cityam 2011-05-26
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News2 CITYA.M. 26 MAY 2011
EU bond seeshigh demandINVESTORS scrambled to snap up a sec-ond4.75bn (4.1bn) bond issue by theEU yesterday, with the book oversub-scribed to a value of10bn by noon.
The European Commission, whichran the sale, said the cash will gotowards boosting the Eurozones main
bailout fund, the FinancialStabilisation Mechanism. The EC saidit saw favourable market conditionsand extremely good investor demand.
The issue takes the total value ofdebt sales to fund Portugals 78bn
bailout to 19bn so far this year, a sig-nificant sum given the controversysurrounding the issue of euro-bondsor e-bonds when they were suggest-ed last year.
The bonds auctioned yesterday havea five-year maturity and offer a
coupon rate of 2.75 per cent. Analysts said that investors were
treating the bonds as German riskplus 43 basis points. The EU plans twomore bond sales this year.
Meanwhile, the Finnish parliamentvoted to contribute to Portugals78bn bailout yesterday, despite fears thatthe nationalist True Finns party could
block the bill.The sale was led by Deutsche Bank,
HSBC, Socit Gnrale and UBS asfinancial advisers, with eight other
banks also on the deal as book-run-ners.
BY JULIET SAMUEL
EUROZONE
BRANSON WANTS 600 BRANCHES OFLLOYDSSir Richard Branson has set his sightson buying a network of branchesfrom Lloyds Banking Group as heattempts to go head-to-head withsome of the biggest banks on the UKhigh street. Sir Richard met AntnioHorta-Osrio, Lloyds chief executive,on Tuesday and plans to make a for-mal bid in July for the 600 branchesthe bank has to sell. This can happenquickly and smoothly, he said. Weare a serious bidder and can give thegovernment what it wants throughcompetition.
REVIEW TERMS OF RBS CASEUNVEILED
The terms of a planned independentreview of the Financial Services
Authoritys handling of Royal Bank of
Scotland were announced by the Treasury select committee on
Wednesday. Sir David Walker and BillKnight, both respected City figures,
will assess whether the FSAs reporton the bank is a fair and balancedsummary of both its own failuresand of the evidence it gathered dur-ing an enforcement probe.
LIBYA SOVEREIGN FUND SUFFERS BIGLOSSESLibya lost billions of dollars on sophis-ticated financial products sold toMuammer Gaddafis sovereign
wealth fund by some of the worldsleading financial institutions, accord-ing to a confidential Libyan govern-ment document.
HIGH COFFEE COSTS HIT STARBUCKSPRICESStarbucks, the US coffee chain, saidon Wednesday that it would raiseprices of its packaged coffee by 17 percent this summer in an effort to sus-tain the business in the face of soar-
ing costs. The price rise follows asimilar move by JM Smucker.
PREMIER IS FIRST TO SMASH THEGLASS CEILINGPremier Farnell has become the firstleading British company to be led by
women as chairman and chief execu-tive. The FTSE 250 company with a1bn turnover has appointed ValGooding, the former boss of Bupa, asits chairman. She joins Harriet Green,Premiers chief executive, who has
been credited with turning the elec-tronics parts company around.
THIRD BIDDER TRIES TO WIN OVERMINERVA
A joint venture between Jamie RitblatsDelancey and Americas Area PropertyPartners has emerged as the front-run-ner to buy the struggling propertydeveloper Minerva. The Times under-stands that the joint venture has madean offer of 115p a share. If accepted, it
would see off competition from ApolloGlobal Management.
PARATROOPERS HIT BY PAY CUT ONRETURN FROM AFGHANISTAN WAR
Thousands of paratroopers who havejust returned from Afghanistan face apay cut of as much as 10 per cent asthe Ministry of Defence attempts tosave more money. Army chiefs havedecided to end a supplement paid toeach member of the regiment forparachuting. It is worth more than2,000 a year.
AMAZON TO CREATE 900 SCOTLANDJOBS
Amazon, the internet retailer, will cre-ate 900 jobs in Edinburgh as it seeksnew technical support staff followingstrong take-up of its Kindle readingdevice. US-based Amazon, the world'slargest online retailer, said theScottish operation will also handlecustomer enquiries as it expands its
product range. It will create 500 per-manent and 400 temporary jobs.
NEW RESIDENCE FOR FORMER IMF CHIEFAPPROVED
A New York judge has approved a newresidence where former InternationalMonetary Fund director DominiqueStrauss-Kahn will be confined underhouse arrest: a 6,800-square-foot town-house at 153 Franklin Street, near thecourthouse in Lower Manhattan,according to a law-enforcement offi-cial.
DEUTSCHE'S SHAREHOLDERS FOCUS ONCEO SUCCESSIONDeutsche Banks failure to identify asuccessor to chief Josef Ackermann israising investors ire and fuelling con-cern that a drawn-out, behind-the-scenes battle over the top job will leavethe giant German bank without astrong replacement. Ackermanns con-tract doesnt expire for two years, but
running the bank is considered anespecially difficult position.
WHAT THE OTHER PAPERS SAY THIS MORNING
UK hopelessly optimistic on pensions
IT is hard to know what is mostdepressing about Britains approachto retirement. The findings of HSBCssurvey on the subject, released thismorning, paint an all too accuratepicture of an ostrich generationconvinced it will be able to retireearly despite not saving anything.How else can one describe a situation
where millions expect to ease intosemi-retirement in their mid-50s, stop
work entirely at 62 and then go on tolive a happy life of prosperous leisurefor the next few decades eventhough the majority are not making
any plans about how theyll fundtheir retirement? Its grim.
No fewer than 17 per cent of UKrespondents do not even know whattheir main source of income will be
in retirement. Another 21 per cent ofrespondents believe that their biggestsource of income will be the statepension, which is very low. Only nineper cent will be relying on personalpensions, while four per cent cite sell-ing property. Unsurprisingly, 68 percent of respondents are worried(though it ought to be even higher,given the publics faulty assumptionsabout life expectancy and investmentreturns) and 48 per cent fear they arenot saving enough, rising to 57 percent among women in their 30s and40s. But despite all this, just 39 percent of Britons have put a plan inplace to provide for their futures.
The report also paints a stark con-trast between East and West: emerg-ing economies are takingresponsibility for their own futures
while Western countries (UK, Europe
and the US) all wallow in a pessimisticvision of a cash-strapped retirement. Twice as many people in Malaysia,China and India have a financial planthan in the UK reversing the tradi-
tional East-West polarities of wealthin retirement. Its a disaster. There isnothing wrong with consuming andsplashing out on enjoying life, as
Westerners do, but it shouldnt comeat the expense of decent living condi-tions in old age. The culture of instantgratification has gone too far.
So what is wrong? The first prob-lem is that too many still see the stateas the solution to all their problems,even though the state pension will bynecessity always be pathetically low.
The second is widespread financialilliteracy and innumeracy: millionsdont really understand financialproducts, in many cases cannot even
work out percentages and areunaware of just how much they willhave to put aside to generate a decentincome. The third is regulatory confu-sion: the government keeps changing
the rules and has raised costs unnec-essarily via excess red tape. Many peo-ple simply dont trust the system
wont keep changing. Remarkably, 57per cent are not even aware of the
new National Employment Savings Trust (Nest), the governments flag-ship semi-automatic universal retire-ment saving scheme due to launch inOctober 2012. The fourth is thatfinancial firms are failing to createsimple, low cost products that appealto the general public. Its time for areal change in the City. Last but notleast, the public needs a reality check:
you cant hope to retire in your fiftieslike your parents if you are going tolive to be 95 years old.
There will be a default solution,and that will be for folk to work untilthey drop, dashing their hopelessdreams of years of liberating retire-ment. Such an outcome could still bepartly mitigated but only if Britaingets its act together, and fast.
[email protected] me on Twitter: @allisterheath
FRENCH finance minister ChristineLagarde officially declared her candi-dacy for the leadership of the IMF
yesterday, confirming speculationthat she would make a bid to replacethe ousted Dominique Strauss-Kahn.
She appears to have few crediblechallengers, but her candidacy couldcause controversy given that herappointment would follow thedecades-old tradition that only
Europeans lead the organisation.However, the major emerging
markets Brazil, Russia, India andChina (BRICs) have failed to unite
behind an alternative candidate.Lagardes only stumbling blockscould be her involvement in a long-standing legal case and an outsidercandidate: Mexican central bankgovernor Agustin Carstens.
French judges will decide on 10 June whether to pursue the legalcase, while the IMF must decide onits leader by 30 June.
BY JULIET SAMUEL
IMF
Lagarde confirms IMF bidFrench finance minister Christine Lagarde has ruffled feathers in emerging markets
NEWS | IN BRIEF
Flights return as ash cloud clearsAirports reopened and flights resumedacross Europe yesterday as the ashcloud from Icelandic volcano Grimsvotncleared. Berlin and Hamburg airportsboth reopened during the day, butHamburg warned that it is possiblethat operations will be limited until a
backlog of disrupted flights clears.Germany had seen 450 flights cancelledyesterday due to the ash. Eurocontrolsaid that it does not expect any disrup-tion from the cloud today.
