TENS of thousands of firms are set

to go bust when interest rates rise,

taking hundreds of thousands of
jobs down with them, business
troubleshooting group the
Institute for Turnaround (IfT) has
warned.
There are almost 150,000 zombie
firms in the UK businesses that
are fundamentally broken, and only
still alive because ultra-low interest
rates are holding down their debt
repayments.
But while some firms
may be able to
restructure their
debts and busi-
ness processes to
thrive in the long
run, up to 50,000
are deemed
beyond hope
by the IfT, as
they can barely
pay interest on
their debts, let
alone repay the capital.
Firms of all sizes from two
or three-person operations to
big businesses employing hun-
dreds of staff are zombies,
meaning hundreds of thou-
sands of jobs are going to be
lost when rates rise at some
point in the coming years.
Between 25 and 30 per cent
of these firms are beyond
hope, and will fail when inter-
est rates rise, IfT chief execu-
tive Christine Elliott told
City A.M.
A lot of over-
supply built
up in indus-
tries like
shipping and retail, and low interest rates
have just postponed the inevitable the reces-
sion still has to work its way through these
sectors.
However, Elliott did provide a glimmer hope
to struggling companies. If they restructure
now, perhaps 10 per cent of these zombie
firms could turn out to be stars, she said.
She also warned that by stopping weak
firms from failing, low rates also stop good
firms expanding to help the recovery.
THERE ARE 146,000 ZOMBIE FIRMS
SECTOR ONLY PAYING INTEREST ON DEBTS
CONSTRUCTION
RETAIL
BUSINESS SERVICES
MANUFACTURING
TOTAL
16%
2%
3%
8%
8% or 146,000 rms
See Page XX
www.cityam.com
FREE
BY MICHAEL BOW
Hoare Govett owner Jefferies sold in $3.6bn share deal
BOTTOM LINE: Page 11

