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...but FTSE bucks the trends as it touches five-year highTHE FTSE 100 climbed to a five

year peak during yesterdaystrading, breaking throughanother psychological barrier.

Londons main blue chip indexreached 6,412.44 points asinvestors were boosted byrenewed belief that the Bank ofEngland could be set for morequantitative easing.

It was the first time sinceJanuary 2008 that the FTSE hadpassed the 6,400 level.

Yet the market eased later inthe day to close up by only 0.26

BY JULIAN HARRIS per cent, at 6,395.37. Analysts weredivided over whether the FTSEsfailure to hold about the 6,400mark could result in profit-taking,or whether the index will haveanother push at closing above6,400 today.

There are reasons to be bullishbut we do expect a light correctionof around three per cent over thenext week, said JN Financialtrader Rick Jones, who expects theindex to retreat to around 6,200this week.

Theres an opportunity to booksome profits.

Equities have enjoyed a strong

rally so far this year, as riskappetite resumes on hopes ofmacroeconomic recovery.

The prospect of further assetpurchases from the Bank have also

bolstered the FTSE.Good economic data from the

UK and across Europe gaveinvestors yet more reason to buyequities as even though thecurrent economic environmentmay not look all that bright, thereare indications that things are onthe mend, commented CapitalSpreads in a note.

Another positive set of labourmarket data for the UK, showing a

further jump in the level ofemployment, contributed to arosier outlook.

Unemployment in the UK fellonce again and the number in

work reached a new record highshowing that we may not beproducing all that much, asevidenced by recent GDP figures,

but at least jobs are beingcreated, Capital added.

The FTSE has been on the risesince sinking to around 5,260 lastsummer, when the Eurozone crisishad flared up again.

It started the year around the5,900 mark but broke through

6,000 and recorded its bestJanuary since 1989 last month,gaining 6.43 per cent.

FTSE 100

20 Feb18 Feb 19 Feb

6,400

6,360

6,380

6,320

6,340

6,4206,395.37

20 Feb

BUSINESS WITH PERSONALITY

THE POUND tumbled to an eightmonth low against the dollar yester-day, after the Bank of Englandrevealed that its governor Sir MervynKing has begun pushing for anotherround of monetary stimulus.

Sterling has taken a hammering sofar this year, dropping from around$1.63 at the start of 2013 to $1.523 bylast night.

Earlier in the day it had fallen off acliff as the City reacted to the publica-tion of minutes of Februarys meetingof the Monetary Policy Committee(MPC), losing $0.01 in value duringjust a quarter of an hour of trading.

The minutes showed that SirMervyn was one of three senior Bankofficials to vote for a further 25bn inasset purchases.The move, which would take the

total level of quantitative easing (QE)to 400bn, was backed by David Milesand executive director Paul Fisher yet defeated by the six remainingmembers of the committee.

Nonetheless, the shift by two ofthe Banks most seniorpolicymakers Miles hasbeen voting for more QE

www.cityam.com FREE

ANDREW SENTANCE AND DANNY BLANCHFLOWER

FTSE 100 6,395.37 +16.30 DOW13,927.54 -108.13 NASDAQ3,164.41 -49.18 /$ 1.53 -0.01 / 1.15 unc /$ 1.33 -0.01

BY JULIAN HARRIS

DOWN,DOWN,DOWN

HEAD TO HEADISSUE 1,824 THURSDAY 21 FEBRUARY 2013

MARKKLEINMANSee Page 7See The Forum, Page 24-25

UK JOBS FIGURES: Page 2

FED MINUTES: Page 2

ALLISTER HEATH: Page 2

Certified Distributionfrom 31/12/12 to 27/01/13 is 127,008

since November prompted investorsto move even further from sterling.The markets were also affected by

dovish noises emerging from theMPCs minutes.

The committee agreed that it wasimportant to communicate clearly itswillingness to bring inflation back tothe target over a longer time horizonthan usual, the minutes said.The MPC added: as long as domes-

tic cost and price pressures remainedconsistent with inflation returning totarget in the medium term, it wasappropriate to look through the tem-porary, albeit protracted, period ofabove-target inflation.

Last June Sir Mervyn was also part ofa three-man push for more QE, on

that occasion endors-ing another 50bnbeing added to

the Banks bal-ance sheet. Thenext month,

July 2012, saw aclear majority ofseven of the MPC

wave through50bn of extra

QE, raisingthe totala m o u n tto 375bn.

Sir Mervyn only has four monthsleft in the top job before steppingdown to be replaced by Mark Carney.His vote surprised many investors,due to recent speeches in which theoutgoing governor indicated that theeffectiveness of the QE programmewas fading.

Incoming governor Carney maylook for new forms of stimulus, withsome investors saying that theCanadians expected dovish stance isalready weighing on sterling.

Carney is already easing policy,before he even takes up his post,Danske Bank economist LarsChristensen told City A.M.

Market forces are determined byexpectations.

Sterling slumps even further as Bank governor votes for more QE

Spot gold dipped during the days trading

7am 9am 11am 1pm 3pm 5pm

1,620

1,600

1,580

1,570.79$/ounce

PRICE OF GOLD FALLS TO A SEVEN-MONTH LOWGOLD dipped to a fresh sevenmonth low last night, as theprecious metal was dealt a triple

blow of hawkish Federal Reserveminutes, growing risk appetite,and speculation that a hedgefund is having to withdraw fromits commodities positions.

Spot gold was down at$1,570.79 an ounce, having

begun the day comfortablyabove the $1,600 mark.

There are rumours that alarge commodity hedge fund

blew up and was forced to dumpits holdings, sparking a selloffacross markets, said AdamSarhan, chief executive atSarhan Capital in New York.

The yellow metal has been onthe decline since the autumn.Having come close to the $1,800level on 4 October 2012, it haslost significant ground whilemore funds have gravitatedtowards resurgent equitiesmarkets across the globe.

Other commodities alsoshowed notable declines, during

yesterdays trading.

Silver was down over threeper cent to $28.5 an ounce in theUS last night, while Brent crudelost 1.86 per cent.

Golds dip has seen it create aso called death cross the terminvestors use for the 50 daymoving average line falling tocross the 200 day line.

But Michael Hewson of CMCMarkets warned off enthusiastic

bears by saying the fall may notcontinue. In the last 10 years

weve seen six death crosses andonly one has worked with anydegree of success, he explained.

Kings vote caused sterling to fall out of bed

7am 9am 11am 1pm 3pm 5pm

1.55

1.54

1.53

1.523/$

Sir Mervyn King leaves hispost at the end of June

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Millions960

940

920

2012

2012

20112010200920082007

20112010200920082007

TOTAL WEEKLY HOURS WORKED, SEASONALLY ADJUSTED

6

4

2

0

-2

-4

-6

PRICES CONTINUE TO OUTPACE WAGES

%

Consumer Prices IndexTotal Pay

UNEMPLOYMENT

2.5m156,000 OVER THE YEAR

EMPLOYMENT

29.73m*584,000 OVER THE YEAR

E

,

*ALL-TIMERECORD

MALE

FEMALE






0.97m11,900 OVER THE YEARYOUTH (16-24)

MALE

FEMALE

YOUTH (16-24)SOURCE:OFFICEF

ORNATIONALSTATISTICS

*ALL FIGURE ARE FOR Q4 OF 20 2, OMPARED TO Q4 OF 20

[email protected]

Follow me on Twitter: @allisterheath

Jobs boom continues butslump in real wages bitesEMPLOYMENT soared to anothernew all-time record in the final threemonths of 2012, despite the econom-ic activity rate falling to a 22-yearlow.

Employment rose 154,000 betweenthe third and fourth quarter of 2012,reaching 29.73m, the highest levelever. At the same time, unemploy-ment edged down 14,000, to 2.50m,156,000 lower than during thefourth quarter of 2011.Total weekly hours worked climbed

0.2 per cent over the quarter and 2.6per cent over the year to reach947.1m. And economic inactivity col-lapsed to its lowest rate since 1991 22.3 per cent with 294,000 morelooking for work than a year earlier.

Yet another set of robust figuresfor the labour market, with achunky increase in employment anda sharp fall in the claimant count,said Item economist Nida Ali.

There is also pleasing evidence of

Twitter tries new tool to unlock adsTwitter has unveiled a new automatedadvertising technology that promises tounlock the moneymaking potential of themicroblogging site. The development of aTwitter ads API, or application-programming interface, satisfies along-awaited desire of advertisers toincrease and improve the reach of theirmarketing messages to Twitters 200mactive users. A similar technologylaunched by Facebook in 2010 helped thatsocial network reach more than $3bn inrevenues the following year.

