compliance asfirms get to grips with the tidal waveof red tape sweeping the sector.That has driven up wages a recent

study from recruiters Robert Halfshowed bank compliance managerspay soaring 7.1 per cent this year toan average of 100,000.

In the last four years we have seena 10 per cent annual rise in demandfor our public courses but in thelast 12 months the figure is morelike 20 per cent, said JonathanBowdler from InternationalCompliance Training (ICT), whichruns courses with the ManchesterBusiness School for the InternationalCompliance Association.The public courses, which cost up

to 3,100 and end in a professionaldiploma, are typically attended bysenior bank staff who need a higherdegree of compliance knowledge.

Office-flat conversion rules to easeDevelopers will be able to convert officebuildings into blocks of flats withoutasking councils for permission underradical changes to the English planningsystem designed to speed up the deliveryof new homes. The plans aim is toincrease the countrys housing supply at atime when building figures areapproaching an historic low. But the Cityof London, which fought a vigorousrearguard action against the proposals,will be promised an exemption from thechange when it is announced within days.

Brussels tables tighter EU media lawsMedia outlets across Europe face beingtightly regulated by independentagencies with sweeping powers toinvestigate complaints and enforce fines ifthe recommendations of a Brussels-appointed panel become law.

Aon mulls bonus deferral backtrackAon, the insurance broker, is consideringfollowing Goldman Sachs andbacktracking on a plan to defer UK bonuspayments to allow hundreds of highly-paid employees to avoid the 50 per centincome tax rate.

Data-hungry customers a fact of LifeThe competition for data-hungryconsumers was stepped up yesterday byPhones4u, which has launched a mobilephone brand for 4G services. It is callingits fledgeling mobile phone service Life.

AstraZeneca gets cold shoulder in USHealth insurers and doctors in the UnitedStates are turning up their noses atAstraZenecas much-vaunted new heartdrug Brilinta, according to broker SocitGnrale.

The FT to axe staff in digital shiftThe Financial Times is to axe 35 jobs aspart of plans to make a big cultural shiftfrom a traditional print news organisationto a digitally focused networkedbusiness in a bid to compete with socialnetworks and information-gatheringservices like Google. The newspaper hasbeen relatively successful in charging foronline news content, but editor LionelBarber said it needs to make wrenchingchanges to adapt to increasingcompetition from non-traditional newssources.

Thai tycoon to win Fraser & NeaveThai tycoon Charoen Sirivadhanabhakdi ispoised to win control of Singaporeanconglomerate Fraser & Neave after rivalbidders led by Indonesias Riady familybacked down yesterday, ending a monthslong stalemate in one of Southeast Asiaslargest-ever takeover battles.

Last Berlusconi hearing scheduledA judge yesterday set the last hearing informer Prime Minister Silvio Berlusconistrial on prostitution charges for 11 March.

THE PRESSURE Japanese leaderShinzo Abe is putting on the Bankof Japan (BoJ) threatens central

bank independence and could riska currency war, Bundesbank boss

Jens Weidmann said yesterday.Japanese Prime Minister Abe has

put heavy pressure on the BoJ todrastically increase its monetaryinterventions in order to boostinflation to its two per cent target.Hungarys government have alsointerfered with policy, forcing fivesuccessive rate cuts past unwillingrate-setters at the central bank.

But Weidmann, who leads thefiercely independent Bundesbank,said in a Frankfurt speech thatpoliticisation of the exchangerate would erode central bankautonomy and remove onerestraint on tit-for-tat monetaryconflict. Alarming violations can

be observed in Hungary or Japan,where the new government isinterfering massively in the

business of the central bank withpressure for a more aggressivemonetary policy and threateningan end to central bank autonomy,he said.

Without independence,countries could be tempted toengage in a currency war roundsof competitive devaluations,hoping for a quick fix to labourcost issue, Weidmann claimed.

Weidmann says

BoJ policy risksa currency war

Ruth Horgan is the latest regulatory specialist to join HSBC after its money-laundering scandal

2 NEWS

BY BEN SOUTHWOOD

To contact the newsdesk email [email protected]

ONE of the greatest risks facingthe world economy is awholesale crash in governmentbonds markets. Yields on UK

gilts, US Treasury bonds and othersare still much too low and thatmeans that capital values are toohigh (the price of fixed income

securities move inversely to theiryield). Given the extraordinarily largesize of government bond markets,and the fact that so many banks,insurers and pension funds are bigholders, sometimes for regulatoryreasons, this will trigger wealthdestruction on a massive scale.

Such a correction has already quiet-ly started. As Leigh Skene of LombardStreet Research points out, yields on30-year US Treasury bonds rose 0.7percentage points from their July2012 lows to 3.13 per cent on 3January, before falling back a little.

EDITORSLETTER

ALLISTER HEATH

Bursting bond bubble will destroy wealth on a giant scale

TUESDAY 22 JANUARY 2013

This cost Treasury owners 16 per centof their capital. Those who boughtgilts at their peak are also nursingsevere losses. But while many com-mentators agree that US bond mar-kets at least will eventuallyexperience an even greater correc-tion, many still cling to the hope thatother bond markets, as well as non-credit assets, will remain insulatedfrom the looming storm.

So Im grateful for M&Gs retailbond team for some fascinating num-

ber-crunching which shows why thebears are right to fear the worst. Thegreat US bond market crash of 1994saw US Treasuries lose just 10 per centof their value, and the overall totalreturn was just -3.45 per cent thatyear. The reason for this almostdecent performance it felt far worse

at the time is that yields startingpoint were much higher; even asmallish correction today would beimmensely greater.

But the experience of 1994 was thatwhile American bond markets werehammered, other risk assets includ-ing in emerging markets actuallysold off even more heavily in reaction.The Bank of America Merrill Lynchemerging market debt index lost15.33 per cent; and even moreremarkably the MSCI emerging mar-ket equity index lost 8.67 per cent.

Nobody knows for sure how it will

been better than it was in recentyears. Many councils kept main roadsrelatively clean, though side roadswere often neglected. But theprogress hasnt gone far enough. It isan outrage that so many trains andflights have been cancelled; the lackof information was appalling. Far too

many schools shut unnecessarily,making it nigh-on impossible formany parents to work, jeopardisingjobs, livelihoods and the economy.

This cant go on. Transport compa-nies must make more of an effort andadapt to the new normal severaldays of snow every winter. Schoolsneed to stay open. London is a mod-ern, prosperous metropolis: a fewinches of snow must never again beallowed to defeat us.

play out this time. Perhaps emergingmarkets are now deemed less riskythan US bonds. Gilts would certainlybe caught up in the fallout and inany case they are horrendously over-valued also, with prices propped upby quantitative easing.

My guess is that money will pour

into equities in most markets, push-ing up their prices. This is undoubted-ly one reason for the recent rally instock markets. The S&P 500 rose veryslightly in 1994. One can never accu-rately predict the timing of crashes.But those who believe that it is easy toforecast which assets will turn out tobe safe havens amid the inevitablecarnage is clearly deluded.

SNOW EXCUSEThe authorities and transport compa-nies reaction to the current, emi-nently predictable bout of snow has

But the group has also started run-ning mass workshops for banks, train-ing hundreds of staff at a time asbanks try to make sure employees atall levels know how the rules work.

We are seeing more people fromoperations and sales backgrounds, forexample, who have put a lot of timeinto their particular roles and thenlook to move across to compliance,said Bowdler.That means the group expects to

train roughly 1000 bankers in the UKthis year, as well as 2000 to 3000 inter-nationally.

Major banks have made high-profilehires in compliance to show they areguarding against any more scandals.

Barclays has taken on formerFinancial Services Authority chief exec-utive Sir Hector Sants to head its regu-latory relations department.And HSBC yesterday announced it is

hiring veteran KPMG partner RuthHorgan as global head of regulatorycompliance. The institution has had tochange its procedures radically follow-ing the money laundering scandal,upping its budget to deal with thethreat nine-fold since 2009.

EXCLUSIVEBY TIM WALLACE

The new jobs website for London professionalsCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

Lord Gradeis ready toretire fromOcado

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REPUBLICANS in the US House of

Representatives yesterday tabled abill that would suspend the debtceiling until 19 May.

Instead of raising the debt limitit would allow spending of anyamount to be funded by sellingextra debt but the cap on totalborrowing would kick back induring May.