Oil trader denies manipulationOil trader Arcadia Petroleum has vigor-ously denied claims that it attempted tomanipulate oil markets in early 2007,preceding a price rally that saw theprice of a barrel soar over $140(85.90). The US Commodity FuturesTrading Commission (CFTC) has suedtwo oil traders and their employers,Arcadia and Parnon, for an allegedmanipulation that the regulator saysresulted in $50m in profits. Arcadiaschief financial officer Colin Hurley said:The CFTC is wrong on both the factsand the law. He said the charges werecompletely without merit.
EDITORS LETTER
ALLISTER HEATH
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The EUs latest bondissue will fund therescue of Portugal, ledby interim primeminister Jose Socrates.
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ROYAL Dutch Shell is moving in onRussias Arctic energy reserves in thewake of BPs failure to resolve its legalissues surrounding a tie-up withRosneft, Moscows national oil giant.
Shell chief executive Peter Vosermet with Russian deputy prime min-ister and energy chief Igor Sechin as well as Rosneft chief EduardKhudainatov yesterday.
Shell said that the talks concerned
development of Russias Arctic shelfand were constructive, but thatthey would not involve a share swapwith Rosneft along the lines of BPscollapsed deal.
If Rosneft does sign a deal withShell, it will be a blow for BobDudley, chief executive of rival BP,who staked his reputation on a tie-up with Russias energy giant but sawthe deal torpedoed by BPs currentpartners in Russia, a group of oli-garch investors in the consortium,
Alfa-Access-Renova.AAR, which is a major shareholder
in TNK-BP, BPs Russian vehicle, suc-cessfully blocked BPs deal withRosneft on the grounds that it brokethe terms of an agreement givingTNK-BP first refusal on any Russian venture by BP. BPs $16bn (10bn)share swap agreement with Rosneftexpired last week.
Shell said that the talks with theRussian government concerned theArctic as well as broader strategic co-operation and technology develop-
ment for the Arctic and other areasas well as opportunities for Rosneftto join Shell in developments outsideRussia.
Shell moves inon BPs failed
Rosneft dealCORPORATE whistleblowers couldscore multi-million-dollar payouts forreporting financial wrongdoingunder a new programme approved byUS securities regulators yesterday.
A divided US Securities andExchange Commission (SEC) voted 3-2to finalise the measure that hasgrown into one of the most con-tentious requirements of last yearsDodd-Frank Wall Street overhaul law.
Tipsters would be paid between 10and 30 per cent of sanctions over $1m(600m) for original and useful infor-mation. Companies have expressedfears the whistleblower rule willundermine internal compliance pro-grammes at public companies byencouraging employees to go directlyto the SEC. The rule does not requirewhistleblowers to first, or simultane-
ously, report problems internally, ascompanies had sought.
In a concession to companies, thefinal SEC version would make a whistleblower still eligible for areward if he or she reports wrongdo-ing to the company, and the company,in turn, reports it to the SEC.
Businesses such as the US Chamberof Commerce are unhappy about therule and could appeal. The SEC hadput trial lawyer profits ahead ofeffective compliance, it said.
MAPLE Group, a consortium ofCanadian banks and pension funds,last night decided to go hostile with itsC$3.7bn (2.3bn) bid for the TMX, theToronto exchange group.
Its bid was rejected in favour of theLondon Stock Exchanges friendlyC$3bn bid, a move that Maple said wasdisappointing. But Maple has thesupport of several Canadian lawmak-
ers, who have expressed concern aboutthe merger of the countrys majorexchange with a foreign rival.
A spokesman for Maple said: Byaccelerating the timing of their meet-ing to consider the LSE takeover, TMXhave given us no choice but to makeour offer available directly to TMXGroup shareholders.
The LSE and TMX said in separatestatements yesterday they would holdtheir general meetings for sharehold-ers to vote on the merger on 30 June.
Rewards of upto $1m for USwhistleblowers
Maple Group goes hostilewith its offer for TMX
TMX rejected Maple Group in favour of a bid from the LSE headed by Xavier RoletBYMARYKAPLINSKY
ENERGY
REGULATION
Rosneft is Russias biggest oil and gas companyand is 75.16 per cent owned by the state, with therest of its shares publicly listed. It has the rights to 22.9bn barrels of proven oilreserves and 47bn barrels of potential reserves.
FAST FACTS | ROSNEFT
NewsCITYA.M. 26 MAY 2011
BY JULIET SAMUELM&A
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HIGH inflation will squeeze UK house-hold budgets well into next year, theOrganisation for Economic Co-operationand Development (OECD) said yesterday.
The OECD cut its forecast for Britishgrowth to 1.4 per cent this year, downfrom Marchs estimate of 1.5 per cent.
Back in November it was still expect-ing 1.7 per cent growth for 2011.
For 2012, the OECD expects a slightacceleration in growth to 1.8 per cent.Yet monetary policy must begin to
be normalised this year, the OECD said,while throwing its weight behind thecoalitions deficit-reduction plans.
The fiscal consolidation strikes theright balance and should continue inline with the governments medium-term plan to eliminate the deficit,while allowing the automatic stabilis-ers to work, the report said.
Normalisation of interest rates willneed to start during 2011 to stave offsignificant increases in inflation expec-tations, the OECD said.
Yet monetary policy should remainexpansionary, it said, suggesting thatthe UKs quantitative easing shouldnot be reversed until 2013.
Growth for the UK was declared at0.5 per cent for the first-quarter of theyear, official data showed yesterday.
ECONOMICS: P23
OECD downbeat over UKgrowth outlook for 2011
Chancellor Osbornes plans received OECD backing Picture: Micha Theiner/City A.M.
News4 CITYA.M. 26 MAY 2011
BY JULIAN HARRISUK ECONOMY
The global economy will expand by 4.2 percent this year, the OECD forecasts, acceleratingto 4.6 per cent in 2012 down from 4.9 percent last year. Japans outlook was slashed, following thedisastrous earthquake and tsunami in March.The OECD now expects a contraction of 0.9 percent for the Japanese economy this year, downfrom its previous forecast of 1.7 per centgrowth. The US economy will grow by 2.6 per cent
this year, the OECD expects. The group revisedup its forecast, from a prediction of 2.2 percent made in November. The OECD urged theFederal Reserve to tighten its monetary stance. Growth in the Eurozone should hit two percent this year, the OECD expects, up from 1.7per cent in its forecast from November 2010. China could hit nine per cent growth in 2011,rising again to 9.2 per cent next year, the fore-casts show. In neighbouring India, growth of8.5 per cent is anticipated for this year.
FAST FACTS | HOW THE OECD SEES GROWTH ACROSS THE WORLD
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News 7CITYA.M. 26 MAY 2011
TYCOONS in Europes troubled south-ern periphery are buying up homes inLondons most affluent postcodes andshifting cash to the Citys banks as theyflee the Eurozone debt crisis, accordingto new research.
The proportion of non-British western Europeans buying prime resi-dential property in London has risen to14 per cent this year from 11 per cent in2010. Within this, buyers from Spain,Italy and Greece grew to 36 per cent in2011, from 25 per cent, data from estateagent Savills shows.
Buyers from these three countriesalso make up half of all westernEuropean buyers of properties worthmore than 15m and 43 per cent in the5m to 15m range, the research shows.
Southern European tycoons are alsobehind the purchase of the 66 per centof prime houses worth less than 5msnapped up by Europeans.
In 2011, I suspect the lure of a safe,sterling denominated asset once againlooks attractive as the financial markets
in those countries... look particularlyprecarious, said Yolande Barnes, headof Savills Research.
Londons private bankers also report arise in business in Europes so-called sunbelt, belying the regions financial quag-mire.
The youngest wealthy entrepre-neurs, wealthy families, are looking out-side of Spain... They are giving globalbanks more of a play in that arena, saidRoberto Islas, head of Latin America andIberia at HSBCs private bank.
And southern Europes rich appear tohave resisted the worst of the financialcrisis when the region first lurched intothe economic downturn, with the mil-lionaire population in both Spain andItaly continuing to grow from 2008 to2009.
Private banks are trying to capturethese clients who were originally withSpanish commercial and savings banks, said Lorenzo Goldberg, aMadrid-based partner at London wealthmanager AlphaOne Partners.
Banks including Citigroup haveopened private banking branches inSpain in recent months.
Euro tycoonsflee to London
Neighbourhoods like Mayfair have seen an uptick in buyers from the Eurozone periphery
BYMARION DAKERS
PROPERTY
ANALYSIS l European purchaser nationality
%120
0
20
40
60
80
100
Southern Europe (Spain, Italy & GreeceRest of Western Europe
2007
25%
2010
25%
2011
36%
2008
23%
2009
43%
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NATIONWIDE Building Societygained market share and grew under-lying profits by almost a third in thepast year despite ongoing housingmarket stagnation, it said yesterday.
Nationwide, the UKs biggest build-ing society, turned a 276m underly-ing profit in the year to April, upfrom 212m in April 2010, against abackdrop of low growth in both itscore savings and mortgage markets.