Intrade traffic plummetsThe number of people using Intrade hasplummeted since a US governmentcrackdown late last year, calling intodoubt the online prediction marketspowers to divine the wisdom of crowds onmatters ranging from election results tothe stock market.

Accor aims to cut costs in EuropeAccor, Europes largest hotels operator,said it would cut costs to cope with adifficult market in southern Europe andaccelerate new openings, particularly inAsia. The firm is moving away fromowning sites to a franchise model.

Pressure to split top job at JP MorganJamie Dimon is under pressure torelinquish one of his roles as chairmanand chief executive of JP Morgan Chaseafter the bank lost $6bn last year througha bungled trading strategy.

Google unveils its GlassesGoogle has released the first videoshowing what the world looks likethrough the latest prototype of its smartglasses, a computer integrated into yourfield of vision.

BAE Systems warns 3,500 jobs at riskBritish defence giant BAE Systems haswarned it will be forced to cut 3,500 jobsin the US if the threat of Pentagonspending cuts becomes reality. Thecompany said it had warned staff at its USship repair business of the possible cuts.

Over-60s told to go back to UniPeople in their sixties should go touniversity to retrain because they will beexpected to work for longer, thegovernment has suggested.

US fights theft of trade secretsThe White House yesterday unveiled anew strategy to exert pressure on Chinaand other countries that engage incorporate espionage against the US aspart of a new push to countercyberattacks and commercial spying.

LivingSocial Gets a $110m boostLivingSocial has raised $110m fromexisting investors, giving its coffers amuch needed boost after the daily-dealssites 2012 losses widened by 30 per cent.

2 NEWS

BY BEN SOUTHWOOD

To contact the newsdesk email [email protected]

BRITAIN is, as ever, a country ofcontradictions. On the onehand, the pound is tumbling asthe global markets begin to

worry about our future, the budgetdeficit is increasing not leastbecause George Osborne got 1.2bnless than expected from the sale of 4G

licences real wages are falling at anaccelerating rate and the Bank ofEngland has gone soft on inflation.On the other, the jobs market iscontinuing to perform remarkablywell, confounding all of the sceptics.While it is still very tough formillions, and unemploymentremains at horribly elevated levels,more people than ever before areworking in the UK, and the quality ofthe new jobs is improving.The best way to assess the strength

of the labour market, adjusted forpart time and full time jobs, is to look

EDITORSLETTER

ALLISTER HEATH

The only greatBritish economic success story of recentyears

THURSDAY 21 FEBRUARY 2013

at the total number of hours workedin the economy. This reached 947.1min the September-December 2012quarter, up by 2.6 per cent over thepast year; the rebound since thetrough of 904m in June-August 2009has been spectacular. We are now just2.2m hours below the boom-timepeak of 949.3m hours worked in Jan-March 2008. That is very encouragingnews, and reinforces the more main-stream data which reveals that thereare now more people in work in the

UK than ever before.There are several major caveats, of

course. The first is that the popula-tion of working age has expandedsubstantially over the past five years,with youngsters entering the work-force and more immigrants movinghere than emigrants leaving. So while

the employment rate for those agedfrom 16 to 64 was 71.5 per cent, up 1.1percentage points on a year earlier,and an astonishing 584,000 net extrajobs were added to the economy (withthe private sector contributing sub-stantially more than that, easily off-setting public sector cuts of 128,000in the year to September) the employ-ment rate remains lower that it wasat the height of the boom. It hit 73per cent or even slightly higher sever-al times during the good years.The difference explains the higher

unemployment, the greater number

stack up. There is something wrongsomewhere.The final caveat is that real wages

are continuing to fall. People are pric-ing themselves back into work, andcompanies are substituting labour forcapital. Total pay is up 1.4 per centover the past year; retail prices rose

3.1 per cent, translating into a real cutof 1.7 per cent. Once again, public sec-tor pay is going up in nominal terms yes, there is meant to be a freeze at afaster rate than private sector pay, at 2per cent against just 1.3 per cent. Inthat respect, though not when itcomes to jobs, austerity is being bornemore by private workers.That said, job creation has been the

one great British success story of thepast few years. Lets hope it continues.

of under-employed workers and theother problems in the labour market.The total number of people on thekey out of work benefits has fallen to4.799m, down from a recent peak of5.098m but remains higher than the4.314m trough of November 2007.The second major caveat is that

while the total number of hours isalmost back to peak levels, outputremains significantly lower. If thedata is correct, it confirms that pro-ductivity output per hour worked is substantially lower than it used tobe. With output stagnant, it seemsthat output per hour worked in thepast 12 months alone collapsed by 2.6per cent. We added over half a millionextra workers but produced nomore than before. Some of the UKspast productivity puzzle makes sense but no economist on earth can con-vincingly make the past years figures

underlying strength, with the rise inemployment almost entirely due toincreasing numbers of full-timeemployees, Ali added.The one potentially glum note was

the starkly below-inflation increase in

THE Federal Reserve last nighthinted its current third round ofquantitative easing (QE3) may cometo an end earlier than planned,trigging a sell-off in US stockmarkets.

Minutes of the last Fed meetingshow there is growing uneasewithin the organisation over lastSeptembers pledge to keep buying$85bn of assets a month until therehas been a substantial recover inthe US jobs market.

They reveal a number ofparticipants at the rate-settingmeeting expressed concern over theopen-ended nature of the latesteconomic stimulus programme.

However Fed chairman BenBernanke appears to still have thebacking of a majority of committeemembers in the short term, withthe Fed voting 11-1 last month tokeep its bond-buying program open-ended and at the same size.

Wall Street fell the most in threemonths after the minutes.

Fedminutes

su

ggest

QE3could end soonBY JAMES WATERSON

WHAT THE OTHER PAPERS SAY THIS MORNING

Find your next step at CITYAMCAREERS.com

The route to your ISA starts here...

wages.Average earnings growth was just

1.4 per cent over the year toDecember, only just over half theheadline inflation rate of 2.7 percent.

But economists have brought outthese flexible real wages as one ofthe main reasons so many UK work-ers are getting jobs despite the direoverall economic picture in thecountry and across the world.

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ITS CRUNCH time for Bumi co-founder Nat Rothschild this morn-ing, as the bitter shareholder battlefor control of the coal miner looksset to come to an end today.

Shareholders will meet in the Cityof London to vote on Rothschildsproposals to overhaul the board.

Rothschild needs a 50 per centmajority to push through his propos-als, which include scrapping 12 outof the current 14 directors includingchief executive Nick von Schirndingand chairman Samin Tan.

His camp also wants the full disclo-

sure of the Macfarlanes legal probe announced in September intoalleged financial irregularities atIndonesian division Bumi Resources,and the removal of any company offi-cials associated with the Indonesianshareholders the Bakrie family.

He has the support of several majorinvestors including Schroders and

Taube Hodson Stonex.If his proposals are rejected, the

D-Day for NatRothschild at

Bumi meetingBY CATHY ADAMS incumbent Bumi board will remain

in charge in an outcome that is look-ing increasingly likely, althoughsources close to the vote said it will godown to the wire.The Bumi board has pledged to

accelerate the divorce fromIndonesian arm Bumi Resources,something it claims Rothschild isunable to do. It has the support ofStandard Life Investments.

Investors should know the outcomeof the meeting tonight, although dueto the complexity of the vote it could

be tomorrow morning.

THURSDAY 21 FEBRUARY 20133NEWS

cityam.com

SPANISH bank Santander slashedbosses bo nuses by o ne-thirdyesterday after profits sl umped,and froze the directors salaries at2009 levels.

Long-serving chairman EmilioBotin took a 32 per cent cut,earning just over 3m (2.6m) though 1.4m of that is in shares,much of which are deferred.

Profits at Spains largest lenderfell 59 per cent on the year and asa result directors pay has been

chopped back by almost 35 percent as a result.

Santander bosses take pay cuton Spanish property troubles

BY CITY A.M. REPORTER Spains banking industry hasbeen crippled by the country sproperty downturn, and althoughSantander is one of the strongest

banks and one of t he few thatdoes not need a bailout, it has still

been affec ted by the housing bust .Chief executive Alfredo Saenz

received 8.24m for 2012, downalmost a third on the year.

And Ana Botin , chief of thebanks UK arm, saw her pay rise2.6 per cent to 5.14m making herthe only boss to record an increasein compensation for the year.

The groups shares fell 1.81 percent on the day.

Network Rail set to be fined asplanning mistakes cause delaysNETWORK Rail is facing a multi-million pound fine for causingunacceptable delays over the winter,the industry regulator warned

yesterday.Overrunning engineering work

over Christmas and basicoperational planning mistakes

were behind the slip in punctualityon English and Welsh railways, said

the Office of Rail Regulation.Around 88.3 per cent of long-

BY MARION DAKERS distance trains arrived within tenminutes of their expected time,slightly better than the 87.1 per centlevel seen last year but still welladrift of the ORRs targets.