The bill would also hitpoliticians with personal financialincentives if Congress cannotpass a budget by 15 April then alltheir earnings will be withhelduntil they do. If they did pass abudget, it would be the first infour years, with funding sincethen largely being authorisedthrough other means.

Those markets not closed forMartin Luther King day a USpublic holiday reacted rapidly.German Bund futures sunk on

lower demand for alternative low-risk assets, while spot gold edgedup 0.3 per cent. The FTSE100climbed by just under 0.8 per cent,though volumes were low due tothe poor weather.

The US federal governmentofficially reached its borrowinglimit on 31 December last year. Ithas been using accounting tricksto avoid defaulting since then, butsays these will run out betweenmid-February and March this year.

Republicanstable deal onUS debt limit

BY BEN SOUTHWOOD

BRITISH businesses are seeing theirtax bills stay high despite GeorgeOsbornes pledge to cut corporationtax, as the chancellor has simplyincreased other charges on the firms,according to a PwC study out today.That means the government is not

increasing the UKs appeal as a com-petitive place to do business as muchas the chancellor may be hoping.The FTSE100 firms paid 77.1bn in

the tax year 2011-12, almost identicalto the amount paid the previous year,even though the headline rate of cor-poration tax fell from 28 per cent to

26 per cent. That represents 14.2 percent of total government receipts.The difference was made up in

other taxes with businesses shellingout more to cover charges like the risein employers national insurance andthe increase in VAT.

PwCs study of the top 100 listedfirms has been running since 2005.

Since then the tax take from f irmsprofits taxes borne, in PwCs words has jumped 19 per cent to 24.8bn.The amount paid from its outgo-

UK businesseshit by jump in

VAT and job taxBY TIM WALLACE ings, like staff pay known as taxes

collected has risen by nine per centto 52.3bn.

Corporation tax only makes up 8bnof the top 100 firms tax payments. Payas you earn income tax collectionscome to 13.8bn while national insur-ance comes to 10.1bn.That represents a shift in govern-

ment tactics from taxing variable fig-ures, like profits, to more fixed factorslike business rates on property andnational insurance on employment.

PwC fears that could make it harderto start a business as more taxes aredue before the firm makes a profit.

The effect varies from business to

business when setting up a retailbusiness you will pay more nationalinsurance contributions and businessrates, while a technology firm haslower costs, with less rates, said PwCsAndrew Bonfield.

But the shift to more predictabletaxes makes it easier for the govern-ment to get the annual deficit down.

These other taxes tend to be easierto collect and less volatile since theyrenot dependent on profits, addedBonfield.

UP TO 106 current and formerBarclays staff named in emailsrelating to Libor fiddling lost their

right to anonymity in a legal caseyesterday, as a judge ruled in favourof a group of media organisations

who wanted them unmasked.The staff, a minority of whom are

thought to have been found to havemisbehaved, can now be named inthe proceedings between GuardianCare Homes (GCH) and Barclays.

The case is based on GCH claimsthat Barclays missold it an interestrate swap product.

The names could come out in a

Ex-Barclays staff lose right toanonymity in Libor court case

BY TIM WALLACE hearing on Thursday.The fact that someone is named

in hundreds of thousands of pagesof documents following a wide-ranging three-year investigation in

which no stone was left unturneddoes not necessarily mean thatperson was involved in any

wrongdoing, said Barclays in astatement. Many entirely innocentindividuals may be referred to inthe documents underpinning thesettlements.

Meanwhile Barclays Wealthschief operating officer AndrewTinney has left the bank after hedisposed of a report into

behavioural problems in the unit.

TUESDAY 22 JANUARY 20133NEWScityam.com

Antony Jenkins has vowed to clean up behaviour at Barclays

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TIMELINE: A JOURNEY BACK TO THE MARKETS1963Crest Homes founded by Bryan Skinner

1968The housebuilder floats on the LondonStock Exchange

1972Crest buys Camper & Nicholsons, the lead-

ing yacht maker, and changes name toCrest NicholsoN

1983Skinner retires and the company starts tosell-off its non-housing businesses

2005Stephen Stone appointed chief executive ofthe company

2007Crest is taken private in a debt-fuelled 1.2bntakeover by Scottish entrepreneur TomHunters West Coast Capital and mortgagelender HBOS

2009Crest becomes majority owned by a consor-tium of 24 banks after a 648m

debt-for-equity swap

2011US distressed debtspecialist Varde Partnerstakes control of the firmwith Deutsche Bankafter buying upCrests 500mdebt pile.

2011William Rucker, the chief executive of LazardLondon is appointed chairman.

2012Crest signals that a float is one of a numberof options being explored by its ownersVarde Partners and Deutsche.

2013Crest announces its intention to return to thestock market and also announces a return toprofit.

UK HOUSEBUILDER Crest Nicholsonis to return to the stock market near-ly six years after it was taken privateat the height of the housing marketcrash.The 50 year-old company, which

builds homes mainly in the south ofEngland, said it plans to raise 50mfrom the listing of new shares to paydown debt. Its owners also hope tosell 150m of their existing shares.The offer is expected to value Crest

at around 500m, restoring thehousebuilder to the FTSE 250, whereit traded before its takeover in 2007.

Crest said it expected the free floatto be a minimum of 35 per cent ofthe issued share capital and that theoffer will be completed in February.

Chief executive Stephen Stone saidthe offering the first of a UK com-pany this year is a sign of confi-dence in the UK housing market.

We think the equity markets aregood at the moment. Housebuilders

have shown modest improvements

Crest Nicholsonplots return toLondon market

BY KASMIRA JEFFORD in trading over the last six months inparticular on the back of the govern-ments Funding for Lending Scheme,Stone said.

He added: Crest has got a landbank in the southern part of Englandwith strong margins of 18 per cent. Soa land bank, good returns and a signof a pick-up in the mortgage marketare all ingredients we think willbe good for shareholders goingforward.

Crest, one of UKs biggest housebuilders, was hit hard by the slump inthe UK housing market after years ofeasy credit inflated prices.

It was taken private by Scottishentrepreneur Tom Hunter and mort-gage lender HBOS in 2007 and is nowmajority owned by US distressedinvestment fund Varde Partners, aftera series of deals last year.

Crest also reported it had made apre-tax profit of 62.1m in the year to31 October, compared to a 27m lossin 2011. Sales rose 28 per cent to408m with completed homes up 24

per cent at 1,882.

BARCLAYS Capital and HSBC are acting asjoint sponsors, joint global co-ordinatorsand joint bookrunners on Crest Nicholsonsinitial public offering. Derek Shakespeare, amanaging director at B arclays investmentbanking division, is leading the effort for thebank. He recently advised Redrow founderand chairman Steve Morgans vehicleBridgemere and fund manager Tosca ontheir bid to take over the housebuilder,

which was eventually scrapped.

Shakespeare has also advised Lufkin, the USoilfield pumping equipment provider on its$127m acquisition of Scottish oil servicesprovider Zenith Oilfield Technology in March2012.He is joined by Chris Madderson, part of thebanks UK origination team and Ben West inthe equity syndicates team.HSBCs advisory team was led by NickDonald, head of equity capital markets(ECM). Donalds previous deals include act-ing as joint bookrunner for miner Lonmin onits $817m rights issue in November and healso advised packaging company DS Smithon its 466m rights issue in February lastyear to buy Swedish rival SCA Packaging.Simon Cloke, head of diversified industriesat HSBC and ECM director Stuart Dickson

worked with Donald on the deal.

ADVISERS

DEREKSHAKESPEAREBARCLAYS CAPITAL

Crest Nicholson was one of the highest profile casualties of the 2007 housing crash

Crest Nicholson chiefexecutive Stephen Stone

TUESDAY 22 JANUARY 20134 NEWS cityam.com

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FLOOR covering retailer Carpetrightis understood to be one of a numberof bidders circling beleaguered bedmaker Dreams.

Accountancy firm Ernst & Young

has been hired to handle the saleprocess for the bed retailer, whichwas put up for sale before Christmasby main lender Royal Bank ofScotland.

Private equity firm Exponentbought Dreams which wasfounded by Mike Clare back in2008 for 222m.

Carpetrighteyes Dreams

BY CATHY ADAMS

CRISIS-HIT music retailer HMV hasperformed a U-turn on its initial deci-sion to refuse gift vouchers, adminis-trators confirmed yesterday.

Deloitte, the business advisory firmwhich took control of retailer lastweek, said HMV vouchers can now beredeemed in stores from today.