It emphasised its efforts to supportfirst time house buyers and saversand said it needed to allocate only16m to compensate customers formis-sold payment protection insur-ance, following the high court rulinglast month.
Bad debts on its loan book also fellby 35 per cent over the year, to 359mfrom 549m in 2010, while only 0.68of its own-originated mortgages weremore than three months in arrears.
We have achieved significant
growth in our franchise against a backdrop of smaller mortgage andsavings markets and an abnormallylow interest rate environment, saidchief executive Graham Beale.
However, its reported profit fellslightly to 317m from 341m in 2010due to accounting changes.
Nationwide said its market share inresidential property rose to 9.5 percent, up from 8.7 per cent in 2010, asit lent a gross 12.8bn. More than afifth of that was lent to first-time buy-ers. It had also expanded in the cur-
rent account market to a 6.1 per centmarket share, up from 5.6 per cent in2010, after new accounts jumped 118per cent in the year, to more than 5m.
Nationwidegrows despitetough market SAGE, the business software and serv-ices group, has invited banks to applyto become its second broker alongsideDeutsche Bank.
The group, which has recently beenthe subject of takeover speculation, isone of the only FTSE 100 companies tohave just one broker advising it.
A number of banks are believed tobe interested in pitching for the busi-ness, including Citi, Goldman Sachs,BoA Merrill Lynch and Credit Suisse.
Being a corporate broker bestowson a bank the status of a trustedadviser, which gives it a good chanceof winning commission-based workon capital raisings and other transac-tions. The broking job itself does nottend to be very lucrative.
Deutsche is likely to be retained,with a second broker brought in as a
joint adviser.Having a single broker is less and
less usual these days, said somebodyclose to the group. You may as wellseek advice from wherever you can.
Sage, whose chief executive is GuyBerruyer, is worth around 6bn.Earlier this month there were reportsthat it might be facing a takeoverattempt from SAP or private equity.
A beauty parade has yet to begin,but the banks will present their caseto the company shortly.
Sage starts thesearch for itssecond broker
BYALISON LOCK
FINANCIAL SERVICES
ADVISERS
Underlying profits up 30 per cent to 276m. Bad debts on loans fell by 35 per cent to359m in the year to April from 549m in 2010. Loaned 12.8bn in residential mortgages,giving it a 9.5 per cent share of the UK market
FAST FACTS | NATIONWIDE
NewsCITYA.M. 26 MAY 2011 9
LAST-ditch efforts by the bidders forthe Tote, the state-owned bookmaker,have been made, as the governmentgears up to reveal its preferred offer.
High street bookmaker Betfred hassweetened its offer for the bettingpool, after it appeared to have lost outto a bid from former LiverpoolFootball Club chairman Sir MartinBroughton.
The bookmaker, which owns morethan 750 shops, is believed to haveraised its offer above 200m the ini-tial price suggested by both bidders.
Meanwhile, Sir Martins SportsInvestment Partners is thought tohave upped the amount of money itwould hand to the taxpayer to above80m. His bid also has the most sup-port from racing.
An announcement on the sale ofthe Tote is expected from the govern-ment as early as tomorrow.
Suitors sweeten up offersfor the state-owned Tote
Both Sir Martin Broughton (above) and Betfred have upped their bids for the Tote
BYRICHARD PARTINGTONLEISURE
BYDAVID HELLIER
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set up a consultancy advising hedgefunds and the private equity sector.
However, Tulchan founder AndrewGrant does have something to smileabout, following recent account winsfrom Lloyds Banking Group, securityfirm G4S and direct shipping firmFindel, not to mention the firms newoffice in Singapore. Every cloud
ON THE HOUSESTOCKBROKER by day; one half of aDJ duo by night. That is the busyschedule of Oliver Saunders, whostarted the house music act DoctorBanker with his medic friend TobyPillinger to supply the creative hit
that working in equity sales at a lead-ing German investment bank justcouldnt provide.
Saunders insists he has no plans togive up his day job, but things seem to
be taking off for the classicallytrained pair, both 26, who have beensigned to Canadian label Play Recordsand have put out their first release oniTunes, the Doctor Banker EP.
They are also due to perform in themiddle of a field at 1am this Saturdayat the Free Range Festival, Leicesters
alternative Bank Holiday event.Expect to see Saunders boss JonathanPotter on the podium who is,apparently, a bit of a fan.
TURF WARSRACEHORSE owners AndyStewart, the former Cenkos
boss and Tim Leslie,founder of JamesCaird AssetManagement, are
being given a runfor their money onthe turf after 14 lit-igation partnersat Evershedsinvested in theirown racehorse.
Evervescent, atwo-year-old geld-ing that the syn-
dicate boughtfor 3,500, is
being trained by Stan Moore, wholearnt his trade from two of the race-
horse training greats, PaddyPrendergast and Vincent OBrien.
The horse has already won majorraces at Goodwood, where it camefifth, and at Haydock, where it wonits first trophy. Next stop Ascot,
where Evervescent will run in theCoventry Stakes on the first day ofthe flat races on Tuesday 14 June and partner Kevin Elliott predictshe can upset the favourites.
RETAIL BOND THE NAMEs Bolland, Marc Bolland. Yes, the chief executive of M&S(below) has been so filmic in hispublicity shots with the retailersglamorous models that one admirerhas been moved to describe him asthe next James Bond.
Although reprising the role ofGordon Gekko in the next Wall Streetmovie might be more plausible, as
Wall Street director Oliver Stone haspersonally asked the dapperDutchman to submit a corporate filmfor the annual competition run by
video hosting platform Vazaar, ofwhich Stone is a shareholder.
Vazaar is still waiting to hear backfrom Bollands people so back to theBond analogy, after a source close tothe competition noted the AstonMartin-driving CEOs uncanny resem-
blance to Daniel Craig.So what does that make Bollands
predecessor Sir Stuart Rose? TimothyDalton the one who only appearedin one film, said the mole, beforeadding, rather unkindly: Hes noSean Connery, is he?
TRADE SECRETSDONT feel you really fit in? Dontworry that approach will make you
a millionaire, says Greg Zuckerman,the US author of The Greatest Trade Ever, who is tonigh
addressing the Financial Tradersand Brokers Network at the MintHotel in the City.
The career risks you take to bean outlier are too great for
many in theindustry, saidZuckerman. But inthis age of financial bubbles it is moreimportant thanever to take uncon-ventional stances. To Zuckermans tradesecrets at the World Spreaevent, please con-
tact Kerry Exall on07807 233145.
RETURN TO SENDER: ROYAL MAILSPINNER POSTS P45 TO ITVS PR
ALL GOOD things come to an end,and so it is that ITV is parting com-pany with Tulchan, its financialpublic relations adviser of four
years, The Capitalistcan reveal. The commercial broadcaster,
whose new press chief is formerIndependent and Sunday Telegraph
journalist Mary Fagan, has told Tulchan it wants a regime changeamong its media advisers.
Favourite to take on the mantle isBrunswick, which used to handlemedia affairs for the Royal Mail whenFagan held the fort there in her previ-ous incarnation as comms director.
It would be a uniting of old friends,of course, since ITV boss AdamCrozier ran the Post Office before join-ing the broadcaster last April.
Fagan wants to choose her ownpeople, said a source close to the
developments, who added thatBrunswicks sparring partnerFinsbury is understood to be out ofthe running for the ITV brief becauseof its work for satellite rival BSkyB.
Meanwhile, Tulchan is also set tolose the services of Andrew Honnor the former special adviser in JohnMajors government who went on tohandle the Goldman Sachs IPO asHonnor has announced he is off to
New media: ITV boss Adam Crozier wants fresh advisers Picture: Micha Theiner/City A.M.
Double life: Saunders (left) and Pillinger
The Capitalist10 CITYA.M. 26 MAY 2011
EDITED BY
HARRIET DENNYSGot A Story? [email protected] The Capitaliston Twitter: @citycapitalist
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DUBAI-BASED ports operator DP Worldsaid yesterday it expects to list shareson the London Stock Exchange on 1June, as it seeks to boost its liquidity byattracting a wider range of investorsthan from its listing on Nasdaq Dubaialmost four years ago.
DP World shareholders earlier thismonth approved a one-for-20 shareconsolidation, in a bid to boost its flag-ging stock price ahead of its Londonlisting. The ports operator issued
shares at $1.30 each in its near-$5bn ini-tial public offering in 2007, but theshares have floundered since then.
The firm is one of the more prof-itable arms of state-owned DubaiWorld, which received part of a $10bnloan from Abu Dhabi and announced arestructuring in late 2009, after need-ing an extension on its debt maturities.
A dual listing in Dubai and London would enable some institutionalinvestors blocked from taking stakes innon-OECD companies to invest. The
London listing will also be seen as anopening up of Dubais traditionallyclosed markets. DP Worlds marketcapitalisation is high enough to place itin the FTSE 100, yet it will not enter theblue-chip index. Rules require a foreigncompany listing in London to have themajority of its shares in free float tojoin the elite index. Only 20 per cent ofDP World is publicly tradeable.