The score improved to 91.4 percent for London and the south east.

The group in charge of Britainsrailway infrastructure can be fined1.5m for every 0.1 percentage pointit falls below its 92 per centpunctuality target in 2013-14.

Network Rails operationalperformance on parts of Britains

rail network has been poor overrecent months, said ORR bossRichard Price.

[We are] concerned that thecompany is losing touch with keyperformance targets as passengersagain suffered poor performanceduring challenging weatherconditions.

The regulator called on NetworkRail to improve its performance in

bad weather, highlighting the

admirable flood recoveryresponses in parts of the country.

Nat Rothschild wants to oust 12 out of 14 current Bumi directors

FOREIGN banks will be put at a

huge competitive disadvantagewhen trying to sell hedgingproducts to EU firms, bankinggroups have warned, if damagingincoming rules are not amendedquickly.

Under the CRD4 directive plans,banks must hold extra capitalagainst derivatives to cover the riskthat they may lose value in future.

The EU negotiators recognise thismakes hedging products whichfirms buy from banks to protectthemselves against risks likeexchange rate moves or interest raterises much more expensive and sohave exempted deals between EU

banks and EU firms from the rules.But they have not exempted non-

EU banks from the credit valuationadjustment (CVA) charge, whichcould push up prices for customersand so damage the economy.

CVA charges in these caseswould amount to a punitive cost forthese entities and could stiflegrowth in the real economy, saidChristine Brentani from the

Association of Financial Markets inEurope (AFME).

The exemption should apply toall non-financial entities and not

just those established in the EU.European parliamentarians and

leaders have been fiercely debatingthe proposals which are already

behind schedule.The most high profile row so far

flared up around bank bonuses,with French and other politicianspushing to cap variable payat the same level assalaries a change

which is likely tocome in as onlyBritain now publiclyopposes the move and

banks feel unableto defendthemselves.

Banks fear EUrules will hitfirms hedging

BY TIM WALLACE

Bumi PLC

20 Feb14 Feb 15 Feb 18 Feb 19 Feb

440

400

420

380

460 p 379.3020 Feb

PROFILE: THE BUMI ROW

JULY 2010Cash shell Vallar, founded by NatRothschild, floats on the LSE after raising700m. It intends to invest in mining sector

NOVEMBER 2010Vallar buys stakes in Indonesian Berau Coaland Bumi Resources in a $3bn cash andshares transaction

NOVEMBER 2011Rothschild writes to the chief executive ofBumi and Bumi Resources to accuse him ofmismanagement

SEPTEMBER 2012Bumi hires City law firm Macfarlanes to inves-tigate alleged financial irregularities atIndonesian arm Bumi Resources after infor-mation is passed to the board

OCTOBER 2012The Bakries propose a share swap, to canceltheir shareholding in Bumi in exchange fortheir Indonesian assets

Rothschild quits the Bumi board, claiming thefirm was failing act in the interests of minori-ty shareholders

DECEMBER 2012Nick von Schirnding replaces Nalin Rathod asBumi chief executive

The UK Takeover Panel rules that two founder

shareholders are acting in concert with oneanother, and rules that their combined vitingpower is reduced to 29.9pc. It also beginsprobe into the deal that put Bumi together

JANUARY 2013Bumi confirms it has conclusions fromMacfarlanes probe, but is unable to substan-tiate details

Nat Rothschild calls extraordinary generalmeeting to remove 12 out of the current 14directors, including chief executive vonSchirnding and chairman Samin Tan

FEBRUARY 2013Indonesian shareholder Rosan Roeslani sellshis 10pc stake to two hedge funds and onefund manager, freeing up the votes

TODAYExtraordinary general meeting held to voteon Rothschilds proposals. It looks likely thathe will be defeated

The ECs MichelBarnier is key inthe negotiations

-St James's Master Fund & Nat

Rothschild 20.5pc

-Schroders 3.5pc

-Taube Hodson Stonex 2.5pc

Others 1.8pc

-Abu Dhabi Investment Council 4pc

-Argyle Street Management 4.1pc

-Flaming Luck Investments 1.7

-Avenue Asia Capital Management

7.6pc

-Blackrock 1.1pc

-Credit Suisse 0.4pc-JP Morgan 1pc

-SG Asset Management 1pc

-Eton Park Capital 1.5pc

-L&G 1.8pc

N.B: Figures are estimates and for illustrative

purposes only

DECLARED SUPPORT

FOR ROTHSCHILD YET TO DECLARE

-Route One 1.2pc

-Standard Life Investments 2.1pc

-Orchard Capital 1pc

-Long Haul Holdings (the Bakries)

29.9pc

AGAINST ROTHSCHILD

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THE TREASURY will bank far lessthan expected from an auction of 4Gspectrum, with bidding leaving ablack hole of more than 1bn inGeorge Osbornes accounts.After weeks of secret bidding, the

UKs four mobile operators, alongwith BT, will spend 2.34bn on air-waves to deliver the next generationof mobile services, far less than the3.5bn Osborne had banked on.

However, the end of the auc-tion does mean that afteryears of arguments and legalthreats between communi-

cations regulator Ofcom andthe operators, the UK willhave widespread 4G cover-age in the coming months,allowing mobile internetspeeds around five timesfaster than current 3Glevels.

Some attrib-uted thes m a l l e r

Osborne hit by1.2bn shortfall

from 4G auctionBY JAMES TITCOMB windfall from the auction to lower

than expected bidding from EE, theUKs largest mobile phone network.Ofcom gave EE clearance to use its 2Gairwaves for 4G use last year, giving ita headstart on the rivals.

EE took a smaller amount of thehigher-value 800 MHz spectrum which allows coverage over longerranges and indoors than both itsmain rivals O2 and Vodafone. Thisalso meant that the UKs smallest

operator, Three, walked awaywith a slice of the 800 MHz air-

waves for the auctionsreserve price.

O2 and Vodafone will

launch 4G networks at theend of Spring, with Threesgoing live later in the year.The lower-quality 2.6 GHz

spectrum will be used toimprove speeds in city centres. BT

will use the spectrum to top up itswireless broadband offering.

WOULD YOU SIGN UP FOR A4G MOBILE SERVICE?Interviews by Amy-Jo Crowley

We're an online stock exchange, soanything that will speed up theprocess will help us. 3G never works on OxfordStreet, so if it helps with that, I'd definitely paymore... not lots though.

These views are those of the individuals above andnot necessarily those of their company

IAN BRANAGANBRITDAQ

I find 3G coverage in the City a bitpatchy - it works in some places but

not in others. If it works as advertised andimproves on coverage, stability and speed, thenI'd consider buying it.

CHRIS GASKINBCM

Not at the moment because of themonthly bandwidth allowance. That

needs to expand significantly for the expectedusage scenarios to make sense.

ROGER MORANHEWLETT-PACKARD

Watchdog backs Libor fine cuts

Another sort of Dutch auction from wary mobile firms

BARCLAYS deserved a multi-millionpound reduction in its Libormanipulation fine because itworked hard to cooperate with theinvestigation, the Financial ServiceAuthority insisted today.

Defending itself against questionsfrom the ParliamentaryCommission on Banking Standards,the FSA said it is vital to encouragebanks to be open with information.

BY TIM WALLACE Barclays received a 30 per centdiscount for settling early, trimmingits fine from 85m to 59.5m.

Early settlement has manypotential advantages as it can result,for example, in the saving of FSAresources, messages getting out tothe market sooner and a publicperception of timely and effectiveaction, said the FSA.

We therefore consider that it is inthe public interest for matters tosettle, and settle early, if possible.

But the FSA added this discountalready came on top of another cutawarded because Barclays had beenhelpful through the investigation,not just in the settlement process.

The benefits of co-operation withthe FSA are cumulative the fact ofa firms recognition of its ownfailings and remedial steps takenpost-offending can result in a lowerthan otherwise penalty, which isthen further reduced by thesettlement discount, it explained.

BOTTOMLINE

MARC SIDWELL

CITYVIEWS

George Osborne expected3.5bn from the auction

ADMINISTRATORS runningcollapsed music and DVD retailerHMV yesterday confirmed they

would close another 37 storesacross the UK, resulting in afurther 464 job cuts.

Deloittes Nick Edwards said theclosures, which come on top of apreviously announced wave of 66

HMV to close a further 37 storesleaving hundreds out of work

BY JAMES WATERSONclosures, were required toenhance the prospects of therestructured business continuingas a going concern.