It also said funds raised by HMVfrom the sale of charity releases,including the Hillsborough JusticeCollective single, will be paid in fullas soon as possible after a publicbacklash last week.

We recognise that

both of these mat-ters have causedconcern for individ-uals and organisa-tions affected andare pleased to havereached a positive out-come, joint admin-istrator NickEdwards, said.

We will con-tinue to assessthe longer term

HMV to honourgift vouchers as

Hilco deal nearsBY KASMIRA JEFFORD options for the business whilst contin-

uing to trade. I am hopeful thisprocess will result inthe business continuing as a goingconcern.

HMVs initial decision not to redeemvouchers contrasted with Blockbuster,the DVD rental chain, whichannounced it would honour vouchersafter going into administration lastweek. HMVs 223 stores collapsed intoadministration last week after restruc-turing talks with its lenders and sup-pliers collapsed, putting more than4,000 jobs at risk.

However, it is understood thatDeloitte is close to striking a deal with

Hilco UK, led by Paul McGowan theowner of HMV Canada that could seethe turnaround fund running HMValongside administrators in the shortterm, without the business changing

hands.Deloitte decline to comment.

DAVID Cameron will finallydeliver his speech on Britainsfuture relationship with the EU

tomorrow morning, DowningStreet confirmed yesterday.

The speech was originally due tobe delivered in Amsterdam lastFriday but was delayed due to the

Algerian hostage crisis.Although the Prime Ministers

aides wanted the announcementto take place on the continent forsymbolic reasons, time constraintsmean it will now be at a centralLondon location.

The PM is expected to set out

David Cameron to give delayedspeech on EU links tomorrow

BY JAMES WATERSON which powers he wants torepatriate from the EU, andpromise a referendum on any newdeal if the Conservatives win amajority at the 2015 general

election.A group of Conservative

politicians want Cameron to tablea straight in/out referendum while

business leaders want an end touncertainty about the EU.

Yesterday Cameron respondedto the Algerian hostage crisis bycommitting UK intelligence andcounter-terrorism resources to thestruggle against al-Qaeda acrossnorth Africa.

BOTTOM LINE: Page 7LL

FORUM: Page 18LL


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The Prime Minister quickly rescheduled his speech on Britains relationship with the EU

Paul McGowan runsturnaround firm Hilco

TESCO intensified its dotcom pushyesterday by opening its fifth dark

store near Crawley, West Sussex.The dotcom store, which will

create 700 jobs, will serve onlyonline shoppers. The supermarkettypically offers an instore pick-upservice for its online customers, butis ramping up its dotcom storepresence thanks to growingdemand in and around London.

The Crawley branch follows otherstores in the Home Counties inEnfield, Greenford, Aylesford andCroydon.

Tesco in newonline push

BY CATHY ADAMS

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PEARSON, the education and mediabusiness behind the Financial Timesnewspaper, has warned that annualprofits will be lower than expected.The company said tough market

conditions and structural industrychange were to blame for an unex-pected fall in operating profits, andthat these issues were likely to con-tinue into 2013.The announcement sent shares

down almost three per cent in trad-ing yesterday, making Pearson thebiggest faller on the FTSE 100.

The companys major difficultiescame in US education. Its NorthAmerican education division, whichpublishes textbooks and runs onlinelearning tools, was hit last year byshrinking education budgets andfewer university students.The FT Group, which has been a

constant source of sale speculationsince former Pearson boss MarjorieScardino announced her departurein October, has seen revenue growthbut lower profits, due to December

Pearson warns

of tough 2013as profits falterBY JAMES TITCOMB 2011s 450m disposal of data service

FTSE International to the LondonStock Exchange.

Scardinos successor John Fallon isseen as less ideologically weddedthan Scardino to the FT Group which includes a 50 per cent stake inthe Economist magazine as well asthe Financial Times.

Last night, Financial Times editorLionel Barber told staff the paperwould be focusing on its digital oper-ations, and would cut 35 staff.

Pearson said it expects an operatingprofit of around 935m for 2012,down from 942m in 2011.

BOTTOMLINE

MARC SIDWELL

Pearson PLC

21 Jan15 Jan 16 Jan 17 Jan 18 Jan

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1,220

1,230

1,240

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21 Jan


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How refreshing.2012 downgrades are expected but 2013 forecasts fall by even more

given warnings in a number of areas. US higher education is still seeing draggiven state budget pressure while college admissions are reducing. Weretain our Hold guidance but cut the price target from 1240p to 1190p.

ANALYST VIEWS

A miss against consensus earnings is a com paratively rare event. Wethink the company will continue to post further market share gains as it did in2012, but we are not convinced overall earnings momentum will im proveuntil late 2013 or even 2014. We are neutral with a target price of 1310p.

While the downgrade may seem small, this is a stock that has (had?) areputation for structural protection and earnings growth. It is clear the structuralpressures are increasing within the business particularly in US highereducation. We reiterate our Sell guidance with a 1050p target price.

DOES PEARSONS PROFITDOWNGRADE AFFECT

YOUR RATING?Interviews by James TitcombSTEVE LIECHTI INVESTEC

THOMAS SINGLEHURST CITI

IAN WHITTAKER LIBERUM CAPITAL

Fighting against the future can only buy so much time

THE decision by HMVsadministrators Deloitte tohonour gift vouchers and to payproceeds raised for charity

singles is a piece of luck for thosecaught out by the music chains crisis.While at first sight this is lessheartwarming for the chains other

creditors, it may in fact be slightlyupbeat news for them as well.As administrator, Deloitte must

act in all creditors interests in itsattempts to keep the business agoing concern. The vouchers move istherefore a bright sign, for tworeasons. Firstly, as Deloitteacknowledged yesterday, the abilityto honour vouchers depends on thecircumstances of the case. Havingreviewed HMVs financial position,

Deloitte evidently believes things arenot bad enough to justify failing tohonour these vouchers. Second, sucha PR-friendly move suggests a strongcommitment to keeping some of thechains stores afloat the onlycircumstance in which consumergoodwill is vital to retain.

But why has the picture suddenlybrightened for HMV? Partly because

a frontrunner has emerged,apparently willing to take on thestruggling entertainmentdistributor: Hilco, which owns HMVCanada and is a specialist inrestructuring troubled firms. Hilcotook on HMVs Canadian brand insimilar circumstances and it now

boasts a re-energised business as thelast nationwide bricks and mortarspecialist retailer in CDs and DVDsnorth of the 49th parallel.

However, no matter who takes thereins in the UK, HMVs stores havelittle chance without a businessmodel that makes sense again. Thateither means adapting to new,digitally-focused consumerdemand for which it is alreadyrather too late or persuading

content firms, also fighting a fiercerearguard campaign to protect theirpre-digital margins, to back HMV astheir last UK high street champion.

So it comes as no surprise to hearthe rumours that Sony, Universaland Warner are lining up to offerHMV special credit arrangements

and cheaper wholesale prices ontheir recordings. As I wrote beforeChristmas, Trevor Moore had alreadysignalled the firms intention tocome cap in hand to suppliers in thenew year. Recent events have onlyheightened the moves urgency. Thestart of 2012 saw the giant contentfirms ride to HMVs rescue. It seemsthey are on their way again. It ishardly a long term strategy though,so spend those vouchers soon.

LEADING THROUGH THE DARKFrom a chain fighting to keep backthe future to one embracing itspossibilities. Tesco is openinganother so-called dark store, thefifth of its warehouses designed toserve online shoppers, after aChristmas in which online food sales

grew 18 per cent. On launch, theretailer conjured up images of itsstaff rolling trolleys up and downsecret aisles on our behalf. However,this month it announced three darkstores will use robots to pick andpack instead, which sounds morereassuringly futuristic. Tesco has itsproblems, but with dark stores andits investment in Click and Collect,at least its looking for the answerin innovation, not nostalgia.

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FORMER Standard Chartered chiefexecutive Sir Malcolm Williamson isset to become chairman of insur-ance buy-out vehicle Resolution, itwas announced yesterday.

Williamson, 73, will succeed MikeBiggs, who is stepping down as partof a plan to streamline the compli-cated executive structure at theFTSE 100 group, which was foundedby industry pioneer Clive Cowderyin 2008.