In its prospectus for listing inLondon, DP World also revealed itsdirect parent company Port & FreeZone World is considering refinancingits outstanding net debt facilities.
DP World setfor its London
debut in JunePETER Wood, chairman of UK motorinsurer Esure, has been meetinginvestment banks to discuss its path toa stock market flotation, the companyconfirmed yesterday.
Wood, an insurance industry sagewho founded Direct Line in 1985 andEsure in 2000, has met bankers forvery early stage talks over listing it onthe London Stock Exchange.
Esure has made no secret of itsintention to access the public marketin the next three years, with plans toraise up to 2bn from a share offering.
Any flotation will take place in thesecond half of 2012 at the earliest,however. Wood is restricted in any saleof Esure after he and private equity vehicle Tosca Penta Investmentbought out Lloyds Banks 70 per centstake last year for 185m.
The buyout, which left Wood with a55 per cent stake and Tosca Penta with45 per cent, included an anti-embar-rassment clause that prevents Esurebeing sold within a certain period.
Wood founded Esure with Sir JamesCrosby in a joint venture with Halifax which, as HBOS, was taken over byLloyds in 2008. Three weeks ago Esurelaunched a broking business, EsureBroker, to enable it to offer a widerrange of motor insurance products asit positions itself for the IPO.
Esure founder
meets banks to
discuss a float
DP World chief Mohammed Sharaf is listing the firm in London Picture: REUTERS
BYRICHARD PARTINGTON
TRANSPORT
INSURANCE
News12 CITYA.M. 26 MAY 2011
ANALYSIS l DP World
$
25 Apr 28 Apr 8 May 16 May 24 May
14.4
14.1
13.8
13.5
13.2
12.9
13.35025 May IAIN Hunter leads the legal team
advising DP World on its London list-ing.
Hunter has been a partner atClifford Chance since 2000, and alsoadvised DP World on its landmark IPOon Nasdaq Dubai in 2007.
He advised AZ Electronics on its$900m IPO and the banks involved in
the restructuring, London listing andcash placing of life fund businessPhoenix Group.
Hunter represents corporate and
investment banking clients on a widerange of corporate finance and publicmarkets facing transactions.
Deutsche Bank and Citigroup actedas joint sponsors on DP WorldsLondon listing. HSBC acted as finan-cial adviser.
Iain Macleod, managing director inthe UK coverage team at Deutscheadvised DP World on its London list-ing. He also advised the firm on itsapproach for P&O.
MEET THE ADVISERS: CLIFFORD CHANCE
IAIN HUNTER
CLIFFORD CHANCE
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News14 CITYA.M. 26 MAY 2011
CITY VIEWS: IS THERE IS A NEW DOT.COM BUBBLE?Interviews by Shiba Babamiri
I think possibly, yes. Companiessuch as LinkedIn are valued veryhighly and its not justifiable. It will
be interesting to see what otherwebsites such as Facebook andTwitter are valued at.
DEEPAK MALIK | AVIVA
I think there is but it's notgoing to be as devastating as itwas in 2001. Internet sites sur-
vived well through therecession so I cant seethe bubble bursting.
Yes there is definitely a dot.com bubble and it is going to burst verysoon. Too many investors are jumping on the bandwagon and valuingcompanies too high. Im looking forward to seeing what figuresLinkedIn will reach.
JASON MCCLYMONT | KBW ASSOCIATES
Zynga is understood to be in talks withGoldman Sachs and Morgan Stanley as itprepares to choose bankers for its IPOthis year. Morgan Stanley is fresh off lastweeks successful float of LinkedIn. Thevaluation range was questioned afterLinkedIns market cap surged from itslisting price of $4.25bn already 30 percent above its initial range to $11bn. Ifchosen, the banks will be keen to ensureZyngas price reflects the red-hot demandfor tech stocks.
ZYNGA: WHO WILLADVISE ON THE IPO
ZYNGA ADVISER
MORGAN STANLEY
SOCIAL games designer Zynga could file fora multi-billion dollar IPO as soon as nextmonth.
It is understood the firm is eager to cashin on the vociferous investor appetite fortechnology stocks following the bumperflotation of LinkedIn last week.
The professional social network saw its
shares surge 171 per cent during its f irst day
trading to reach a market cap of an eye- watering $11bn (6.8bn), despite posting2010 earnings of just $15.4m.
Zynga has been valued at as high as $9bn based on shares trading on the secondarymarket and fundraising talks with investors.
It looks set to be the next in a line of highprofile internet companies hoping for sky-high valuations. Facebook, which has been
valued at more than $60bn, plans to float in
2012 according to chief executive Mark
Zuckerberg. Microblogging site Twitter hasbeen valued at $10bn while Groupon is saidto be hoping for a flotation of up to $20bn.
Zynga, which has 248m monthly activeusers, is best known for games playablethrough Facebook including FarmVille andMafia Wars. They allow users to purchase in-game credits for actual money. It is backed
by investors including Foundry Group,Union Square Ventures and Kleiner Perkins.
BY STEVE DINNEENTECHNOLOGY
Zynga eyes market float
Zynga, which makes games including FarmVille (left), could file for an IPO nextmonth.
WARREN CAMPBELL | Jubilee
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News 15CITYA.M. 26 MAY 2011
Google set tolaunch mobilepayments
CABLE & Wireless Communications (CWC) yes-terday saw its shares tumble over 11 per centafter it admitted conditions in its coreCaribbean market were tougher than expected.
The companys shares closed at 42.41p their lowest level since its demerger fromthe former Cable & Wireless Group in 2009.
Full-year revenue at the firm rose four percent to $2.4bn (1.4bn), but its Caribbean
business kept core earnings broadly flat at$872m, hit by a decrease in tourist spendingin the region.
Analysts expected CWC to report revenueof $2.3bn, and core earnings of $864m,according to consensus estimates.
Thr firm said the conditions in theCaribbean have been partially offset by astrong showing in Panama, Monaco and,especially, Macau.
Chief executive Tony Rice told City A.M.there is a need for caution, saying he expectsno favours from the economy in theCaribbean, which he described as a more
volatile market than most.He said: Itll be a couple of years before it
emerges. We arent sitting on our hands
though, we have made big improvements toour business but its hard to prosper whenpeoples household incomes are falling.
On the other hand, Macau is booming.Macau has seen a rapid upshot in higherdata revenue, which Rice described as thefuture of the business.
CWCs stock had fallen nine per cent inthe period since the demerger, against amore than 40 per cent drop for C&W
Worldwide, which focuses on corporate andgovernment markets in the UK and else-
where.It is paying a full-year dividend of 4.9p,
which it said it expected to keep at the samelevel in the current year.
CWC tumbles ontough Caribbean
Chief exec Tony Rice says conditions remain tough in CWCs Caribbean market
BY STEVE DINNEEN
TELECOMS
EVERYTHING Everywhere and BT Wholesale yesterday announced the firstlive trial of 4G LTE broadband.
The project in Cornwall will use BTsinfrastructure and EverythingEverywheres mobile network to providesuperfast broadband to 700 rural premises.
The firm says the trial will be used to testthe performance of a 4G LTE network out-side lab conditions. Everything Everywherechief executive Tom Alexander said thetechnology could be used to help the gov-ernment meet its target of having the best
broadband network in Europe by 2015.
BT to live trial newwireless broadband
TELECOMS
GOOGLE will today unveil its first mobilewallet technology that turns your phoneinto a touch-payment system.
Googles VP of commerce and paymentsStephanie Tilenius said: Were making a
big bet on it as a company. There is a lot ofpotential there.
It is understood the service, known asNear Field Communication (NFC), will betrialled in the US with partnersMasterCard, Citigroup and network opera-tor Sprint.
The technology, which is built intoGoogles Android operating system, couldeventually mean credit cards are no longernecessary to make payments.
Orange and Barclaycard last weekannounced the UKs first contactless
mobile payment service in stores includingPret A Manger, EAT and Subway.
It will allow users to make purchases of15 and under without requiring a PIN.
City A.M. got a sneak peek of the technol-ogy last year in the Spanish town of Sitgesas part of trials by Visa.
Visa and Monitise hope to showcase thetechnology in the UK in time for the 2012Olympics.
ANALYSIS l Cable & Wireless Communication
p
28 Feb 18 Mar 7 Apr 3 May 23 May
52
50
48
46
44
42
42.4125 May
BY STEVE DINNEEN
TELECOMS
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JUST one day after admitting a 260bnyen (2bn) loss for the year, Japaneseelectronics giant Sony yesterdayrevealed a fresh online security
breach - this time for 2,000 customersof its Sony Ericsson joint venture inCanada.
Sony spokesperson Atsuo Omagarisaid that names, e-mail and encrypt-ed passwords may have been stolenfrom the Sony Ericsson Canada web-
site, but no credit card informationwas taken.
The eShop website, a partnershipbetween Sony and Swedens Ericssonto promote their products, has beenshut down.