Stores, including all four unitsat Heathrow airport, will shutover the next four to eight weeks.This will leave HMV with just 116shops, around half the number ithad when it was placed intoadministration on 15 January.

THURSDAY 21 FEBRUARY 20134 NEWS cityam.com

WHO WON WHAT IN THE 4G AUCTION?

OPERATOR SPECTRUM BOUGHT PRICE PAID STATE OF PLAY

10 MHz of 800 MHz,70 MHz of 2.6 GHz

20 MHz of 800 MHz,

65 MHz of 2.6 GHz

20 MHz of800 MHz

10 MHz of800 MHz

50 MHz of2.6 GHz

Launched 4G on existing spectrumlast year and will use new spectrum

to boost capacity

Will start running 4G

network in spring/summer

Will launch 4G in spring/summer withobligation to cover 98% of

population by 2018

Will launch 4G by end o 2013with separate spectrum rom

EE and not charge extra or it

Will use spectrum to improve mobilebroadband ofering rather than

challenge other networks

588.9m

790.8m

550m

225m

186.5m

SHARE OF TOTAL SPECTRUM

BEFORE AUCTION

AFTER AUCTION

10

12

1322

10

%%35

29

43

25

THERE were five winners in the2.3bn UK auction of fourthgeneration (4G) wirelessfrequencies announced

yesterday, but George Osborne wasnot one of them.

The chancellor was counting ona 3.5bn 4G windfall to provide afigleaf of respectability over hisincreasingly threadbare claimsthat he is reducing the UK deficit.

The auction came up 1.2bn short,leaving Osborne looking more

than ever like a case of all mouth

and no trousers.However, while it is bad news

for all of us if the governmentcant keep its promises to spendless money it doesnt have, thechancellors embarrassment hasits bright spots for the mobilecompanies and their investors.

For example, it wasnt like thisin Holland. The Dutch 4Gcompetition last December wasanything but a Dutch auction, as abidding war ended up proving far

more expensive than expected forthe telecommunications firms

involved. Those companies felt thepinch of buyers remorse as aresult. KPN, one of the three mainmobile players in the Netherlands,cancelled its final dividend for theyear and reduced its 2013dividend as well. Vodafonesshares fell 2.8 per cent at the time.

The hangover from a night onthe town in Holland probably fedinto more cautious bids in the

UK but it may also reflect a lessbullish view on l ikely consumer

interest in 4G. Thats a pity, forBritain has been embarrassinglylaggard in its adoption of ultrafastdata on the go, and estimates ofthe resulting cost to business havebeen high. But slow adoptionwouldnt be too surprising. Evennow, the UK 4G picture isconfusing for consumers, withdifferent flavours of 4G workingwith different phones. One mor e

thing to worry about, alongsideour ballooning national debt.

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*Source: FIL LImited as at 31.12.2012. Issued by FIL Investments International, authorised and regulated in the UK by the Financial Services Authority. Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo and F symbol are trademarks of FIL Limited. CSO4637/0413

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APPLEs major supplier, Chinesecompany Foxconn, has frozenrecruitment at its factories,suggesting a slowdown in demand forthe iPhone.

The news sent shares in the UScompany down 2.4 per cent yesterday,despite research showing that boththe iPhone 5 and its predecessor, the4S, had outsold rival SamsungsGalaxy S3 during the final quarter oflast year. According to StrategyAnalytics, the iPhone 5 sold 27.4munits in the quarter with the iPhone4S selling 17.4m to the S3s 15.4m.

Apple supplierfreezes hiring

BY JAMES TITCOMB

THE New York Times is putting TheBoston Globe on the auction blockfor a second time as it seeks to focus

solely on growing its flagshipnewspaper.

The company said it had hiredEvercore Partners to advise on thesale, which is expected to come at abig loss. Ken Doctor, an analyst withOutsell Research, estimated theGlobe could fetch about $150m(98m). The company paid $1.1bn forthe newspaper in 1993.

The New York Times is run byMark Thompson, the former BBCDirector-General.

NY Times to sellBoston Globe

BY CITY A.M. REPORTER

COUNTRYWIDE Holdings, Britainslargest estate agency, is to return tothe market six years after it was takenprivate, heralding a further sign ofrecovery in the housing market.The company aims to raise 200m

through the issue of new shares,which it said it will use to repay debtsand fuel further growth.

It will be the second housebuilder tofloat this year after Crest Nicholsonwas admitted to the London StockExchange this week.

Grenville Turner, who has beenchief executive since 2006, would not

comment on the groups expected val-uation, although it is understood itcould be as much as 650m.

He said signs of the IPO marketoperating effectively and of a recov-ery in the housing and the mortgagemarket were all reasons it decided toreturn to the stock market.

Countrywide runs 46 high streetbrands including John D Wood andChurchills and specialises in all serv-ices relating to residential property.The company was taken private by

Countrywide infloat plan in bid

to raise 200mBY KASMIRA JEFFORD US buyout firm Apollo Global

Management at the height of the hous-ing market collapse in 2007 for 1bn.Distressed debt specialists OaktreeCapital together with Alchemy Partnerthen took control of Countrywide in2009 in a complex deal that saw themwrite-off three quarters of the debt andinject 75m cash.Turner has since led a restructuring

of the group that has included strip-ping out more than 200m in costsand expanding its lettings business.

It has bought over 40 businesses inthe last three years, including the UKfranchise of Sothebys and HamptonsInternational, which have helped

expand its presence in the south east.The group also revealed its 2012

earnings rose 12 per cent to 63m onrevenues up six per cent to 540m.

Oaktree currently has a 50 per centstake, Apollo 25 per cent andAlchemys Special Opportunities Fundhas an eight per cent stake. The rest ofthe shares are owned by the compa-nys directors including Jones.All shareholders have agreed to a

lock up period preventing them fromselling shares for at least six months.

MAGIC circle law firm Slaughter and May ispart of the legion of advisers assistingCountrywide on its return to the London Stockmarket. The law firms team is led by corpo-rate partners Jeff Twentyman and RichardSmith, both experts in equity capital marketsand handling mergers and acquisitions andflotations. Twentyman recently advisedManchester Airport Group on its successful bidto acquire Stansted Airport for 1.5bn and oninsurer Direct Lines IPO last year. On the

banking side, Goldman Sachs and Jefferieshave been hired as joint sponsors, joint globalco-ordinators and joint bookrunners whileCredit Suisse is acting as joint global co-ordi-nator and a joint bookrunner. Simon Taurins,managing director of Credit Suisses invest-

ment banking division together with JonGrussing, the groups global markets solu-tions head and Nick Williams, head of equitycapital markets are acting on the deal.Goldman Sachs managing director of equitycapital markets Richard Cormack and ChristosTomaras managing director of financial spon-sors are advising Countrywide together withAlex Garner, vice president of investment bank-ing. Jefferies team includes Robert FosterEuropean co-head of retail investment bankingand Paul Nicholls head of Hoare Govett, the UKbroker Jefferies acquired last year.

ADVISERS

JEFF TWENTYMANSLAUGHTER & MAY

Chief executive Grenville Turner said Countrywide could list on the FTSE 250


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THURSDAY 21 FEBRUARY 20137NEWScityam.com

Mark Kleinman is the City editor ofSky News @MarkKleinmanSky

BANKS, ratings agencies , nowauditors: the firing line offinancial sub-industries

being dragged kicking andscreaming into a post-crisis worldcontinues to lengthen.

As soon as tomorrow, theCompetition Commission will pavethe way for an overhaul of the Big

Four accountants with a proposalto enforce mandatory rotation oftheir major audit clients at leastonce a decade.

It is an overdue reform: theaverage FTSE 100 company has hadthe same auditor for almost half acentury.

The Financial Reporting Councilhas done a limp job of addressingconcerns about the oligopolyenjoyed by Deloitte, Ernst &

Young, KPMG and PwC.Yet the consequence of

mandatory rotation may not be asprofound as some hope. Those whoargue that forcing FTSE companiesto switch between other Big Foursuppliers will do little to stimulatecompetition beyond that closedquartet have a point.

But there is a wider issue. WouldPwC, for example, have been happy

to approve the use of Barclaysinfamous off-balance sheet

vehicle, Protium, if it had been onthe verge of being replaced by oneof its main rivals? Indeed, I

INSIDETRACK

MARK KLEINMAN

Plans to force firms to switch auditors dont go far enough

understand that Antony Jenkins,Barclays chief executive, willprobably use the arrival of a newfinance director (replacing ChrisLucas, himself a former PwCpartner) to review the banksrelationship with the audit firm.