Sir Malcolms experience as achairman, as well as his understand-ing of the Groups operations, itspeople and its regulatory and gover-nance framework, will equip himwell to lead the company in thefuture, Biggs said of his successor.Williamson has been chairman of

Resolutions Friends Life subsidiarysince February 2010 and will takeup his new position when the twoboards are merged in March, subject

to shareholder approval.He will be tasked with guiding a

Resolution tapsex-Stan Chartboss to be chair

BY JAMES WATERSON company that last year abandonedits original business plan buyingstruggling UK life insurers and com-bining them into a more profitablewhole due to the high cost ofacquisitions in the current financialclimate. Instead Resolution has saidit will focus on running its existingbusinesses.

Williamson began his career withBarclays in 1957 before leaving in1985 to join the Post Office. He laterserved as chief executive of StandardChartered, and card provider Visa, aswell as chairman of Clydesdale Bank.

Sir Malcolm Williamson began his career at Barclays in 1957

Resolution Ltd


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US MARKET maker Virtu Financialis to shut its London office andrelocate all its European tradingoperations staff to Dublin, itemerged yesterday.

The high frequency trader,which merged with fellow UStrading outfit Madison Tyler inMay 2011, will close its office onthe edge of Hyde Park and slim

down to a single European officebased in Dublin, a source said.

Virtu Financial ditches Londonfor merged Dublin operations

BY MICHAEL BOWThe expanded Dublin office will

combine all of Virtus Europeantrading operations into a singleunit, with further staff alsorelocated to offices in Singaporeand the US.

The development, first reportedby Private Equity News, will seearound 30 staff relocate fromLondon. Virtu has had a presencein Dublin since 2009.

It obtained the London office

after its merger with MadisonTyler 18 months ago.

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PETER Cruddas, the majority share-holder of spread-betting group CMC

Markets and a former Conservativeparty treasurer, is set to appear in theHigh Court tomorrow to proceedwith a defamation claim against thepolitical lobbyist Mark Adams.

Sources said that a meeting aimedat reaching a settlement in the casefailed yesterday, with Adams unableto make an acceptable offer. Themeeting was attended by Adams anda lawyer for Cruddas, Jeremy Clarke-Williams of Slater & Gordon.

Cruddas resigned as Conservativeparty treasurer in March last yearafter it was alleged he had welcomedthe offer of a donation to the partyfrom a company based overseas, aclaim he denies. Adams was theoriginal source of the allegations.

Cruddas has since alleged thatAdams has caused him distress, angerand annoyance through a series ofreferences on his blog and on Twitter.

Adams is defending himself in theaction.

Last week City A.M. revealed thatCruddas has recently regained theposition of chief executive at CMCMarkets, where he is the principalshareholder.

Cruddas due toface accuser inthe High Court

BY DAVID HELLIER

EASYJETS biggest shareholder SirStelios Haji-Ioannou has gone on theoffensive as the airline considers itsnext plane purchase, threatening tosell his holding unless the board callsa halt to any new aircraft orders.

Sir Stelios, along with his brotherand sister, have already sold 600,000EasyJet shares in the open market tosend a clear message to our direc-tors over the firms spending plans.

It is thought to be the first timesince 2004 that Sir Stelios has solddown his familys 37 per cent stake inthe airline.The EasyJet founder has long been

critical of the companys relationshipwith Airbus, and forced out deputychairman Sir David Michels in 2011in a dispute over the firms expan-sion strategy.

He has claimed the company is pay-ing over the odds for too many air-

EasyJet drawsfresh protests

from SteliosBY MARION DAKERS craft at the expense of profit growth.He said in an open letter to the

board yesterday that while he wel-comed EasyJets recent profits anddividend payouts, another aircraftorder could screw up this financialsuccess story.

EasyJet, which has 217 aircraft in itsfleet, has been speaking to Airbus,Boeing and Bombardier about itsnext order, for delivery after 2017.The firm declined to comment.

Dell appoints Evercore Partnersto find alternative buyout offersDELL, the US personal computermanufacturer which is currentlynegotiating a private buyout deal,has appointed advisory firmEvercore Partners to find out if abetter offer can be found,according to reports.

Dell is believed to be close to adeal led by buyout firm SilverlakePartners, which is being supportedby founder and chief executiveMichael Dell in a deal wortharound $23bn (14.5bn).

However, because of MichaelDells 15 per cent stake in hiscompany, any deal involving him

BY JAMES TITCOMBwould be heavily scrutinised byshareholders.

In order to avoid the risk oflawsuits from those shareholdersanxious to get the best return ontheir investments, the firm hashired Evercore to test whether Dellcould get a better deal elsewhere,Bloomberg reported, citing peoplefamiliar with negotiations. Themove would supposedly protectDell against criticisms and lawsuitsover its handling of the deal.

Shares in Dell, which rose 20 percent in two days last week as newsof Silverlakes interests emerged,were flat in New York yesterday.

Dell is believed to have

appointed JP Morgan as its leadadviser on the deal, whileSilverlake has tapped Barclays,Bank of America Merill Lynch,Royal Bank of Canada and CreditSuisse for funds.

The personal computermanufacturer, based in Texas, sawits share price decline by a thirdlast year as sales were hit by risingcompetition from Chinas Lenovo,and the increasing popularity oftablet computers.

Because of this it is seen as abargain buy by investors hoping toimprove the companys fortunes.

Dell did not comment last night,while Evercore was unavailable.

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THE VIDEO game firm behindclassics such as Pong and Asteroidshas filed for bankruptcy in the US.

Atari, one of the firms creditedwith kickstarting the industry inthe 1970s, is being separated fromits French parent company, in a bid

to isolate the business from theFrench firms debts and give it achance to succeed on its own.

Ataris Paris-listed owner wasformerly known as Infogrames butchanged its own name to Atariafter it bought the US firm for

BY JAMES TITCOMB $11m (6.9m) in 2008. The parentfirms business has declined inrecent years, and Atari US is seenas having a chance to revive itselfas a developer of smartphone

games based on its 1970s classics.The company, founded in 1972,

had a string of arcade successesbefore making its own home

consoles. Its hardware lostpopularity in the late 1980s and

Atari began to develop games forother systems, scoring hits withthe likes of Roller Coaster Tycoon.

It then fell into financialdifficulty before it was bought out.


Atari reached prominence in the 1970s and 1980s with its early video game consoles

The HAILO app.Black Cabs just got easier.

OFFERS on price comparisonwebsites, cashback services andvoucher schemes have become anadvertising market worth morethan 800m in the UK.

Research from professionalservices firm PwC out today claimsthat the offers known as onlineperformance marketing (OPM) have become one of the fastest

growing parts of the advertisingbusiness, with spending expectedto rise by 25 per cent in 2013.

PwC claims that the 814m spentby advertisers on OPM in 2012generated 9bn in sales, so forevery pound spent, businesses take11 back. Unlike with displayadvertising, OPM advertisers only

Vouchers and cashback offersboom as shoppers tighten belts

BY JAMES TITCOMBpay if someone completes anaction, for example clicking a linkor completing a purchase.

Examples include cashback siteQuidco, in which shoppers receivea small return on purchases theymake, or special banking rates oncomparison websites such asMoneySupermarket. The rise of theecommerce, as well as squeezed

budgets, has led to savvy shoppersusing these services.

Economically challenging timeshave seen marketing budgetssqueezed, PwCs Anna Bartz said.

As a result, we expect that theattractiveness of paying foradvertising based on an extremelymeasurable and specific consumeraction will see more advertisersusing OPM.

Arcade game legend Atari looksfor extra lives after bankruptcy

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RBS should be broken up to make it

easier for the government to sell thebailed out bank, formerpolicymaker Adam Posen saidyesterday.

The ex-Bank of England MonetaryPolicy Committee member told acommittee of MPs and peers thatselling simple units of the retailbanking and investment bankingarms could be a better option thanoffering up the whole institution.

The suggestion comes as RBSconsiders splitting the leadership ofits investment banking arm.

It is thought that current bossJohn Hourican could be pushed totake the blame for Libor fixing, notbecause he was involved or knewabout the bad behaviour, but simplybecause he was a senior figure in therelevant part of the bank at the time.

One possible option for dealingwith the arm after his departure

could be to cut out a layer ofmanagement, leaving the heads ofthe markets arm and theinstitutional banking unitreporting directly into the board.

MPs hear RBSshould be splitin two for sale

BY TIM WALLACE

MOSCOWS stock exchange plans tofloat on its own platform, seeking torevitalise Russias capital markets andconvince companies to list domesti-cally rather than abroad.