The breach is the latest in a seriesof hacker attacks against the electron-ics and entertainment company,
which last month saw the accountinformation of more than 100m cus-tomers compromised in cyber attackson its networks.
On Tuesday, Sony said that its cus-tomers in Thailand and Indonesiahad also had their personal informa-tion targeted.
Earlier this year, Sony attracted theattention of Anonymous, a group ofactivist computer hackers, following alawsuit by the company against ahacker who modified his PlayStationgame console.
However, Anonymous has deniedresponsibility for the attacks andSony itself has said it does not believeit is directly involved in the attacks.
In its first estimate for the year toMarch 2012, Sony said operating prof-it would come in around 200bn yen.
Sony expects to report a net loss of260bn for the year ended 31 March,its third straight annual net loss,after writing off tax credits following
Japans devastating earthquake andtsunami. Analysts said Sony had pro-
vided markets with a realistic view ofthe impact of the quake and thePlayStation network hacking, both of
which had weighed on the shares.
Sony suffersafter hackersstrike again PROPERTY investor Quintain Estatessaw its share price soar yesterdaydespite being hit by valuation write-downs as its annual pre-tax losses
widened to 48.1m for the first threemonths of this year compared to a lossof 10.2m a year earlier.
The developer of malls, studenthomes and regeneration schemes saidfull-year net asset value (NAV) pershare fell to 116p, from 120p a yearago, mostly on a writedown in the
value of its property assets.But the firms shares rose by 5.7 per
cent to 52.5p reflecting its progress inrevitalising its business and an increas-ingly strong outlook, giving the com-pany a market capitalisation of266.8m.
Chairman William Rucker said thecompanys key plan for the coming
financial year is to restart develop-ment programme at GreenwichPeninsula and to continue the build-out of the Western Core at WembleyCity.
Quintain is also building a 361 roomHilton Hotel and 660 bed studentaccommodation building, both adja-cent to Wembley Stadium.
The hotel is expected to open for theOlympic Games and the studentaccommodation for the 2012-13 aca-demic year.
LONDON landlord Shaftesbury yes-terday posted a first-half rise inunderlying net asset value and saidit was confident of maintainingoutperformance in its income, div-idend and capital growth.
In the six months to 31 March,the company posted a 5.3 per centrise in underlying net asset value(NAV) per share to 436p, partly on
the back of rising rents. The real estate investor -- owner
of more than 500 shops, restau-rants and bars in the West End the-atre district -- booked an pre-taxprofit of 14m, against 11.1m a
year earlier.Despite challenging trading con-
ditions across much of the UK econ-omy, visitor numbers and spendinghave remained buoyant inLondons West End, Shaftesburychairman John Manser said.
Quintain cheersinvestors despitelosses widening
Shaftesbury sees incomegrowth on West End sites
Shaftesburys portfolio includes buildings on the iconic Carnaby Street Picture: Micha TheinerBYKATIE HOPE
TECHNOLOGY
PROPERTY
NewsCITYA.M. 26 MAY 2011
BYHARRY BANKSPROPERTY
17
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News 19CITYA.M. 26 MAY 2011
THE CHIEF of stockbroker Tullett Prebonyesterday warned retail investors againstthe use of some exchange traded funds(ETFs).
Terry Smith said the rise of ETFs as apopular vehicle for investors had becomeworse than I thought.
Writing on his blog, he added: I sus-pect a lot of retail investors think thatETFs are the same as index funds. Someof them are, but many arent.
The City veteran is concerned that thegrowth in the popularity of some ETFscould become dangerous should theglobal economy be faced with a freshcredit crisis.
Retail investors warned over ETFs
INVESTMENT
PROFIT GROWTH at financial servic-es group Brewin Dolphin has been
wiped out by a 6.1m charge paid tothe Financial ServicesCompensation Scheme (FSCS) forthe collapse of failed firm Keydata.
The wealth manager saw its pre-tax profit decline by 21 per cent onlast year to 12m in the six monthsto 27 March.
Excluding the charge and otherone-off costs, the firm posted analmost 10 per cent pre-tax profitincrease to 22.9m.
Financial services firms wereforced to contribute to a 247m levyfollowing the collapse of Keydata.
The company said it was taking
an active role with regulators toprevent such large levies beingimposed on the industry in future.
Its done and dusted, lets lookforward just as much as anyoneelse, see what can be done so thatsort of thing can be seen earlier
before it becomes quite as destruc-tive, executive chairman JamieMatheson told City A.M..
I think there are changes under-way and I think its important thatthe industry engages in the debatesurrounding those changes and
were certainly willing to do that,he added.
Brewin Dolphin also revealed itsfunds under management had hit25bn for the first time. Total man-aged funds increased seven per centin the six months to 27 March.
The company said its corporateadvisory and brokerage business,
which had agreed a managementbuyout to merge with Spanish advis-er N+1, would no longer be a part ofthe group by the end of the year.Brewin shares closed 0.2 per centlower at 165.7p yesterday.
Brewin hit by 6.1mcompensation levyBYRICHARD PARTINGTON
FINANCIAL SERVICES
ANALYSIS l Brewin Dolphin
p
28 Feb 18 Mar 7 Apr 3 May 23 May
185
175
165
165.70
25 May
Banks need clarity from regulators, not criticism
DOES the governor of the Bank ofEngland hate banks? You mightthink it is a rather sacrilegiousquestion, but it is one that
bankers themselves are asking, at the very highest levels. It is normal forthere to be tensions between anindustry and its regulators; indeed as
the electricity industry showed in the1990s, it would be alarming if there
werent.
But this goes beyond normal.Mervyn King and Hector Sants, headof the Financial Services Authority(FSA), have become the bogeymen ofthe financial services sector,denounced angrily whenever bankershuddle together.
The banks complain about theaggressive regulatory stance, theunnecessary goldplating and front-running of international regulations,superequivalence, the regulatorsthunderings about their sector, andthe FSAs doubts about competitive-ness.
It isnt abilities and judgements ofKing and Sants that are questioned
the normal critique of the regulatedagainst their regulators but theirpsychological state, their motivations
and their ultimate aims.The concern is that they are com-promised because financial servicesimploded on their watch, and theynot only appeared not to see it com-ing, but did nothing to prevent it.
They are embarrassed, traumatised by what happened. They are nowengaged in the massive exercise ofnoisily slamming stable doors shutafter several horses have bolted, runsthe refrain in the boardrooms of thesquare mile.
Having seen the boiler explode,they are responding not by mendingit but by turning the heating off.
Whether or not they are so trauma-
tised they are over-reacting, it is cer-tainly true that in terms of their per-sonal credibility, they have nothing to
lose and everything to gain by pursu-ing a policy of tougher than thou.In any trade-off between greater regu-lation and economic growth, theyhave a personal incentive to choosegreater regulation.
There is one key thing the bankswant to know of King and Sants dothey think the financial services sec-tor is too big in the UK? Is their unspo-ken game plan to try to cut the sectordown to size? Has Mervyn been read-ing too much of Will Huttonscolumns, calling for financial servicesto be forcibly shrunk?
For international bankers thinkingof investing in the UK, it is critical to
know the regulators long term aims.Nor is it clear to the industry
whether the Treasury or at least its
political masters share the aims ofthe regulators. The governments priority is to
boost growth, and financial servicesremain one of the best hopes for eco-nomic expansion in the coming
years. Erring on the side of overzeal-ous regulation may appeal to Kingand Sants, but it will have littleappeal for the chancellor.
All this might just be a terrible mis-understanding between the banksand their regulators. If so, it is a mis-understanding the regulators musttry to clear up.
Anthony Browne is on the board oftheCityUK
THURSDAY COMMENT
ANTHONY BROWNE
FOR a company with roots likeCaledonia Investments, whichtraces its history in line with theCayzer shipping empire, a shake-up is a rare thing.
But for newly installed chiefexecutive Will Wyatt (pictured),change is a necessity.
Caledonia, founded in the1920s, has struggled in recenttimes. In terms of total returns,investors have lost 3.6 per centover the past five years, below theperformance of the FTSE All-Share index.
So it was with some triumphthat the company revealed astock market-beating perform-ance yesterday.
Caledonias diluted net asset
value per share rose by 6.4 per
cent in the year to theend of March, abovethe FTSE All-Shareindex.
Net assets held by the firm alsoincreased by 6.5per cent to1.26bn.
Wyatt told CityA.M. he hadstripped down thenumber of invest-ments the compa-ny places and hirednew staff.
He wants to cutdown the number ofinvestments the compa-ny makes to about 40,from its cur-r e n tposi-
t i o n
of 68.But the new chief isalso the great-grand-
son of CharlesCayzer, the founderof the shippingindustry giant that
bore his name, andis keen not to rockthe boat too much.
What Ive doneis less a shaking upmore of a sharpen-ing up around the
edges, he said.Its more redefin-
ing what has worked very well and pro-
vides value tosharehold-
ers.
BYRICHARD PARTINGTONWEALTH MANAGEMENT
WILL WYATT
New Caledonia Investments boss
rocks the boat to bolster returns
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SPORTSWEAR chain JJB Sports yester-day warned that it will take as long asfive years to turn round the businessafter it reported mounting losses.