The inabil ity of the Big Four tospot the looming crisis in 2007and 2008 makes a strong case foreven more frequent mandatoryrotation, say every five years, inthe banking sector.

The Competition Commissionshould go further.

ROLLS-ROYCE CHAIRMANS CLOSE TIESNobody doubts that Ian Davis,named last week as the nextchairman of Rolls-Royce Holdings,is a man of integrity. But there issomething about his appointment

to one of the most illustrious postsin British business that isuncomfortable.

The issue is this: Davis is amongthe directors of BP responsible for

setting the pay of boardroomcolleagues including Iain Conn,the oil groups head of ref iningand marketing.

Conn was, in turn, the non-executive director of Rolls-Royceresponsible for leading the searchfor Sir Simon Robertsonssuccessor as chairman of the

aerospace group.Did Davis recuse himself fromdiscussions about Conns pay oncehe became a candidate for theRolls-Royce job? Did Conn handover the search to another Rolls

board member?If either is the case, it should

have been made clear in thestatement announcing Davissappointment.

That is not to say that Dav is will

or watching business newsbulletins, c learly.

Im told that at a recent meetingwith seni or bankers, i ncludingBruce van Saun, finance directorof Royal Bank of Scotland, Sir

Jeremy professed himself to beoblivious to industry concernsabout the eventual bill for mis-

selling payment protectioninsurance and interest ratederivatives.

Given that the 12bn already setaside for redress by the four

biggest bank s could support 10times that sum in lending to thereal economy, it is a worrying gapin the mandarins knowledge.

not make a fine chairman ofBritains most importantmanufacturing company. His crisismanagement experience, honedafter the Gulf of Mexico oil spill,should equip him well if a similarcatastrophe were to emerge atRolls-Royce.

But the episode has done

nothing to assuage the widespreadimpression that FTSE 100boardrooms remain a c ossetedclub where the back-scratchingsuits its members just a little tootidily.

SIR JEREMY MISSES MIS-SELLINGWhere has Sir Jeremy Heywood,the cabinet secretary and Britainsmost powerful civil servant, beenfor the last two years? Not reading

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MORE THAN 680m was wiped offRSAs market capitalisation yesterdayas investors took flight following thecompanys decision to slash its divi-dend by a third.

Chief executive Simon Lee told CityA.M. that the unexpected decision tocut investor payouts which forcedits share price down 14 per cent

was never going to be the most pop-ular decision in the short term. Buthe insisted that consistently lowinvestment returns meant RSA hadto be more realistic about what itcould offer shareholders.

If we were going to pay out thatlevel of earnings it would restrictcapacity to grow in the future. Ourshare price is only down to where it

was three or four months ago, Leeexplained.

We have a robust balance sheetand growing premiums. Its just that

were operating a low interest rateenvironment and a conservativeinvestment portfolio with 90 percent in cash and bonds.

Shares in other insurers, includingAviva, fell as investors feared their

Payout cut sees

680m wipedoff RSAs stockBY JAMES WATERSON

boards may now to be tempted totake similar action.

RSA also announced a decline infull-year operating profit to 684m,down from 727m, which the compa-ny partly blamed on payouts relatingto UK floods and Italian earthquakes.Lee said the company intends tomake up for flatlining performancein Europe by expanding into develop-ing markets, where he hopes organicgrowth can increase premiums from1.2bn to 2.2bn by 2015.The company also used yesterdays

announcement to confirm it intendsto change its auditor from Deloitte toKPMG.

David Gill led Manchester United through its controversial takeover by the Glazer family

RSA Insurance Group PLC


135

125

130

120

140 p 117.0020 Feb

Had the dividend cut been accompanied by a weak trading statement,the fall of 14 per cent might be justified. However, the trading floor believes thesell-off is harsh and applaud the boards swift reaction to low-yieldingbond incomes.

ANALYST VIEWS

Once the dust settles we urge investors to revisit the shares and indeedwe would view such weakness as a buying opportunity owing to the prospectsfor the group outside the UK and the expectations for good return onequity delivery in the coming years.

Given that 12 months ago RSA flagged that the rate of dividend growthwas to reduce to circa two per cent we view the cut as very disappointing giventhat nothing has materially changed over the last 12 months. We haveconsequently downgraded our recommendation to Sell.

DID INVESTORSOVERREACT TO RSAS

DIVIDEND CUT?MARC KIMSEY ACCENDO MARKETS

EAMONN FLANAGAN SHORE CAPITAL

BARRIE CORNES PANMURE GORDON


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INSURER Ageas UK, best known forits partnership with Tesco,

yesterday revealed that totalwritten premiums passed 2bn forthe first time in 2012.

This allowed the company topost an 11 per cent rise in full-yearnet profits to 82.9m.

Ageas managed to increasereturns at its Tesco tie-up, whichsees motor and household coversold under the supermarkets

brand, by focusing on moreprofitable business.

Its combined ratio a measureof underwriting profitability thatcompares total premiums with

Premiums at Ageas UK pass2bn for the first time in 2012

BY JAMES WATERSONtotal claims improved slightly to99.8 per cent.

It also booked a one-off 50.9mgain following Septemberspurchase of Groupamas UK

business at a discount to net assets.While the market is not

without its challenges our breadthof distribution, strongpartnerships and reputation forservice excellence gives usconfidence that we will continueto build momentum during 2013,said chief executive Andy Watson.

The companys Belgian parentgroup, previously known as Fortis,yesterday beat analystsexpectations to unveil a full-yearprofit of 624m (545m).

FORMER JP Morgan banker EdWoodward will take control ofManchester United this summer,replacing long-serving chiefexecutive David Gill.

Woodward helped the Glazerfamily with their purchase of theclub in a 790m leveraged takeoverin 2005 before joining the clubshortly afterwards.

Gill piloted the club through adifficult period which saw regularfan protests against the Glazers. Healso oversaw the football clubssuccessful float on the New YorkStock Exchange last year. Shares inthe club closed down one per cent.

Man Utd CEOsteps down

BY CITY A.M. REPORTER

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TITAN International chairmanMaurice Taylor has taken a boldstand on behalf of the Anglo-Saxon model, not-so-politelydeclining an offer to buy a Frenchfactory that is being closed byAmerican tyre-maker Goodyear.

After being invited to visit thefactory in northern France, Taylorsent a letter to French industryminister Arnaud Montebourg,and did not hold back on the rea-sons behind his firms decisionnot to purchase the tyre plant.Taylor wrote: I have visited the

factory several times. The French

workforce gets paid high wagesbut work only three hours. Theyget one hour for breaks andlunch, talk for three and work forthree. I told this to the Frenchunion workers to their faces. Theytold me thats the French way!Taylor was equally frank about

what he thought of politicians:You are a politician so you dontwant to rock the boat. TheChinese are shipping tires intoFrance... and yet you do nothing.

France will lose its industrialbusiness, he warns. Sir, your let-ter states that you want Titan tostart a discussion. How stupid doyou think we are? Titan is the onewith the money and the talent toproduce tires. What does thecrazy union have? It has theFrench government... Titan isgoing to buy a Chinese companyor an Indian one, pay less than

one euro per hour wage and shipall the tires France needs. You cankeep the so-called workers.

It seems the Titan boss is grizzlyby name, grizzly by nature, as col-leagues affectionately refer to himas Morry or The Grizz. Not oneto say vive la difference.

A relaxing afternoon in the Jardin des Tuileries

Lawyer Lukas Hirst, and an elephant

Got A Story? Email [email protected]

11cityam.com

THECAPITALIST

THURSDAY 21 FEBRUARY 2013

cityam.com/the-capitalist

EDITED BY

CALLY SQUIRES

Bearish Titan says nonto French bon vivants

They say the SquareMile is one of the safest

places in the country andfor one woman who washaving a heart attack whiledriving past the CitysMansion House yesterday,that proved correct. On herway to work, The Capitalistspotted a crowd gathered onthe doorstep of the Lord

Mayors residence. Luckily thequick-thinking John Davies,Keeper of Walbrook Hall, hadrun outside to the rescue defibrillator in hand andcarried out resuscitation.Davies modestly toldcolleagues afterwards that hedid what anyone else wouldhave done. Lucky that theMansion House is so well-equipped.

READERS of this page willremember that lucky CliffordChance associate Lukas Hirstrecently won a City A.M. prizedraw, and was rewarded with aluxury holiday for two at the

beautiful Sanda ls hote lin Antigua.

There is just one problem: ourlovely lawyer is single and theresort, recently voted theworlds most romantic isaimed at couples in love.

Not missing an opportunity toplay Cupid, any ladies who wishto meet an Aussie former rower,not to mention fancy thepossibility of escaping the greyBritish winter for more exoticclimes, should mark their lovenotes FAO The Capitalist.