Shareholders of the MoscowExchange, Russias main venue fortrading in stocks, bonds, foreignexchange and derivatives, are expect-ed to sell stock worth at least $500m(315.9m), one source familiar withthe situation said yesterday.The exchange is valued at between

$4.2bn and $6.5bn by the banksorganising the initial public offering(IPO), a second financial source said.

The exchanges dominant positionin Russias markets and expected ben-efits from reforms such as upgradesto clearing and settlement couldattract investors.

Moscow stockexchange plans

Russian floatBY HARRY BANKS

Its a really interesting asset in itsown right its unusual as anexchange as it has several differentbusiness lines with equity, forex andderivatives, said Roland Nash atMoscow hedge fund Verno Capital.

Details of the IPO were limited, butshares will be offered to institutionaland retail investors in Russia, and off-shore investors and qualified institu-tions in the US. The exchanges largestshareholder is Russias central bank,which will keep its 24.3 per cent stake.

Other shareholders includeSberbank with 10.3 per cent,Unicredit, VTB, Gazprombank, US pri-vate equity fund Cartesian Capital andRussian state-backed private equity

fund the RDIF. The exchange has adeadline of 30 June to float, afterwhich RTS shareholders could exercisea put option allowing them to selltheir shares back to the exchange.

FLOODING has hit the centre of Jakarta, resulting in at least 20 deaths and causingmillions of pounds worth of damage to the Indonesian capital. Insurers now face asubstantial bill for the catastrophe, although the floods do not appear to be on the samescale as Indonesias 2007 monsoon season which cost the industry $400m (250m).

FLOODS DEVASTATE INDONESIAN CAPITAL

TUESDAY 22 JANUARY 201310 NEWS cityam.com

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THE MOST important people inthe world are currently packingtheir toothbrushes, making surethe neighbour will feed the cat

and getting ready for five daysdiscussing the global financialsystem in the Swiss Alps.

But The Capitalistwonders whetherthose attending this weeks WorldEconomic Forum or Davos to youand me really have much fun.Moreover, do those world leadersever want to skip another round-table on reforming ratings agen-cies and mess about on the slopes?

Ladbrokes has been thinkingalong the same lines and hasopened a range of marketsfor those whose mindinstinctively drifts to lessweighty matters than thefinancial crisis.You can get 8/1 on

Its snow jokeas Merkel facesDavos bookies

Germanys Chancellor, the never-caught-smiling-in-public AngelaMerkel, being hit with a snowball atany point during the event.Alternatively, a joint sledging sessioninvolving David Cameron and chancel-lor George Osborne is a hefty 100/1.And while Cameron insists his

favourite band is The Smiths, theres agood value 33/1 that the Prime

Minister is spotted on a night outwith U2 frontman Bono.

Alex Donohue of Ladbrokessaid: Should Merkel get pelt-

ed during Davos the odds onwho threw the snowballs will

be pretty short. As for theserious stuff it doesntlook like there will beany immediate solu-tion this week.

12 cityam.com

cityam.com/thecapitalistTHECAPITALISTWITH just over six months until hepicks up Sir Mervyn Kings mantle as

governor of the Bank of England, MarkCarney must have been bracing himself forscrutiny from regulators and analysts. Buthe cant have been expecting criticismcoming his way from dendrologists (treesand shrub experts, of course). Eagle-eyedleaf-lovers have claimed that thedecoration on Canadas new $20, $50 a nd$100 notes far from being the sugarmaple beloved by mounties and pancakedevotees alike is actually closer to aNorwegian maple leaf. In response theBank of Canada has claimed artistic licence,saying the image is stylised. Eh?

TUESDAY 22 JANUARY 2013

Got A Story? [email protected]

Cally Squires is away

THE DIZZYING career arc of areality TV music star of ten takes ina spot of busking along the way.

But Transport for London hasdecided to turn the format on itshead, inviting prospective Londonbuskers to take part in a terrifyinground of X Factor-style auditions towin a coveted spot serenadingdroves of weary commuters on theUnderground.

Transport bosses invite buskerswith the X Factor to auditions

TfL has assembled a judgingpanel made up of music industryprofessionals, people from thecapitals music scene and LondonUnderground to size up theaspiring performers for the 150busking licences on offer acrossthe Tubes 37 pitches.

The Capitalist recalls that PwCsAndrew Sentance is pretty nifty onthe guitar...

Its a sure bet that not everybody is only interested in finance at Davos

Good odds on Merkelsledging antics

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Davos has traditionally been a mysterious event, with the real businesshappening well away from the prying eyes of journalists. So its unfortunate that

the entire 2,630-strong attendance list for this years event has been leaked to theQuartz website. It shows Barclays is sending chief executive Antony Jenkins but RBSStephen Hester and Lloyds Antnio Horta-Osrio are missing out. Tony Blair, BillClinton and David Cameron will also be at the event. But the best job title on the list?Thats Rossanna Figuera, Ambassador of Good Things at food firm Wafels & Dinges.

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IN BRIEFGoldman chief backs Chinan Goldman Sachs Asset Managementchairman Jim ONeill yesterday saidChina should be ditched from the

Brics concept he originally coinedbecause it had grown too important.Speaking at the London School ofEconomics, ONeill said China was sofar ahead of its Brics counterparts Brazil, Russia and India it should notbe included. China is of a scale ofimportance which is way more thanthe other three, he said.

UK workforce facing 3.1m shortfalln The UKs workforce will be short of3.1m skilled workers by 2050 if it failsto boost skills or loosen controls on itsborders, a recruiter said yesterday. Ifthe UKs population rises to 74.5m by2050, as expected, even with anemployment rate at pre-crisis levels of71.6 per cent, just 32.3m out of 45.1mpeople of working age will be in work,Randstad projects, unless the

government U-turns on the restrictivemigration policy it began in 2010.

Fed easing assumptions attackedn The assumption that monetaryeasing can slash US unemployment isbased on a false assumption that allunemployment is cyclical, INGresearchers argued yesterday. TheFederal Reserve is radically looseningmonetary policy as it believesunemployment is due to thedownturn but actually much of it isstructural, the ING note argues meaning Fed policy may be in vain.

THE BANK of Englands Fundingfor Lending Scheme (FLS) seems tohave kicked in to reduce lendingcosts for firms, official figuresshowed yesterday.

But business lending kept onfalling, which industry groupsbelieve points to a lack of demandfrom firms for credit.

Net lending to firms fell another2.8bn in November, resulting in a4.1 per cent fall in net lending onthe year.A net balance of more than 30

per cent of large firms saw interestrates coming down.

But despite that, larger firmsincreasingly looked to the capitalmarkets for funds, raising 29.1bnin December, up from 13.5bn inNovember.

But smaller firms have lesschance to use alternative fundingsources and a small net balancesaw bank loan interest rates risingin the month.

Business loans

down as firmsstop borrowing

BY TIM WALLACE Signs that lower borrowing costsare beginning to reach firms areencouraging and show thatFunding for Lending is beginningto make an impact, said MatthewFell from the Confederation ofBritish Industry (CBI).

However, weaker demand forfinance among small and medium-sized businesses indicates that theyare still lacking confidence toinvest, so raising awareness ofavailable schemes is crucial.

Meanwhile the Labour partycalled the governments efforts toboost lending to businesses anabject failure.

Labour has led calls for a properBritish Investment Bank to backbusiness, but ministers are drag-ging their feet and bickering overtheir plan, said the partysshadow business secretary ChukaUmunna.

The governments Business Banklooks highly unlikely to get off theground much before the next gen-eral election.

Mortgage market is stagnatingwell below pre-crisis peak levelMORTGAGE lending barely budgedin 2012 despite hopes that theeconomy could be recovering andgovernment-led efforts to improvecredit conditions, the Council ofMortgage Lenders (CML) revealed.

Total lending came in at anestimated 143bn for the year as awhole, hardly up on the 141bnrecorded in 2011.

But the industry body estimatesthat lending will start to recover alittle this year, forecasting a nineper cent rise in mortgages to

156bn.We are more positive about the

BY TIM WALLACE UK housing market and widereconomy than a year ago, despiteeconomic headwinds anddownside risks, said the CMLschief economist Bob Pannell.

A key reason is that lenderscurrently face few fundingpressures, in part reflecting theFunding for Lending Scheme(FLS).

The FLS is a Bank of Englandscheme backed by the Treasury,giving cheap funding to banks aslong as they promise to lend it onto households and consumers.

Although the forecast increase

represents a solid rise, it is onlyincreasing from a very low base

level.Before the financial crisis,

lending was far higher it peakedat 362bn, well over twice the levelforecast this year.