The full-year losses almost doubledto 181.4m. The retailer was savedfrom administration in March whenit hammered out a company volun-tary agreement with its landlords,closing up to 89 unprofitable stores.
JJB also recently raised 96.5m tofund a turnaround plan, which sawthe company relegated to AIM.
Chairman Mike McTighe said yes-terday: The restructuring of JJB willnot be easy or quick and will mostlikely take three to five years. Theretail environment is challenging,
will remain so for some time and weface intense competition.
But the work undertaken over thepast six months, together with thecrucial support of all our stakehold-ers have given JJB a chance to surviveand ultimately to prosper.
JJB, which is based in Wigan, hasearmarked the funds raised torevamp 150 stores this year to try toentice shoppers back. Analysts atPanmure Gordon reiterated theirbuy recommendation on the stock.
We believe that JJB now has thestrategy and the finances to realise itspotential, but this will obviously taketime to come through in the num-
bers. JJB has tapped shareholders for
cash three times over the past 18months, raising a total approaching200m.
JJB revival
plan hit as itslosses mount
Legal action dogs Tate & Lyle
#&!#!%)
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!"$
TATE & Lyle (T&L) will announce itsannual results tomorrow against the
backdrop of a 100m legal dispute.The conglomerate is embroiled ina complex court case with London-
based firm Whitefox Technologies.The two firms are suing each other
in a spat that could cost the giant inexcess of 100m if it loses.
There has also been a ruling thatpunitive damages could be madeagainst T&L, which could bring the
figure as high as 200m should it losethe case.
Despite involving two Londonfirms, the action is being heard in theNew York State Supreme Court
because the dispute involves plants inthe US. T&L launched action against
Whitefox in 2009 over membranessupplied to help reduce the environ-mental costs of ethanol production,
with Whitefox launching a counter-claim.
The sensitive membranes wereused to produce millions of gallons of
ethanol in Loudon, Tennessee.A Whitefox spokesman told City A.M.:
We can confirm that legal action ispending against Tate & Lyle. We willnot be making any further comment
until it has been completed.A T&L spokesman declined to com-ment yesterday.
Last month T&L announced that ithad agreed to sell its Vietnamesesugar business in a cash deal worth33m, subject to regulatory approval.
The sale to a Vietnamese firm is partof the firms efforts to address itsdebt pile.
BY JOHN DUNNE
RETAIL
BY STEVE DINNEEN
PRODUCTION
AUSTRALIAN mall operator WestfieldGroup reconfirmed its earnings fore-casts yesterday despite the impact of alower US dollar, but kept tight-lippedabout reports of plans to expand inEurope.
Westfield has already ventured intothe UK with the opening of WestfieldLondon in 2008 and WestfieldStratford City, which is expected to
open later this year.Westfield is also reportedly in talks
with Italian developer GruppPercassi to develop a shopping centreto the east of Milan. Frank Lowy, whostepped down as executive chairman
yesterday, said he could not confirmany plans or the potential timing ofan expansion. The firm kept its earn-ings forecast to pay out 48.4 cents ashare a share in 2011, with opera-tional earnings seen at 74.6 cents.
Westfield on target butsilent over European plansRETAIL
News20 CITYA.M. 26 MAY 2011
SPORTS CHAIN RUNS INTO MORE TROUBLE
Chairman Mike McTighe warned JJBs turnaround could take five years.
NEWS | IN BRIEF
FSA fines Bank of ScotlandBank of Scotland, owned by LloydsBanking Group, has been slapped with a3.5m fine from the Financial ServicesAuthority (FSA) for failures in how ithandled certain customer complaints.The FSA added it had also secured
17m in compensation for customers,following complaints about the compa-nys retail investment products. BetweenJuly 2007 and October 2009, Bank ofScotland received 2,592 complaintsabout sales of several investment prod-ucts, some of which the FSA said werewrong rejected. The watchdog said itwill continue to make intrusive assess-ments of banks with a complaints issue.
Costain wins water contractsConstruction and engineering firmCostain yesterday announced twomajor water contract extensions worth100m. The firm is in a joint venture toupgrade and extend Sandon Docksewage treatment works in Liverpool,and has a contract to design and buildwastewater schemes for Severn Trent.Chief executive Andrew Wyllie said hewas pleased with the water industryscontinued investment in infrastructure.
Revolt at Robert Walters AGMShareholders yesterday refused to sup-port recruitment firm Robert Walterspay package for directors at its annualmeeting. Around 28 per cent votedagainst the remuneration report, with afurther 10 per cent abstaining. Only 26per cent of all shares were used to votein favour of the pay package. Somedirectors were to receive bonuses inexcess of 100 per cent of their salaries,against company policy. The companydid not comment on the rebellion.
ANALYSIS l JJB Sports
p
28 Feb 18 Mar 7 Apr 3 May 23 May
35
30
25
20
15
10
23.2525 May
September 2008JJB announces unimpres-sive interim results, raisingdoubts over the companysfuture. February 2009JJB puts its Qube andOSC subsidiaries intoadministration after fail-ing to find buyers. By theend of the week, thecompany wins a reprievefrom its bankers to avoidputting the whole groupinto administration.March 2009Avoids going into admin-
istration by selling its fit-ness club for 83m.May 2010Reports losses of 70m. February 2011JJB and JD Sportsrevealed to be in mergertalks, as JJB announcesplans to enter into acompany voluntaryarrangement (CVA).March 2011Company unveils a65m recovery strategyto revamp stores, closeloss-making outlets andinvest in online.
March 2011Creditors back JJBsCVA plans to avoid goinginto administration whileJD Sports backs out of
merger plans. April 2011JJB announces plans toraise 65m from anoth-er share placement toprovide emergency addi-tional funding.March 2011JJB warns that recov-ery plan could take upto five years.
by Shiba Babamiri
TIME LINE | JJBS TROUBLED HISTORY
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1 2 3 JULY 2011
Admission strictly by advance ticket only
For tickets or hospitality please call: +44 (0)1243 755055
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ESTATE PARTNER OF GOODWOOD
Consumer News 21CITYA.M. 26 MAY 2011
DRINKS giant Diageo yesterdayannounced a shake-up of its interna-tional business with two senior
executives leavingyesterday.
Stuart Fletcher,(pictured right)president ofD i a g e oInternational,and chief cus-
tomer offi-ce r
Ron Anderson (left) have quit thefirm.
Chief executive Paul Walsh saidthe companys regions would be re- jigged, indicating that staffingwould be reviewed.
He said: Diageo has begun areview of our business to ensureresources are deployed closer to themarket and in those areas wherethe potential for growth is greatest.
Meanwhile Walsh praised bothoutgoing executives who will stayon until the new structure kicks in.
The drinks maker, whose brandsalso include Johnnie Walker andSmirnoff, is to launch two new divi-sions, Diageo Latin America andCaribbean and Diageo Africa.
The maker of Guinness has20,000 staff, and has its head office
in London.Diageo has recently been linked to
the owner of Jose Cuervo tequila, hav-ing conducted talks to extend a distri-bution deal or buy the brand outrightfor over $2bn (1.2bn).
Diageo distributesthe tequila in mostbig export marketsoutside Mexico,and is talking tothe Beckmannfamily ownersabout what hap-pens whenthis long-t e r mcontractends inJ u n e2013.
Shake-up at Diageosparks job cut fearsBY JOHN DUNNE
CONSUMER
HOME improvement retailer FocusDIY is to close with the possible lossof up to 3,000 jobs, after the admin-istrator was unable to find buyersfor the bulk of its stores, it wasannounced yesterday.
Administrators at Ernst & Youngsaid they had appointed retail con-sultants Gordon Brothers to adviseon the sale of all Focus DIYs stockwith a view to shutting the chain.
The closing down sale will begin
this weekend.While we have been successful
in securing up to 900 jobs from thesale of 55 stores in three separatedeals, finding a buyer for thewhole of the business has not beenpossible, joint administratorSimon Allport said.
While the administrators arecontinuing negotiations for thesale of a number of stores acrossthe group, the stock liquidation islikely to result in a number ofFocus stores closing with remain-ing employees going through aredundancy process.
When it went into administra-tion earlier this month, Focus DIY
employed 3,919 people at 178stores.
The group which defaulted onits credit facility has been suffer-ing for years, with a weak housingmarket and stiff competition fromthe likes of B&Q, Home RetailGroup and Travis Perkins.
Earlier this month, B&Q bought31 Focus stores and rival Wickespurchased 13, but there have beenno takers for the others. GeoffCooper, chief executive of Wickesparent company Travis Perkins,
warned that the DIY sector wasover-supplied.
Focus DIY to close after failing tofind buyer as 3,000 jobs face axeRETAIL
NEWS | IN BRIEF
Sound Oil plans three new wellsIndependent oil and gas company SoundOil hailed its most successful year yester-day despite significantly widening its loss-es at the end of 2010 to 15.9m from2.9m the previous year, fuelled by a14.2m loss on the write down of theBangkanai asset in Indonesia. However,
the company plans to work up a numberof explorations with a view to operatingthree wells in the next 18 months.