Wanted: Female, likes Antigua

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For further information call 0808 175 7742 to speak to one of our lawyers or visit slatergordon.co.uk/executive

Equal Pay& the LawNow is the time to act

Slater & Gordon Advertisement

Legal Commentby Samantha Mangwana

Employment Lawyer

Slater & Gordon

Statistics tell us that most

women are paid less than most

men even though this has

been outlawed since 1970

On average, men are paid a fifthmore than women in equivalentprivate sector jobs, and reportedlyup to 60% more in financial services

even though this has been unlawful for

over 40 years. The problem in tackling

this is that most of us do not know how

our pay compares to colleagues.

Many women feel it is nerve-wracking

to ask the question, but presently the

law is on your side. Employers have to

tell you if you are being paid differ-ently, and the reason why - but only if

you ask them. And they cant hold it

against you for asking - the law comes

down heavily on that.

However, the government is planning

to repeal this shortly, perhaps as early

as March, so the time to act is now:

Know Your RightsEmployers must pay women and men

equally for broadly similar work, orwork that is of the same value, unless

there is a rock-solid justification for the

pay discrimination. It really is that

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order an increase in your pay goingforward, and up to six years worth of

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Obtain information fromyour employerAsk your employer specific questionsabout what yourcolleagues are paid,what they get as bonuses, and the pre-cise reasons why, if they are paid morethan you. There is even a set form forthis purpose. Any employer who failsto respond within eight weeks, or givesfalse, or evasive responses, risks anEmployment Tribunal ruling againstthem as a consequence.

Take Legal AdviceAlthough equal pay is a basic andlong-standing employment right, it canseem daunting if you feel out of yourdepth. Experienced independentlawyers can help you negotiate, or take

it up on yourbehalf. You don't need tofeel like a second class citizen, and youcan take control of the situation.There's no excuse in this day and agefor paying a woman less than a man.

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7/29/2019 Cityam 2013-02-21

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THE CHANCELLOR should set outspecific tax objectives against

which to test tax policy, aprominent think tank said

yesterday.

This move should come as part ofa new way of doing tax policy, theinfluential Institute for FiscalStudies (IFS) argued, with the

Treasury facing greater scrutiny inits policy-making. Reform is needed

because the current system isunnecessarily inefficient, complexand unfair and costs run intobillions of pounds in reducedoutput and welfare, the IFS said.

IFS pushes fornew tax policy

BY BEN SOUTHWOOD

US NEW housing starts crashed inJanuary, but kept well above their

level during January last year.Privately-owned housing starts

sunk 8.5 per cent betweenDecember and the first month of2013, bringing them from 973,000in December to 890,000 but they

were still 23.6 per cent aboveJanuary 2012s 720,000 starts,according to US Census Bureaudata. Data for completed projectsand issued building permitsshowed them both racing up,rising by over a third in just a year.

Housing startsdip in January

BY BEN SOUTHWOOD

MORTGAGE interest rates dropped totheir lowest level ever in February,new figures showed yesterday, sixmonths after the Bank of Englandstarted offering banks cheap fundingin an effort to boost lending to theprivate sector.The average five-year fixed mort-

gage costs just 4.14 per cent, accord-ing to finance research siteMoneyFacts.That is down half a percentage

point from 4.64 per cent a year agoand represents an enormous plungefrom 5.41 per cent in the samemonth of 2011.

The Bank of Englands Funding forLending scheme (FLS) has allowed

banks to draw down billions ofpounds in cheap funding sinceAugust, pushing down rates.

But even banks which are not tak-ing state funding have increasedlending.

HSBC, the largest bank not takingpart in the FLS, published healthylending data yesterday.The banking giants gross new

mortgage lending jumped 24 per

Mortgage ratesfall to new low

with state aidBY TIM WALLACE

cent to 16.4bn in 2012, while itapproved 5bn for first time buyers,an increase of 32 per cent on the year.And its gross new business lending

increased two per cent to 30.4bn.But figures across the whole indus-

try were not uniformly positive forborrowers despite the falling inter-est rates, mortgage lending fell inJanuary according to the Council ofMortgage Lenders.

Gross home lending in the monthcame in at 10.4bn, down nine percent on Decembers figure and threeper cent on the year.Analysts blamed cold weather for

the fall, and remain upbeat about themarkets prospects.

Interest rates have plunged in the last year

Feb13Nov12Aug12May12Feb12Nov11Aug114.0

4.2

4.4

4.6

4.8

5.0

5.2 Average five-year fixed mortgages, %

Source:MoneyFacts

JAPAN recorded its deepest evertrade deficit in January, despite asharp weakening in the yen due to

a raft of monetary stimulus.Exports climbed for the first

time in eight months, helped by a16 per cent slide in the yen, versusthe dollar, since November lastyear. But this 6.4 per cent annualrise was more than erased by a 7.3per cent surge in imports, bringingthem to 6.43 trillion (44.9bn).

This left a balance of minus 1.63trillion, up ten per cent on last

January, and the highest gap ever.The record deficit came despite

Japan posts record trade deficitas weak yen pushes up imports

BY BEN SOUTHWOOD Prime Minister Shinzo Abesaggressive fiscal and monetarypolicy to weaken the yen,indicating a rise in exports on itsown was not enough to turn things

around.Trade deficits could continue

for much of this year, if not intonext year, said Norio Miyagawa,senior economist at MizuhoSecurities Research & Consulting.

This shows that on a net basismoney is leaving the country. Weneed to turn this aroundbyincreasing our earnings powerfrom exports. A weak yen will help,

but it wont solve all ourproblems.


Prime Minister Shinzo Abe has tasked the Bank of Japan to boost inflation up to two per cent

7/29/2019 Cityam 2013-02-21

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THE EUROPEAN Commission will getnew powers to monitor Eurozone gov-ernments budgets and can demandchanges if they do not fit in withEuropean borrowing rules under a dealstruck with the European Parliament

yesterday.But a plan to pool debts was aban-

doned after countries led by Germanyrejected the idea that they should backother states borrowing.The aim of the so-called two-pack deal

is to strengthen discipline over spend-ing and taxation in an effort to stop

budget deficits ever getting out of handagain and causing crises like those in

Greece and Spain.Rules have already been introduced

to make sure states running deficits ofabove three per cent of GDP are pun-ished more quickly in the future, after

Brussels stepsup control over

borrowing rulesBY TIM WALLACE governments went unchecked in run-

ning up borrowing before the crisis.Under the new rules countries deemed

to be getting out of line will be putunder close surveillance, reporting tothe European Commission every quar-ter and forced to correct past mistakes.

This will mean that the Eurozone canbenefit from a more integrated andeffective policy-setting frameworkalready for the 2014 budgetary cycle,said commissioner Olli Rehn.Towards the end of the year the

European Commission hopes to pro-pose further measures to coordinateeconomic reforms.And although Germany rejected plans

for pooled borrowing as it fears high-

borrowing member states could benefitfrom its prudence, the EuropeanCommission is planning more worktowards a shared debt programme to beimplemented at a later date.


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7/29/2019 Cityam 2013-02-21

14/31

SOUTH African banking groupNedbank yesterday said it expectsannual earnings to be between 18and 23 per cent higher than last

year after a strong performance in

the f inal quarter.Nedbank, majority owned byLondon-listed Old Mutual, willrelease its full-year results onMonday.

The firm said in October that itsfocus on unsecured lending whilethe corporate market remainedsubdued was set to deliver double-digit growth.

Nedbank profitrise is on track

BY MARION DAKERS

FRENCH bank Credit Agricole report-ed record losses yesterday after a heftytax bill on the disposal of its Greekarm sent costs soaring.The bank lost 3.98bn (3.47bn) in

the fourth quarter of 2012 and6.47bn in the year as a whole, itsworst performance since going public11 years ago. But shares rose asinvestors welcomed the banks plan tocut costs over the next three years.

Revenue fell 15.8 per cent on theyear to 16.315bn, far more rapidlythan operating expenses which onlydipped 2.9 per cent to 12.037bn.

The bank was further hit by anunexpectedly large 838m tax bill onthe sale of Greek unit Emporiki, as

well as a541m charge from a revalu-ation of its own debt and a 267mimpairment recorded on its 20 percent stake in Portuguese bank BES.Tougher prudential requirements

added charges of832m to the corpo-rate and investment banking arm,923m to consumer finance opera-tions and 921m to internationalretail banking.

Credit Agricolein the red again

with record lossBY TIM WALLACE But underlying performance was

solid with normalised profits of3bnin retail banking and a contribution of3.538bn from its regional banks.