Dijsselbloem elected to succeedJuncker as Eurogroup presidentJEROEN Dijsselbloem, Dutch financeminister, will succeed his

Luxembourger counterpart Jean-Claude Juncker as Eurogrouppresident, after a vote yesterday.

The 17 Eurozone financeministers chose the widely-tipped46-year-old after they managed toconvince French delegate PierreMoscovici, seen as the only memberwith misgivings about theappointment.

The Netherlander, in only his 12thweek of his current role, will takeover from Eurozone stalwartJuncker, who has chaired the group

BY BEN SOUTHWOOD for eight years.Dijsselbloem indicated he wanted

to expand the role from beingmainly focused on crisis-resolution

to more of a long-term focus ongrowth and prosperity.This came in a

meeting whereEurozonefinancial ministersrevealed thatCyprus will have towait until at leastMarch to getthe17bnbailoutpackagethey seek

from their lenders.Negotiations surrounding the aid

were still ongoing, according toJean- Claude Juncker, currently

president of the Eurogroup offinancial ministers.We will wait for the troika

report, Juncker said, referring to thegroup of lenders made up of theEuropean Central Bank, the EU andthe IMF.

I dont think that we will come toa decision on Cyprus in a short

time. I also dont thinkthats necessary.

Mortgage lending is edging up

2001 20112009200720052003 2013

150

100

200

250

300

350

400 bn

estimates


THIS year will be another one ofstruggle for southern European

banks, Fitch said yesterday, as itput the sector on a negativeoutlook.

Banks in Spain, Portugal, Italy,Greece and Cyprus will be keptin a tight grip by continuedmacroeconomic weakness andsovereign debt crisis. Lendersratings are closely correlated

with their governments rating.Weak macro conditions will

continue to put pressure onearnings generation and assetquality, said Erich van Lumichat Fitch. The outlook is unlikelyto change back to stable in theabsence of an improvement in

Fitch says southern Europeanbanks in for another hard year

BY BEN SOUTHWOOD financial market conditions,which would allow for a moresustainable funding and liquidityprofile across the sector withreduced reliance on theEuropean Central Bank.

A more positive movement may

come from mergers andacquisitions, Fitch predicted,which could c lear upovercapacity and improveefficiency, especially if there iscontinued lender flight to higherquality institutions.

But this will not erase thebasic problems banks will havetrying to boost their bottomlines, Fitch said, and it will bedifficult to fill the gaps withpatchier fee and commissionincome.

LLOYDS is increasing its mortgagesto first time buyers to its highestlevel since the group was draggeddown in the financial crisis andhad to be bailed out, indicating it isedging closer back to health.

The banking group has promisedto lend 6.5bn to 60,000 first time

buyers in 2013.That is an increase on the 5bn

pledged to 50,000 last year, and upon the 5.7bn loaned in first timemortgages in 2011, 5.6bn in 2010and 5.3bn in 2009.

Before that the figures are notcomparable as that was whenLloyds merged with HBOS.

The bank has been the biggestuser of the Funding for Lending

Lloyds pledges 6.5bn for first

time buyers through this yearBY TIM WALLACE Scheme so far, drawing down 3bn

from the Bank of England.It says it is using the cash to

support mortgages and lending tosmall and medium-sizedenterprises (SMEs). But the bankalso noted it is hard for oneinstitution alone to boost overalllending or the economy.

The recovery in the housingmarket rests on growth in the

wider economy, said LloydsStephen Noakes.

Whilst the property market islikely to continue to bechallenging, we remain committedto getting things right at the startof the chain, creating liquidity inthe housing market and helping

more people get on to the propertyladder in 2013."

Jeroen Dijsselbloem willexpand the Presidents role

LENDING DROPPED AGAIN TOWARDS THE END OF 2012

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

120

100

80

60

40

20

0

-20

-40

-60

billions Loans

Bonds

Equity

Commercial Paper

Total

NET FUNDS RAISED BY UK BUSINESSES

*ALL FIGURES ABOVE ARE FROM NOV 2012

*ALL FIGURES ABOVE ARE FROM DEC 2012

SOURCE: BANK OF ENGLAND

LENDING TO FIRMS

2.8bnHOMEOWNERSPAID BACK A NET

200m

2-YEAR MORTGAGESRATES DOWN TO 3.35%

70%2-YEAR RATES

DOWN TO 5.31%

90% LTVLTV

UNSECUREDBORROWING

ROSE100m

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IN BRIEFEADS sees 2012 sales improvementnEuropean aerospace and defencegroup EADS achieved a very significantimprovement in revenue and operatingprofit in 2012, chief executive TomEnders said yesterday. All four of ourdivisions have delivered goodperformances in 2012, all exceeding ourobjectives, he said at a New Year mediaevent. The firm, whose units includeAirbus, space division Astrium anddefence arm Cassidian, is due to publishfull-year results on 27 February.

Equistone closes 1.5bn fundn Equistone, the private equity shopspun out of B arclays last year,yesterday said it had defied a toughfundraising environment to entice1.5bn (1.3bn) from investors for anew fund. The groups fourthEuropean buyout fund will targetinvestments of up to 300m. The firmhas already completed threeinvestments from the fund, includingthe acquisition of bespoke UK travelagent Audley Travel in March 2012.

City of London Group profit fallsn

Money manager City of LondonGroup yesterday reported decliningrevenues and profits for the sixmonths ending November 2012.Chairman David Cardale said theperiod was not an easy one for theasset manager, as funds undermanagement dropped 500,000 to2.4bn, with revenues down 12 percent and pre-tax profits falling 18 percent. The group was hit after a clienttook a large fund mandate in-house.

STOBART Group has taken theunorthodox step of appointing anexecutive chairman to help thehaulage firm get back on course.A week after the FTSE 250 firm

warned its profits would be belowforecasts, Stobart Group said yester-day that deputy chief executive AvrilPalmer-Baunack will become execu-tive chairman with immediate effect.The Cumbria-based firm also

announced the surprise retirement ofnon-executive chair-man, Rodney Baker-Bates, after fouryears in the role.

Another non-executive direc-tor, David Beever,has also abruptlyleft his seat onthe board tospend more timeon other businesscommitments.

Chief execu-tive AndrewT i n k l e r ,who owns

Stobart shakesup board after

profit warningBY MARION DAKERS

almost 10 per cent of Stobart stock,said in a statement: To meet the chal-lenges and opportunities within ourstrategy the board now believes it isappropriate that Stobart is headed byan executive chairman.

In the relatively short time that shehas been with the group, Avril hasdemonstrated to the board that she isthe right person to carry out thisdemanding role.

Palmer-Baunack joined the firm inSeptember after its purchase of logis-tics group Autologic.The move was welcomed byinvestors, who sent the stock soaring

3.8 per cent.But the appointment of an execu-

tive chairman goes against the UKCorporate Governance Code, whichcalls for a division of responsibili-ties between a companys chairmanand chief executive.Proxy voting agency Manifest

described the appointment as acontinuation of poor governance

standards.

Avril Palmer-Baunackwill take up the chair

FRANCES Areva and JapansToshiba are considering bids fornuclear fuel producer Urenco, but

British, German and Dutchauthorities disagree over what todo with the ultra-secret firm,industry sources said.

Britain is keen to sell its 33 percent stake, and German utilitiesRWE and E.ON are talking topotential buyers over theircombined 33 per cent, but theDutch government is notconsidering a sale.

Analysts estimate that theuranium enrichment firm is

UK moves closer to Urenco saleas Toshiba and Areva mull bids

BY CITY A.M. REPORTER worth between2.5bn (2.1bn) to3.6bn, but some of the sellers arehoping for as much as 12bn.

Both Areva and Toshibadeclined to comment.

Any transaction would requirean agreement between the three

governments due to the firmsunique corporate structure.

A spokesman for the UKsDepartment for Business,Innovation & Skills said yesterdaythat Britain was considering a saleof its Urenco stake and that the

government was discussing itsoptions with Urencos othershareholders but that no formalposition had been taken yet.


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Urenco is owned in equal parts by the UK, German and Dutch shareholders

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Meggitt PLC


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445 p 429.4021 Jan

Portmeirion Group PLC


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555 p 540.0021 Jan


CHINESE telecoms giant Huawei sawprofits rise by a third in 2012, as itwas buoyed by strong growth inEurope and Japan despite facing a USsecurity investigation.