Telefonica job cuts widenTelefonica and unions want to extend a
job reduction plan by two years, sourcessaid yesterday, in a move that could leadto redundancies rising by an additional2,500. Telefonica proposes extendingthe cuts over five years but lifting thenumber of redundancies in Spain to upto 8,500 staff. Unions have agreed tothe extended timeframe, but not to theincreased redundancies. Unions hadrejected Telefonicas initial plan to cut itsSpanish staff by 20 per cent, or 6,000employees, in the next three years.
First Derivatives profits up 15pcAIM-listed software and consulting serviceprovider First Derivatives yesterdayannounced a pre-tax profit increase of 15.1
per cent to 6.5m this year with a 44.2 percent rise in revenues. Chairman DavidAnderson said product launches would befollowed by sustained marketing as thecompany capitalises on recent investments.
CORPORATE travel firm HoggRobinson shrugged off the latest vol-canic ash cloud to hit Europe andunrest in North Africa and the MiddleEast, saying yesterday that short-termtravel disruption was often good forbusiness.
We dont see this having anyimpact on our business at all.Whenever travel plans have to change,that creates work for us, and thisinevitably means that we create someadditional revenues from that,finance director Julian Steadman said.
Steadmans comments came as the
firm predicted 10 per cent operatingprofit growth this year thanks to arebound in demand for business traveland posted slightly better than expect-ed results, helping send its shares up
as much as seven per cent before clos-ing up 2.2 per cent at 59.3p.
The company posted a 16 per centrise in underlying pre-tax profit for theyear to the end of March to 32.9m onrevenue of 358m, up 10 per cent.Client travel transaction activity wasup 17 per cent in the year, while travelspend grew 23 per cent.
We are comfortable with the num-bers in the market ... They are general-ly looking at about a five per centincrease in revenue, with nearly twotimes that in terms of operating profitincrease, Steadman added.
Hogg Robinson, which was estab-lished in 1845 and whose customersinclude the Ministry of Defence and
German carmaker Volkswagen, alsoraised its final dividend 25 per cent.Steadman also said the company waslooking at small acquisitions in itscore travel business.
Hogg Robinson inboost as business
travel takes offBYHARRY BANKS
LEISURE
ANALYST VIEWS: CAN HOGG ROBINSON KEEPUP ITS PROGRESS ? Interviews by John Dunne
JULIAN CATER | COLLINS STEWART
The four global players (including Hogg Robisnon) have only 18 percent of the market, offering scope to gain share as clients look to consolidate theirtravel management providers. The net pension deficit reduced to 88.6mfrom 93.5m a year ago.
RICHARD FINCH | EDISON
I think Hogg Robinson has been spectacularly undervalued, having suf-fered in the downturn. The latest figures are very strong and the company has avery good management team. The shares have doubled in the last yearand with business travel coming back we think theres more to come.
CHARLES PICK | NUMIS
The business travel market is expected to grow at four to five per centper annum for the next decade. Near term there should be slightly better top linegrowth for Hogg Robinson as some of its clients are spending more andcorporate spending is still down on pre-recession levels.
Hogg Robinson chief executive David Radcliffe hopes to see further growth in corporate trips
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News22 CITYA.M. 26 MAY 2011
SECURITY giant G4S outlined theextent of its emerging markets oppor-tunity yesterday as it eyes a return topre-recession growth levels by the endof next year.
G4S, which protects assets such asoil and gas plants and runs govern-ment facilities such as prisons,expects the global security market togrow at eight to nine per cent from2012 to 2019, as fast-expanding emerg-ing markets buy more services.
It is banking on high GDP growthin these new markets to return itsearnings per share growth to pre-financial crisis levels by the end of2012, chief executive Nick Bucklessaid at a strategy day for investors.
Buckles says this growth, combined with a lack of international rivals,gives G4S a multiplier effect that
will aid its expansion in marketsclosed to global players until now.
Thats why we believe some timein the next five or so years, 50 per cent
of our business will come from emerg-ing markets, he told City A.M.
New markets are expected toaccount for almost half the worldsecurity market by 2019, up from 33per cent in 2004, as Asia develops.
A lot of the countries where wewill see big organic growth are thosethat are mineral rich or with oil andgas, so we will secure oil and gas facil-ities, ports, aviation, all that criticalinfrastructure. Theres a lot of require-ment for security to help support theinfrastructure that is creating thegrowth, he said.
G4S expands
east to secure2012 growth
BTG revenues up 13 per cent
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BRITISH pharmaceutical firm BTGyesterday posted a 13 per cent rise
in full-year revenue, helped by a6m contribution from itsBiocompatibles acquisition in thefinal two months of the year.
The company bought oncologyproducts supplier Biocompatiblesin November 2010, extending theportfolio of products it can sell tohospital-based specialists.
Chief executive Louise Makin said
the group would start direct sales ofBiocompatibles LC oncology beads,
which deliver drugs for liver cancer,in the US from 2012.
She said increasing the compa-
nys specialists sales force wouldalso be useful in marketingVarisolve a treatment it is develop-ing for varicose veins.
Going direct is a way to get toknow a market well, she said yes-terday. Analysts at Deutsche Banksaid selling the beads directly wasa key strategic move allowing BTGto capitalise with its existing and
planned hospital specialist infra-structure.
BTG, which also sells anti-poisontreatments, posted revenue of111m for the year to the end of
March, in line with market expecta-tions. Its profit was boosted by a18.6m tax credit, resulting in prof-it after tax of 9.2m, slightly downon the 11.3m posted a year earlier.
Makin said integration of theBiocompatibles business was going
well and recruitment was on trackfor all three Phase III studies of its
Varisolve treatment.
BYALISON LOCK
SUPPORT SERVICES
BYHARRY BANKS
PHARMA
MARTHA Stewart Living Omnimediahas hired an investment bank toadvise it on its options, a signal thatthe company founded by the cookingstar may seek a partnership or a sale.
The move to hire the BlackstoneGroup, which sent shares of the com-pany up more than 20 per cent yester-day, comes after several years of salesdeclines in its magazine publishing,
television and merchandising busi-nesses. Between 2007 and 2010, rev-
enue fell by more than a quarter.The company, whose stock market value is just above $200m (123m),said yesterday that it hired Blackstoneafter other parties approached itabout becoming a partner or investor.
However, the firm cautioned thatthere was no guarantee that hiringBlackstone meant any transaction orpartnership would happen.
Adviser hire sparks salestalk for Martha Stewart
MEDIA
NEWS | IN BRIEF
Aveva demand boosts profitSoftware firm Aveva yesterday postedan eight per cent rise in full-year profitafter strong demand from customers inthe oil, gas and power sectors. Aveva,which makes software used to designnuclear power stations, ships and oil
facilities, said adjusted pre-tax profit forthe year was 54.7m compared with50.7m for 2010. The company said itsoil and gas sector, which accounts foraround 45 per cent of total revenue, hadbeen the main driver behind its growth,with Asia Pacific its standout region.Revenue for the financial year was up 17per cent to 174m.
Telecom Plus sees profits surgeUtility services group Telecom Plus saidyesterday its full-year profit rose 51 percent on higher demand for gas during thewinter and an increase in energy prices.The company, which supplies gas, elec-tricity, telephony and broadband underthe Utility Warehouse name, forecasthigher financial results for the currentyear, in line with market expectations.Pre-tax profit for the year rose to 27.5mfrom 18.2m last year. Gross margin roseto 15.9 per cent from 15.1 per cent, helpedby strong margins from fixed telephonyand broadband services. Revenue rose 13per cent to 418.8m.
Twitter to warn privacy usersTwitter will seek to notify its users sothey can defend themselves before ithands over user information to theauthorities, a senior manager said yes-terday when asked about the ongoingprivacy dispute. Lawyers for Ryan Giggs,have asked Twitter for details of theusers who published his name in tweetsdespite an injunction being in force.
AS CHIEF executive of G4S since2005, Nick Buckles has weatheredthe financial crisis and is nowfocused on returning the compa-ny to its former high growth.
While G4S, as a securityfirm, is associated with flak
jackets and war zones, Bucklessays it is global industry, notinstability, that will help itregain pre-crisis growth levels
by the end of 2012. The recent violence in north
Africa, for instance, isnt what hesees fuelling growing demand forsecurity.
We prefer stable economic envi-ronments and stable governments
because that actually attractsinvestment and enableseconomies to grow,he told City A.M.Short term crises,
while good forthe reputationand helping cus-tomers, dontreally creategrowth oppor-tunities.
Energy, avi-ation andports are all
high on G4Ss radar but also tele-coms infrastructure such as mobilephone masts.
Its a very different tale to the UK,where it is capitalising on
the authorities needto provide public
services morecheaply. Here, itis working onreducing the benefits billand outsourc-ing probation
services.Were helping
the UK govern-ment save moneyin the medium
term, hesaid.