The bank vowed to turnaround itsperformance in 2013, arguing that ithas now put its Greek losses behind itand is pushing through a programmeof650m in cost reductions across IT,procurement and real estate.

2012 was a year of transformationand refocusing. We are turning a pageand will develop a new medium-termplan this year, promised chief Jean-Paul Chifflet.The banks shares ended the day 3.89

per cent higher.

THE consortium responsible for the Heron Tower on Bishopsgate is understood to berenegotiating a 370m loan used to construct the building. Gerald Ronsons HeronInternational built the 230m tall structure, which opened in 2011, in conjunction withMiddle Eastern investors but both parties are now in discussions with German bankswho provided funding towards the project. Less than half the floors have been let.

HERON TOWER SEEKS REFINANCING

Credit Agricole

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THURSDAY 21 FEBRUARY 201314 NEWS

cityam.com

Boss of CapitalSpreads quits

BY AMY-JO CROWLEY

Simon Denhamfounded the firm

THE CHIEF executive and co-founderof spread betting firm CapitalSpreads stepped down yesterday, as

parent firm London Capital Groupswung to a 200,000 annual loss.

Simon Denham, who leaves aftera decade at the helm, will bereplaced by Mark Slade.Revenues at LCG fell by27 per cent to 28.6m,

which the Aim-listedfirm blamed oncalmer markets.

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DRINKS-can maker Rexam yesterdayreported full-year underlying profitabove estimates and said it expectssales to grow in its largest marketNorth America, sending its shares up

by over five per cent.Rexam said it has a 20 per cent mar-

ket share in North America, theworlds largest beverage can marketwith 100bn cans used per year.

Well expect to see some high-sin-gle digit (to) low double digit growthin North America because were alsoseeing speciality cans growing very

well there, chief executive GrahamChipchase said yesterday.

Rexam, which counts Anheuser-Busch Inbev, Coca-Cola, PepsiCo andRed Bull among its customers,recorded 10 per cent growth in spe-ciality cans volumes in 2012.The company also expects 2013 vol-

ume percentage growth in the mid-single digits in South America as itscustomers gear up for the 2014Football World Cup and the 2016

Rexam expects

sales growth inNorth America

BY HARRY BANKS Olympics in Brazil.However, it did not give an overall

growth forecast for 2013.Rexam said it would invest 115m

over the next three years to build anew beverage can plant with anexpected capacity of 2.2bn cans in

Widnau, Switzerland.The company reported an underly-

ing pre-tax profit of 418m for theyear to December, up from 414m ayear earlier.

Operating profit from Rexams bev-erage can business grew five per centto 465m.

Chief executive Graham Chipchase has been with drinks-can maker Rexam since 2003

Rexam PLC


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SHARES in Sodastream fell asmuch as seven per cent yesterdayin spite of the firm reporting a

better-than-expected 42 per centrise in net income to $7.5m(4.9m), as investors took fright atforecasts of slowing growth.

The Nasdaq-listed company saidrevenues rose 55 per cent to$132.9m in the final three monthsof 2012.

But Sodastream pointed to aslowing pace of growth in 2013,

with revenue growth set to slideto 25 per cent, while adjustedearnings growth is expected toease to 34 per cent.

The Israel-based group alsopredicted a surge in costs.

Fizz goes out

of SodastreamBY MARION DAKERS


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Garmin profit drives off a cliffas motorists ditch satnav toolsGARMIN yesterday forecast full-

year results below analysts

estimates, suggesting a marketshare gain from smaller rivalscould no longer offset a lack ofdemand for its GPS-enabledhandheld navigation devices.

Net profit fell to $129.3m(84.5m) in the fourth quarter,from $165.6m a year earlier.

Shares of Garmin, whosequarterly profit also fell short ofmarket estimates, fell over nineper cent after the results.

BY CITY A.M. REPORTER Americas biggest navigationdevice maker has been trying tofight sluggish demand for theseonce must-have gadgets by

bundling them with high-marginspecialised mapping services, assmartphones loaded with freemapping apps invade its market.

Analysts had expected thestrategy of including valuablemapping software with hardwareto boost sales by the end of 2012.

But total annual revenue fell 16per cent to $910m, the firm said

yesterday.Sales at Garmins struggling

automotive and mobile business,which makes navigation devicesfor cars and accounted for nearlyhalf of the companys total

revenue in the fourth quarter,slipped to $437m.The companys outdoor

business, which makes dog-trackers and golf gadgets, fell twoper cent to $119m in the fourthquarter, while revenue from itsfitness business that makesgadgets such as GPS-enabled

watches to count calories andmonitor heart beats, rose 10 percent to $104m.

OFFICE Depot will acquire smallerrival OfficeMax in a $1.2bn(788m) all-stock deal, thecompanies said yesterday,confirming an agreementinadvertently announced earlier inthe day, before it was completed.

The combined entitys name,headquarters location and chiefexecutive are all stillundetermined, suggesting thecompanies were in a rush to getthe deal confirmed after a draftaccidentally went up on OfficeDepots website.

Office Depot chief executive NeilAustrian and OfficeMax boss Ravi

Saligram are both candidates forthe top job, the US firms said.

Office Depot

buys its rivalBY CITY A.M. REPORTER

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TM & 2013 Apple Inc. All rights reserved Sign up for 24 months to get this deal Minutes and texts are for most UK mobiles and UK landlines 08/070 numbers cost 35p per call plus 35p per minute/1.02 per call plus 71.5p per minute respectively - check price at Three.co.uk/nts Ultrafast(DC-HSDPA) technology is rolling out across our network now Youll need an Ultrafast ready device The speeds youll get will vary by location, coverage, demand and TrafficSense, which is a system we use to manage data on our network to ensure the best experience possible for the majorityof our customers See how at Three.co.uk/network for more info

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IN BRIEFPolymetal buys $96m gold fieldn JSC Polymetal, the subsidiary ofRussian precious metal producerPolymetal, has agreed to buy ZAOMaminskaya Gornorudnaya kompania,which has a mining licence for theMaminskoye gold mining field inRussia, in a deal worth $95.5m(62.7m). The licence is valid until2023. Scoping studies show that thefield could have the potential toproduce between 80,000 and120,000 ounces of gold each year.

Severstal lays out spending plansn Russian steelmaker Severstalyesterday said it would spend $1.3bn(850m) this year, focusing mostly onits Russian operations. Out of the$1.3bn, it will direct $704m towards itsRussian steel business, to spend onprojects such as building steel millsand modernising operations acrossthe region. Around $107m will bespent in Severstals North Americabusiness, and $60m will be puttowards the maintenance programme.

Lafarge returns to quarterly profitn French cement maker Lafarge

returned to profit in the fourthquarter, as it secured almost 900m(787m) of divestments in 2012.Quarterly net profit was 100m,compared to a loss of 3m in the sameperiod a year earlier, while salesdeclined one per cent to 3.8bn, itsaid yesterday. Full-year sales were upthree per cent to 15.81bn. The worldslargest cement maker also doubled its2012 dividend to 1 a share.

SOUTH African miner AngloGoldAshanti yesterday reported a plungein fourth quarter earnings, hit by

wildcat strikes at its operations lastyear.

Industrial action plagued theworlds third-largest bullion produc-er from the end of September untilNovember, essentially halting pro-duction for several weeks.

Fourth quarter headline earningsin 2012 were $7m (4.6m) downfrom $295m in the fourth quarter of2011 hit by lower output volumesand higher cash costs.

Full-year earnings came in at

$924m, down from $1.3bn in 2011.The wildcat strikes last year and sub-sequent mine closures wiped $208moff annual earnings.

Full-year production totalled 3.9mounces of gold which includes aloss of 235,000 ounces due to thestrikes below the firms target.The gold miner is targeting a ramp-

up in output this year to between4.1m ounces and 4.4m ounces,

which would make 2013 outputbroadly flat to 2011s full-year pro-

AngloGold seesprofits plunge

as strikes weighBY CATHY ADAMS

duction of 4.33m gold ounces.Last week, AngloGolds closest rival

Gold Fields reported a 20 per cent fallin headline earnings, largely due tothe impact of an illegal strike at twoSouth African mines it has since spunoff.

Elsewhere in the South African min-ing sector, striking employees at

Anglo Americans 80 per cent ownedsubsidiary Anglo American Platinumreturned to work yesterday, followinga one-day walkout in response to vio-lence at a mine.Amplats said that over the one day

of suspended production, it lost 3,886ounces of platinum output.

AngloGold Ashanti Ltd


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ICONIX Brand Group said yesterday it has snapped up the British denim label Lee Cooper for47m as it continues its buying spree to expand its international business. The group, whichlicenses shoe and clothing brands to retailers, also reported a fall in fourth quarter profit to$26.1m (17m) from $27.2m last year with sales down 11 per cent to $85.1m.