The company said it anticipatesfurther growth in 2013, as itexpands its smartphone businessinto more developed markets.

Huaweis main presence outsideof east Asia is in installingequipment such as radio masts formobile networks. In this regard itranks second only to Swedish firmEricsson, which it is expected toovertake in the coming months.

The Chinese firm recentlyannounced a 1.3bn investment inthe UK that will create around 700jobs. However, it has a tiny presencein the worlds richest economy, theUS. Huawei, along with fellowChinese firm ZTE, has faced aSenate investigation overallegations that it has installedsurveillance technology in itsinfrastructure.

Chief financial officer CathyMeng said the security concernswould not dampen Huaweisgrowth and said it would keep anopen mind about a potential listing.

Huawei saw annual revenues riseeight per cent to 220bn yuan(22.3bn) and profit of 15.4bn yuan.

Huawei postsa 33pc surge

in its earningsBY JAMES TITCOMB

FTSE 100 engineer Meggitts sharesdropped almost two per cent yester-day as the international probe intothe 787 Dreamliner widened toinclude one of its subsidiaries.

Securaplane Technologies, a US firmowned by Meggitt, makes chargers forthe lithium ion batteries used onBoeings new Dreamliner planes,which have been grounded world-wide amid safety worries.

Investigators are due to travel toSecuraplanes Arizona base today toexamine the chargers for any signsthey might be behind the problems.They also plan to carry out similar

tests at the site where a unit of UnitedTechnologies builds the power unit,after looking at battery maker GSYuasas production line in Japan.

A spokesperson for Meggitt said thecompany is taking part in theinvestigation but could not commentfurther.

US aviation watchdogs have beenworking with Japanese authorities to

787 Dreamliner

probe spreadsto Meggitt unit

BY MARION DAKERSfind the cause of the issues in the bat-teries used in the Dreamliner, whichhave shown signs of burning.Authorities around the world last

week grounded the new Dreamlinersafter an All Nippon Airways planemade an emergency landing.

But the regulators remain in thedark about the underlying cause, withJapans Civil Aviation Bureau saying itmight have been sparked by over-charging, while the US NationalTransportation Safety Board declaredthat the battery did not exceed its des-ignated voltage.

HR Owen shares accelerate asthe car seller beats its forecastsSHARES in upmarket car seller HROwen roared nearly four per centahead yesterday after it revealedthat it was set to beat profitforecasts for the year.

The FTSE-listed firm said aparticularly good sales run at itsRolls-Royce and Bentley franchiseshad driven its performance in thesecond half of the year.

HR Owens success echoes reportsof record turnover at several luxurycar makers including Jaguar andAudi in recent weeks.

The firm opened a new Ferrarishowroom at The Berkeley in

BY MARION DAKERSKnightsbridge in summer 2011,which has also helped to improve itssales figures.

Orders for the new LamborghiniAventador were also a welcomeboost during 2012.

The company said the first half of2013 will be less pronounced thanlast year as car makers are expectedto roll out fewer new models, butthe firm added that it has severalplans for growth during theyear.

Housebroker CharlesStanley has

raised its pre-tax profit

forecast for 2012 from 1.8m to2.2m, and increased its 2013 profitoutlook by 0.1m to 1.8m.

Whilst allocations are notexpected to be a problem, in partdue to weakness in some overseasEuropean markets, we feel itappropriate to remain somewhatcautious at this early juncture in theyear, the analysts said, whileremaining upbeat in the long term.

Shares in HR Owen closedup 3.7 per cent at 69.5p

yesterday.

Portmeirion pre-tax profits ontarget after bumper revenuesPORTMEIRION Group, the china-maker best known for its Botanic

Garden pattern and collection bySophie Conran, said full-year profitsare likely to be in-line with forecastsafter enjoying a strong Christmastrading period.

The Aim-listed manufacturer saidit expects to report revenues for theyear to 31 December 2012 of over55m, around three per cent abovelast year its fourth consecutiveyear of record sales.

A strong performance in its UKand South Korean markets helpedoffset a fall in US sales, which

BY KASMIRA JEFFORD Portmeirion said were hit byhurricane Sandy.

The achievement of anotherrecord level of sales in such

challenging conditions is highlysatisfying, Dick Steele, non-executive chairman, said.

Our diversity of export marketshas enabled us to balance harshconditions in the US withopportunities elsewhere in theworld.

Analysts at Seymour Pierce expectthe company to report a pre-taxprofit of around 6.7m.

Portmeirion announced last weekit has appointed Philip Atherton asits new sales and marketing

director to accelerate its expansionoverseas in its existing markets,such as Hungary and Canada, andto launch in new markets such as

Russia and China.

CARTIER watch maker Richemontsaid yesterday sales growth had

ground to a halt in the Asia-Pacificregion, rekindling fears about amarket which has been the drivingforce of luxury sales in recent

years.Shares in the worlds second-

biggest luxury goods company fellup to six per cent in trading after itposted a smaller-than-expected risein fourth-quarter group sales.

At this stage, it is unclear howbusiness patterns may develop and

Richemont slumps after salesgrowth slows in Asia Pacific

BY CITY A.M. REPORTER how the business in the Asia Pacificregion will evolve in the nearfuture, Richemont said.

Richemont sales rose five percent at constant exchange rates inthe three months to 31 Decemberto 2.86bn (2.3bn), missingforecasts for a 7.6 per cent rise inan analyst poll, as the previously

booming Asia-Pacific regionreported no growth. Wholesale

growth fell in the quarter to justtwo per cent from eight per cent inthe April to September period dueto caution by retailers in HongKong and mainland China.

Cartier watch maker Richemont missed sales forecasts

BLACKBERRY software could belicensed to other phonemanufacturers, the chief executiveof owner Research in Motion (RIM)has said.

Thorsten Heins, who was madeRIMs chief executive 12 monthsago, said offering the BlackBerryoperating system to other parties,such as Samsung and HTC, was apossibility, and that the Canadiancompany could even sell itshardware business.

There are several options,including the sale of hardwareproduction, as well as licensingour software. But there is noreason for us to decide in haste,Heins told German newspaper Die

RIM chief Heins says BlackBerrycould feature on rival devices

BY JAMES TITCOMB Welt. The companys plans hingeon the success of BlackBerry 10,RIMs next generation of handsets

which will run new software.Heins said licensing would only

be considered after the newsoftware had a chance to succeed.

The main thing for now is tosuccessfully introduce Blackberry10. Then well see, Heins said. TheGerman-born chief executive ishoping BlackBerry 10 can reviveRIMs fortunes having lost out tothe likes of Apple and Samsung.

The current BlackBerry softwarehas seen little innovation in recent

years, and is seen as outdated.However, parts of RIMs software,such as its BlackBerry Messengerchat service and reliable email, arestill viewed as valuable assets.

OIL explorer Afren reportedrecord production for 2012

yesterday, as it said full-yearrevenues were up 151 per cent.

The FTSE 250 oil and gascompany which made threesignificant explorationdiscoveries last year: the OkoroField Extension and Ebok NorthFault Block in Nigeria and aKurdistan block said full-yearproduction was in line with

guidance at 42,830 barrels of oilequivalent per day.

Full-year production for thisyear is estimated to averagebetween 40,000 barrels of 47,000

barrels of oil a day.Record financial results are also

Afren hails top year as output

and revenue hit record levelsBY CATHY ADAMS expected, with sales revenues

forecast to hit a total of $1.5bn(944m) for last year, a 151 percent increase over the previous

year.Additionally, Afren said it would

ramp up investment spending to$620m, from $520m last year.

In 2013 we expect to furthergrow our reserves base through amulti-well exploration andappraisal drilling campaign in

both established and new basins,while continuing to grow ourproduction base, chief executiveOsman Shahenshah said yesterday.

Analysts from N+1 Singeryesterday hailed Afrens tradingstatement a strong 2012

performance, with productioncoming in as per guidance.Demand for luxury cars movedup a gear in the last year

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16TUESDAY 22 JANUARY 2013 cityam.com

LONDON REPORT

Mayer BrownThe law firm has appointed

Alistair Graham as a litigationpartner in its London office. Hejoins from White & Case, wherehe was a partner in its Londoncommercial litigation practice.Graham has previously workedas enforcement counsel to theFSA, where he assisted in the runup to the introduction of theInvestigative Disciplinary and Enforcement regime.