Economic stability keyto demand, says BucklesBYALISON LOCK
SUPPORT SERVICES
ANALYSIS l G4S
p
28 Feb 18 Mar 7 Apr 3 May 23 May
285
275
265
255
280.0025 May
NICK BUCKLES
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THE UK economy grew by half a percent in the first quarter of the year,according to official data released yes-terday.
The second estimate of 2011s GDPgrowth matched the Office forNational Statistics (ONS) preliminarycalculations, yet a prominent group ofeconomists continue to cast doubt onthe figures.
We still think that this understatesthe underlying strength of the econo-my, said Andrew Goodwin of theErnst & Young Item Club.
The construction figures are quiteclearly unreliable given their suddenextreme volatility and lack of consis-tency with any other evidence fromthe sector. When considering the
underlying strength of the economywe are taking the construction dataout of our calculations, Goodwinadded.
The economy grew by 0.8 per cent inthe first three months of the year ifthe construction figures are discount-ed, Item said. Extremely weak domes-tic demand is being offset by anupturn in demand from overseas, theONS breakdown of figures showed.
Private consumption contracted by0.6 per cent quarter-on-quarter, after a0.3 per cent decline in the fourth quar-ter of 2010, noted Eoin OCallaghan ofBNP Paribas. Yet exports rose by 3.7per cent on the last quarter, nearlydouble consensus expectations.Imports, meanwhile, dropped by overtwo per cent quarter-on-quarter, headded.
THE UK service sector is set for a two-speed recovery, with business services
bouncing back but customer servicesstill being squeezed.
Business and professional serviceshave reported rising activity for the
last six months, according to a
Confederation of British Industry (CBI)survey released today.
Customer services, however, havebeen hit by five consecutive quarters ofdecline, the survey showed.
When times are tough, consumerscut back their discretionary spendingon holidays, leisure pursuits and
meals out, and we are seeing that ris-
ing prices and squeezed incomes areholding back household spending,said CBI economist Ian McCafferty.
A positive balance of 10 per cent ofrespondents in business servicesexpect their companies to expand inthe coming year. The value of businessin this sub-sector grew at its fastest
since November 2007, the survey said.
Business sector remains on track yetconsumer services face tight squeeze
GERMAN consumer confidenceslipped for the third consecutivemonth in May, it emerged yesterday.
The highly-regarded GfK indicatorfell to 5.5 from 5.7 in April.
Sentiment has been hit by the
ongoing sovereign debt crisis in
Greece, as well as high energy prices.This shows that commodity-driv-
en inflation is probably the mainthreat for the German economy, saidINGs Carsten Brzeski.
Private consumption has not yettaken over the baton from exportsand investments as a growth driver,
he added.
German morale slides assovereign debt fears weigh
UK ECONOMY
GERMAN ECONOMY
JAPANS exports fell 12.5 per cent inApril from a year earlier, pushing thecountry into its first trade deficit inthree months, after the earthquakein March disrupted supply chains andhurt output.
The countrys trade balance fellinto a deficit of 463.7bn yen (3.5bn).
Imports rose 8.9 per cent in the
year to April, though less than themedian forecast for a 12.3 per cent
increase, due to higher commoditycosts and domestic supply shortagescaused by the disaster.
Analysts expect Japan to log a tradedeficit in the second-quarter, as theeffects of the earthquake and tsuna-mi linger, but see it returning to asurplus in the fourth-quarter as sup-ply constraints ease.
Japans exports plummetafter its natural disasters
ASIA ECONOMY
MORTGAGE approvals dropped bysix per cent in April, according to fig-
ures from Britains leading highstreet banks. Approvals fell to 29,355, down
from 31,205 in March, while grossmortgage lending was five per centlower than the same time last year,the British Banking Association(BBA) said. The average price of hous-es purchased with mortgages came
in at 145,100, a drop of 1.1 per centfrom a year earlier.
And demand for unsecured bor-rowing remains at a weak level, thereport said.
Individuals and businesses con-tinue to save more, pay off debt andborrow less as uncertainty about theeconomy has entrenched a wait andsee attitude, explained the BBAsstatistician David Dooks.
Repayments from individuals out- weighed new loans by 181m, thefigures revealed.
Lending to non-financial compa-nies dropped by a further 500m in
April, following a far sharper fall of3.2bn in March.
Lending to business has declined
by an average of 1.3bn over the pastsix months.The further, albeit small, drop in
net lending does little to dilute con-cerns that tight credit conditionsremain a significant handicap toeconomic activity, particularly forsmaller companies, commentedHoward Archer of IHS Global Insight.
Banks mortgage lending fallsBY JULIAN HARRIS
UK ECONOMY
ONS confirms0.5pc growthBY JULIAN HARRIS
UK ECONOMY
Hospitality packages from 245 per person
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300 YEARS OF THE WORLDSMOST FAMOUS RACECOURSE
Economics 23CITYA.M. 26 MAY 2011
SENTANCES FINAL CALL AS A BANK OFFICIAL
ANDREW Sentance made his final hawkish call as a member of the Bank of England yes-terday, urging it to rescue its credibility by normalising interest rates. Globalisation isincreasingly causing global price pressures, which national authorities will have torespond to, he said. Sentance expects a prolonged period of upward pressure on energyand commodity prices, he told a meeting in Jersey. Picture: Micha Theiner/City A.M.
NEWS | IN BRIEF
Durable orders tumble in the USNew orders for long-lasting US factorygoods fell more than expected in April torecord their largest decline in sixmonths, as aircraft and motor vehicleorders tumbled, a government reportshowed yesterday. Durable goods ordersdropped 3.6 per cent after an upwardly
revised 4.4 per cent rise in March.
US mortgage applications rise...Mortgage applications in America roseby 1.1 per cent in the week ending 20May, in another positive sign for ailingUS housing market. On Tuesday newhome sales were reported at increasingby 7.3 per cent in April.
...yet American house prices fallPrices of US homes plummeted in thefirst quarter of the year, the FederalHousing Finance Agency said yesterday.Prices were down 2.5 per cent com-pared to the final three months of 2010,and 5.5 per cent lower than the sametime last year. Yet the fall in March (0.3per cent) was less severe than expected,providing some relief to analysts. Theindex had recorded monthly declines ofgreater than one per cent for previousmonths, noted Michael Gapen, a USeconomist with Barclays Capital.
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GE CAPITAL is selling its A$5bn(3.2bn) Australia and New Zealandmortgages books to Pepper Homeloansas concerns rise over a softening of theAustralian housing market and the ris-ing cost of funds.
GE Capital, which shed part of its Australian home loans portfolio in2008 when global conglomerates wererestructuring their lending arms, saidyesterday it will sell the rest of the port-folio for a small discount to non-bankAustralian lender Pepper Homeloans.
GE Capital Australias chief executiveSkander Malcolm declined to specifythe discount but said GE Capital wouldnow focus on its other eight lines ofbusiness that span consumer and cor-porate finance.
We can now focus on those busi-nesses where we believe we have sus-tainable competitive advantage, he
said.GE is streamlining its GE Capital
finance unit to focus on funding pur-chases of heavy equipment, lendmoney to mid-sized companies and toinvest in commercial real estate.
Analysts said the equity value of thedeal could be around $100m assumingthe risk weighted assets were 25 percent of the portfolio and the equity onthem was about a tenth of that.
Pepper, which was formerly part ofOakwood Global Finance that countsMerrill Lynch as its key shareholder,will fund the deal via a consortium ofbanks and mezzanine debt.
It said it would also look at raisingfunds by securitising the mortgages inthe not too distant future.
GE Capitals move comes amid someconcerns over the Australian housingmarket, which has seen a strong run
up in prices, but has recently seensome softening after hikes in interestrates.
GE Capital in3bn sell-offBYHARRY BANKS
FINANCIAL SERVICES
WATSON Pharmaceuticals yesterdayacquired privately held genericdrug developer SpecifarPharmaceuticals for $562m(345.2m) in cash, expanding itsglobal footprint.
Watson said yesterday it expectsthe deal to immediately add to 2011
non-GAAP earnings.Specifar is a third-party product
developer, with some 400 marketingauthorisations licensed to third par-ties for sale in 36 countries, predom-inantly in Europe. It has eightproducts currently filed in the EUand additional products in develop-ment.
Specifars pipeline includes ageneric tablet version of Nexium(esomeprazole), which could be avail-
able in certain European markets asearly as the fourth-quarter of 2011.
Watson Pharmaceuticals extendsglobal reach with Specifar deal
ENERGY
FRENCH oil company Total hasextended its offer to buy up to 60per cent of US solar companySunPower by two weeks after con-sultations with European regula-tors led to a delay.
The offer will now expire on 14June, Total said yesterday, adding ithas carried out a number of consul-tations with the European
Commission before filing docu-ments related to the takeover onTuesday.
Such a pre-filing consultationtends to make the decision-makingprocess at the EuropeanCommission faster and easier andallow for an efficient process withinthe time allocated, a spokesmansaid.
Total said in April it was offering$1.37bn (616m) for a majority stakein SunPower, marking one of the
bigges