ICONIX BUYS DENIM BRAND LEE COOPER FOR 47M

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AXMINSTER Carpets, the historicmanufacturer that has wovencarpets and rugs for Britains statelyhomes since the eighteenth century,has filed for administration.

The Devon-based company, whichemploys around 400 people,confirmed its intention to appointDuff & Phelps as administrators.

It said it would continue to tradewhile it explores all potentialrestructuring operations.

Company director JoshuaDutfield said: Trading has beendifficult and the management hasbeen working with key suppliers,creditors and the lenders in anattempt to resolve the companysfinancial difficulties.

The company was founded inAxminster in 1755 by weaverThomas Whitty, who was inspiredby the Turkish style of makingcarpets. His carpets could be foundin Chatsworth House and BrightonPavilion and were bought by KingGeorge III and Queen Charlotte,who visited the factory.

In modern times, the companyhas supplied carpets to high streetretailers including John Lewis andCarpetright.

Axminster is the latest in a stringof companies to collapse this yearincluding Jessops and HMV.

Carpet makerAxminster on

brink of failureBY KASMIRA JEFFORD

VODAFONE takeover target KabelDeutschland hiked its dividend bytwo thirds yesterday in a move thatmay protect the company from a bid.The German cable company, which

Vodafone is circling as it attempts toimprove its presence in the country,also saw profits double to 200m(175m), boosted by strong demandfor broadband and pay-TV.

However, the companys manage-ment refused to comment onwhether it had been approached byVodafone over a deal that would belikely to value Kabel Deutschland atmore than 6bn.

Shares in the company rose byabout 1.5 per cent as it raised its divi-dend by 67 per cent, a move that waswidely seen as a defensive move toprevent a hostile takeover. The com-panys value had risen by nine percent last week as news of Vodafonesinterests emerged.The British telecoms giant has

appointed longtime advisers

Kabel hikes its

payout as triesto fend off bid

BY JAMES TITCOMB Goldman Sachs and UBS to work onthe deal. Vodafone is interested inKabel Deutschland as it tries to pro-tect its German mobile base, withincreasing numbers of people takingbroadband, mobile and TV contractsas a bundle.An acquisition would be the latest

in a series of large telecommunica-tions deals, which has included USfirm Liberty Globals $23.3bn (15bn)takeover of British company VirginMedia.The companies did not comment on

takeover speculation.

STV shares leap as battle withITV ends and it returns to profitSHARES in Scottish broadcaster STVjumped by more than 10 per centyesterday as the company posted arise in profit on improved TVadvertising revenues.

STV, which runs the terrestrialchannels in central Scotland run byITV in England, posted a surprisingimprovement in performanceduring 2012, and said it expectsadvertising revenues to improve inthe first quarter of this year.

Chief executive Rob Woodwardalso said his company had put a

longrunning dispute with itspartner ITV behind it. The two

BY JAMES TITCOMB companies were involved in a legalbattle for several years overalleged unpaid contributions toITV.

The company had been hitwith a 13.4m charge relatedto legal costs in 2011, andbooked 5.3m in taxcharges last year over thedispute.

STV, which has also wonthe licences to run local TVstations in Edinburgh andGlasgow, saw a one per centrise in revenue to 102.7mduring the year, and saw

profit rise three per cent to14.4m. Significantly, the

firm also cut its debt by 17 per cent.The company has made steady

progress in its TV production arm,and announced yesterday it had

won new contracts to producenew episodes of BBC Twos

Celebrity Antiques Road Tripand ITVs Catchphrase.

We have deliveredstrong financial resultswith double digit growth

in operating profit and asignificant reduction in debt,

Woodward said.

US startup incubator TechStarsmoves into Silicon RoundaboutA COLORADO-BASED firm thatnurtures technology startups has

made its first move out of the US bylaunching in London.TechStars will launch a

programme designed to help 20small businesses develop, allowingthem 85,000 (74,000) made up offunding and convertible debt each.

The startups will also receivementoring from successful Britishtechnology startups such as MoshiMonsters creator Mind Candy.

The launch will come as a boostto Number 10s Tech City project,which aims to incentivise

BY JAMES TITCOMBinnovative technology startups toset up in London. Last week sawnew proposals to encourage highgrowth companies to go public

on the London Stock Exchangeby relaxing listing requirements.TechStars chief executive

David Cohen said he hadchosen London aboveother European citiesbecause the currentbusiness climate heremeans we can workwith an incrediblybroad spectrum ofBritish and internationalteams and top talent.

At a Downing Street

announcement of the launch,culture minister Ed Vaizey said: We

are putting in place the policies tohelp companies grow and help

them get access to the financethey need.TechStars, which is based in

Boulder, Colorado, also hasprogrammes in Boston,New York, Seattle andChicago. The firm said itwould welcomeapplications fromprospective startups in

March.

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Actress Kym Marsh will feature inSTVs Celebrity Catchphrase

BSKYB has inked a deal withDisney that will see the Hollywood

giants films shown on a newchannel as well as open up itscatalogue of historic films to on-demand viewing.

The deal will tighten Skys gripon exclusive film rights by givingit first access to new titles such asIron Man 3 and Avengers

Assemble, having signed similardeals with Sony, Universal and

Warner in the last six months.However, it is the first deal Sky

has signed that will create a

Sky splashes out with a deal forDisney movies and new channel

BY JAMES TITCOMB separate channel, which will shownew and classic Disney films whenit launches next month.

The agreement continues Skysclaim to first access rights tomovies from Hollywoods sixmajor film studios, allowing it todisplay films around six monthsafter they have run in cinemas anda year before other broadcasters.

Its dominance has been a boneof contention for its rivals, and

was probed by the CompetitionCommission last year, althoughthe body found that the launch ofNetflix and Lovefilm had curbedSkys powerful position.


Movies to be shown on Skys new channel will include Pixar titles such as Finding Nemo

TESCO has been voted the worst ofBritains nine major supermarketsin a poll carried out by one of theleading consumer groups.

More than 11,000 Which?

members rated the supermarketswith customer scores based oncustomer satisfaction and thelikelihood they would recommendit to a friend.

Tesco, the UKs largestsupermarket group, came last, witha customer score of 45 per cent andpoor marks for its pricing, storeenvironment, quality of freshproduce and customer service.

In contrast Waitrose was votedthe most popular supermarket,

with an overall satisfaction score of

Tesco voted worst supermarketin survey of 11,000 UK shoppers

BY KASMIRA JEFFORD 82 per cent including five-starratings for customer service andthe quality of its fresh produce.

Discount supermarkets Aldi andLidl came second and third withscores of 74 per cent and 69 percent respectively, beating their

bigger rivals such as Morrisons (59per cent ), Sainsburys (58 per cent),and Asda (53 per cent).

In these tough economic timesits understandable thatsupermarkets scoring well for valuefor money are being ranked sohighly in our league table, Which?director Richard Lloyd said.

In fourth place was Marks &Spencer with a score of 68 per cent.

Ocado was voted best onlinegrocer followed by Waitrose,Sainsburys and Tesco.

THE PUBLISHER of businessmagazines Marketing Week andThe Lawyer saw its losses morethan treble in the six months tothe end of last year, owing torestructuring costs.

Centaur Media, which also ownsmarket researchers Econsultancy,said exceptional costs associated

with recent sales and acquisitionshad dragged the company down toa loss of 5m.

Chief executive Geoff Wilmothas attempted to refocus the

business on events and digitalpublishing as print magazineadvertising falls.

The turnaround resulted inrising profits last year, and the

Digital revamp takes its toll on

Centaur Media as losses widenBY JAMES TITCOMB company announced a 14 per cent

rise in half-year revenues yesterdayto 30.4m.

Digital revenues now accountfor 39 per cent of total revenues,compared to 32 per cent last year,

with prints contribution fallingfrom 45 per cent to 31 per cent.

Wilmot said that, as usual,Centaur will see better trading inthe next six months the secondhalf of its financial year.

We are maintainingmomentum in improving thequality of our portfolio andremain focused on increasingmargins, he said.

The performance failed toimpress investors however, as

analyst downgrades sent sharesfalling by 9.4 per cent.

Culture minister Ed Vaizeywelcomed the news

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THE GOVERNMENT needs some radi-cal thinking to get the economy mov-ing, the boss of the countrys biggestsupplier of building materials, TravisPerkins said yesterday.

The trouble at the moment is thatpeople are thinking of conventionalsolutions and Im afraid were not inconventional economic times, so

weve got to think more radically toget some of these markets moving,chief executive Ge

cityam 2013-02-21

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