RBC Capital MarketsThe investment banking arm of Royal Bank of Canada hasappointed Christoph Seibel as managing director and headof corporate debt capital markets in Europe. He was mostrecently head of Europe, Middle East and Africa corporatedebt capital markets origination at UBS. Seibel has 15years experience in the sector, and has also held roles at

Bank of America and BNP Paribas.

Mitsubishi UFJ Securities InternationalPaul Hartwell has been appointed chief executive of theEuropean capital markets arm of Mitsubishi UFJ FinancialGroup. He joins from Standard Bank, where he was groupchief risk officer. Hartwell has over 30 years experience inthe industry.

BairdThe investment bank has appointed two London-baseddirectors to its European investment banking team.Matthew Gehkre has worked at Baird since 2006. He waspreviously a fighter pilot in the US air force. Gary Page hasbeen a member of Bairds UK investment banking teamsince 2009. He has also previously worked at Merrill Lynch.

Neptune Investment ManagementNick Webb has been appointed intermediary sales

manager at the fund management firm. He joins fromSkandia, where he was a sales manager for 13 years.Webbs team will report directly to Adam Hughes, head ofUK wholesale at Neptune.

Takeover Appeal BoardLord Collis of Mapesbury has been appointed deputychairman of the Takeover Appeal Board. He was appointeda lord of appeal in ordinary in 2009, and served as a justiceof the Supreme Court between 2009 and 2011. Collis was apartner at Herbert Smith & Co between 1971 and 2000.

EquifaxThe credit information business has appointed MartinHagerty to its banking and financial institutions team. Hejoins from HSBC, where he was most recently head of retailrisk for Latin America. Hagerty was previously head ofretail risk for the UK at HSBC, and has also held senior risksroles at Marks & Spencer, MBNA and at HBOS.

WHOS SWITCHING JOBS Edited by Tom Welsh

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

Investors selloff Europeanluxury shares

EUROPEAN shares rose yesterday,climbing back towards neartwo-year highs, as investorsbought back into relatively

undervalued sectors such asutilities and steel as they betEuropes economy will improve.A sell-off in luxury stocks capped

gains, however, sparked by com-ments from Swiss watch maker

Richemont about weak sales growthin China. Its shares lost 5.6 per cent,whileBurberrydropped 1.4 per centand Louis Vuitton owner LVMH fellone per cent.The FTSEurofirst 300 index of top

European shares ended 0.3 per centhigher at 1,166.53 points, just a fewpoints shy of a near-two-year high of1,170.29 hit on 10 January.The Eurozones blue chip Euro

STOXX 50 index added 0.6 per cent to2,726.63 points, moving backtowards an 18-month high hit a weekago.Trading volume was low in Europe

on Monday as Wall Street was closedfor Martin Luther King Jr. Day.

Shares of utilities and basicresources companies which wereamong the worst performers inEurope in 2012 led the gainers yes-terday, withArcelorMittal up fourper cent, GDF Suez adding 1.8 percent and E.ON climbing 1.6 per cent.

Investors are switching to thevalue stocks, theyre looking for thecheapest valuations. If things finallyimprove on the macro side inEurope, these are the stocks thatcould outperform, after years ofunderperformance, a Paris-basedtrader said.The STOXX Europe 600 utility sec-

tor index lost 1 per cent last year andthe STOXX Europe 600 basicresources sector index gained 3.9 percent, both underperforming theSTOXX Europe 600 benchmark,which gained 14 per cent on the year.

Investors have been scooping upEuropean shares in the past twomonths with the Euro STOXX 50surging 13 per cent since mid-November as fears about a poten-

tial break up of the Eurozone abatedand global macroeconomic dataimproved.

The stress is coming down inEurope, Barclays France directorFranklin Pichard said.

Bond yields are falling inSouthern Europe, while theres a bitof tension on German and French 10-year bond yields. Could this finallybe the start of reallocation out ofbonds from Northern Europe coun-tries and into equities?According to EPFR Global data,

flows going into equity funds out-paced flows going into bond fundsfor a fifth straight week in the weekending 16 January, with equity fundsattracting money from retailinvestors for a second week running.

Despite the brisk two-month rally,European equities remain relativelycheap, with about a third of the

stocks listed on the Euro STOXX 50still trading below their book value.

BRITAINS FTSE 100 scaled fresh 4-1/2

year peaks yesterday, with signs ofprogress in US budget talksencouraging investors shift from

low-yielding government bonds intohigher risk, higher return equities.

US Republican leaders signalled theywould allow the government to raise thedebt ceiling and borrow to prevent adefault in the next three months withoutdemanding immediate spending cutsfrom President Barack Obama.

Britain, with a heavy dose of internation-ally-focused companies among its bluechips, was a key beneficiary of easing con-cerns about the US budget, together withrecent signs of stronger economic growththere and in China.The FTSE 100 closed up 26.57 points, or

0.4 per cent, at 6,180.98, its highest finishsince mid-2008.

There are clearly some political issuesthat face us in the near term ... (But) if youare an investor, equities are cheap againstfixed income, that combined with animproving global environment meansthere are plenty of opportunities," saidJohn Haynes, head of research at Investec

Wealth and Investment, who recommendssome industrial companies and strongbrand names like Unilever and Diageo.

But the strong gains, which have put theFTSE 100 on track for its best month in halfa year, have also taken it into overboughtterritory on the 7-day relative strengthindex (RSI), raising the risk of a correctionor at least consolidation.

If you look at stochastics and RSI, theyare massively overbought so I am envisag-ing a correction in the fairly near future,said Jack Pollard, of Sucden Financial.

If we saw a correction to around the5,977 area, it wouldnt be a massive con-cern. If we then managed to hold that, Ithink people will start loading up on longsand we could move higher again into theend of the first quarter.Traditional risk-on sectors led the way

on Monday with miners up 1.3 per cent.Financials added their weight to gains

too, with insurers bolstered by a 4.9 per

cent rally to 1211p inAdmiral GroupafterGoldman Sachs upgraded the firm to

buy and added it to its conviction list.Goldman Sachs analysts, led by Ravi

Tanna, said the stock has the potential toreturn 30 per cent over the next year.Analysts believe shares will be helped by

proposals for legislative change in Britain,such as capping whiplash claims and limit-ing fees paid to no win no fee lawyers,and holding down costs and premiums.

We believe there is potential for claimsinflation to decline faster than the marketexpects, Tanna wrote in the note. As aresult of renegotiated reinsurance terms,the group has significant gearing towardslower claims inflation.The outlook for earnings, however,

remained a key concern, with Pearson thetop faller among the blue chips after theeducation and media group reported aweak finish to 2012 and said it expectstough market conditions to continue.

Its share price fell 2.9 per cent to 1202p.The Financial Times publisher now

expects adjusted earnings per share ofaround 84p, down from the 84.9p it statedin October, with full-year operating profitof around 935m.

Pearson said cuts in government spend-

ing would continue to hold back its schoolpublishing business in the UK and US, butits international division would reportdouble digit sales growth due to the strongdemand in emerging markets.

Given the lack of earnings momentumand the current valuation 14 times con-sensus 2013 earnings, which we believewill see downgrades as we go through theyear we would continue to take profits,analysts at Killick said in a note.

FTSE 100 soars to a 4 1/2-year highas investors take heart from the US

BESTof the BROKERSAdmiral Group PLC

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p1,240

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1,180

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ADMIRAL GROUPGoldman Sachs yesterday upgraded Cardiff-based insurer Admiral fromneutral to buy, sending the companys share price up five per cent.The banking giant said the stock had underperformed over the last sixmonths due to softening premium rates and regulatory interventionbut it now presents an investment opportunity, as there is potential forclaims inflation to decline faster than the market anticipates.

FTSE


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6,125

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Henderson Group PLC


p160158

154156

150152

148146

158.7021 Jan

HENDERSON GROUPShore Capital have upgraded money manager Henderson Group to abuy from hold with a target price of 151p, following the settlement

of legal claims against the fund manager last week. A group of investorssued the firm in 2009 for misrepresentation of mandate after poorperformance. Last week the claim was withdrawn, leading Shore to re-rate the group citing its attractive fund positioning

Unilever PLC


p2,4502,440

2,4202,430

2,4002,410

2,3902,380

2,440.0021 Jan

UNILEVERInvestec analysts have upgraded Unliver from hold to buy ahead ofthe consumer giants fourth quarter results tomorrow and raised itstarget price from 2400p to 2800p. Investec said the principle catalystsfor choosing to upgrade the stock are the potential for margins to

su

cityam 2013-01-22

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