INVESTMENT bank Jefferies,
owner of UK corporate
broker Hoare Govett,
yesterday said it will merge
with one of its largest
shareholders, US holding
group Leucadia National
Corporation, in a deal valued
at $3.6bn (2.9bn).
The bank, which has its
European headquarters in
the City, has agreed to
approve an all share deal
giving shareholders 0.81
Leucadia shares per Jefferies
share, in a move designed to
shore it up against future
industry headwinds.
As part of the tie-up,
Jefferies chief executive Rich
Handler will take the reins
as chief executive at
Leucadia, with its current
president Joseph Steinberg
becoming chairman of the
combined group when the
deal closes early next year.
Leucadia, dubbed a mini
Berkshire Hathaway for the
diverse range of subsidiaries
under its umbrella, adds
Jefferies to a portfolio that
includes US beef processor
National Beef, lumber firm
Idaho Timber and a
portfolio of luxury
wineries on
Americas west
coast.
The firm already
owned 28.6 per cent
of Jefferies before
yesterdays
announcement,
and has a
close
working relationship with
the management at the firm.
Ive thought about this
for my entire career,
Handler said yesterday.
Over the course of five
years weve thought about it,
but the stars havent really
aligned until today.
Jefferies Group, which
bought historic City broking
institution Hoare Govett
from Royal Bank of Scotland
in February, has its
European subsidiary,
Jefferies International,
headquartered in
London.
A source at Jefferies
London office yesterday
said it would be business as
usual for the firms
European operations.
Jefferies will maintain its
own credit rating separate
from Leucadia and will also
continue to file separate
regulatory filings.
The deal, which was
advised on by some of Wall
Streets biggest banks
including UBS and
Rothschild for Leucadia and
JP Morgan and Citigroup for
Jefferies, will leave Jefferies
shareholders owning 35.3
per cent of Leucadias stock
after the deal closes.
Shares in Jefferies, listed
on the New York Stock
Exchange, shot up 14 per
cent yesterday as markets
cheered the news.
BUSINESS WITH PERSONALITY
ISSUE 1,759 TUESDAY 13 NOVEMBER 2012
Certified Distribution
01/10/12 til 28/10/12 is 129,297
FTSE 100 M5,767.27 -2.41 DOW M12,815.16 -0.23 NASDAQM2,904.26 -0.61 /$ 1.59 unc / 1.25 unc /$ 1.27 unc
Rich Handler said the
deal had been in the
works for five years
SOURCE:R3
MORE
HEADS
ROLL AT
THE BBC
AS AUDIT OFFICE QUERIES
ENTWISTLES PAYOFF
See Page 3 & The Forum, Page 22
EXCLUSIVE
BY TIM WALLACE
50,000ZOMBIE
FIRMS TO FAIL
IF RATES RISE
The Bank of
Englands
low interest
rates are
keeping
zombies
alive
allister.heath@cityam.com
Follow me on Twitter: @allisterheath
THE GOVERNMENT last night faced
down a Labour bid to further delay
the planned 3p rise in fuel duty,
disappointing motorists but fending
off a backbench rebellion.
The motion, which would have
pushed the rise back from January to
at least April, was defeated by 282
votes to 234, resulting in a healthy
margin of 48, and came following a
groundswell of public support for a
delay in the rise.
Labour had called for yet another
delay in the rise, saying it would be
wrong and harm growth chances.
But it was quashed by Tory
backbenchers decision to vote
against the motion against earlier
suggestions they might ally with
Labour instead hoping the
chancellor will push back the rise in
next months Autumn Statement.
The Treasury defended the
governments position by saying it
had already kept fuel price rises 10p
per litre below the plans set out by
the previous government in the fuel
duty escalator.
This was abolished in 2011 by
George Osborne, who set out plans
for an alternate system, which would
have led to a 3.02p rise in fuel duty
in January this year, but Osborne
postponed the rise in last years
Autumn Statement, as well as
cancelling a further 1.92p hike that
had been planned for August.
Tories stop bid
to delay fuel
duty rise again
BY BEN SOUTHWOOD
STARBUCKS, Amazon and Google
were yesterday criticised by MPs fol-
lowing accusations that the multina-
tional firms are moving profits
abroad to minimise their UK corpo-
ration tax bill.
MPs were critical of deals that
appear to show firms diverting
apparently British transactions
through overseas divisions in low-tax
countries. Members of the Public
Accounts Committee accused the
firms respectively of being frustrat-
ing, deceptive and immoral.
There is no suggestion that the firms
involved are breaking the law with
their arrangements.
Troy Alstead, Starbucks finance
chief, admitted that the firm has not
paid any UK corporation tax since
2008. But he said this was because of
long-term profitability challenges
that meant the UK business had
always struggled to produce a sur-
plus despite other executives
telling analysts it makes money.
I assure you we are not making
money. Its very unfortunate, he
added. This led Labour MP Austin
Mitchell to declare: Youre either
running the business very badly or
theres some fiddle going on.
Alstead revealed that Starbucks has
a tax arrangement with the Dutch
authorities that covers the 4.7 per
Nissan hits back at tax critics
Nissan yesterday became the latest
company to face scrutiny over its tax
affairs after it was revealed that Britains
biggest carmaker avoided millions in
corporation tax every year by selling
vehicles through a Swiss company that
manages its European operation. The
company hit back at the criticism, saying
it was a massive contributor to the
British economy and its investment in
Sunderland had generated financial
benefit to the exchequer worth far more
than its savings in corporation tax.
Germany investigates UBS clients
State prosecutors are searching the
properties of various UBS clients across
Germany as officials intensify their efforts
to crack down on alleged tax evasion
ahead of a key vote on a tax deal with
Switzerland.
Bloomberg lets others into network
Bloomberg is launching an iTunes-style
portal for applications to allow clients and
outside developers to incorporate their
own software into the groups financial
data terminals and sell it to Bloombergs
roughly 315,000 subscribers.
MegaFon market debut to go ahead
The stock-market debut of the telecoms
company MegaFon is set to go ahead
despite concerns raised about the editing
of the Wikipedia entry of the billionaire
oligarch behind the deal.
Moonpig delivers gloomy tidings
PhotoBox has been forced into the red in its
first year after buying Moonpig. PhotoBox
was forced to write down the value of
Moonpig, after the government closed down
a VAT loophole in the 2011 Budget.
Enterprise Zone could create jobs
Thousands of jobs could be created at the
former Pfizer site in Kent, as new owner
Discovery Park said it would take advantage
of the sites Enterprise Zone status and tax
reliefs to attract global brands to the site.
Govt defends small Post Offices plan
The Government has defended the
introduction of a new type of small Post
Office branch after MPs argued that the
move could lead to a reduction in services for
consumers.
Kodak reaches deal with bondholders
Eastman Kodak reached a deal with
bondholders for $793m (500m) in loans
that could help take the onetime
photography icon out of bankruptcy
proceedings, the company said.
Trading glitch hits NYSE
NYSE Euronext will not resume trading in
more than 200 securities affected by a
trading glitch reported shortly after the
opening bell, and it will not hold normal
closing auctions in these issues.
Starbucks finance chief Troy Alstead said the firm paid no UK corporation tax from 2008
2
NEWS
BY JAMES WATERSON
To contact the newsdesk email news@cityam.com
S
OMETHING extraordinary is
happening to the global
economy, with huge
implications for geopolitics and
international flows of trade and
capital. The United States has
engineered an energy renaissance:
while it currently imports 20 per
cent of its total energy consumption,
much of it from the Middle East,
America will become roughly self-
sufficient in net terms by 2035, as a
result of rocketing output of oil,
shale gas and bioenergy, and
improved efficiency by consumers.
As if this were not astonishing by
itself, falling US oil imports mean
that North America is set to become
a net oil exporter by around 2030, in
just 18 years time. The United States
is even projected to become the
largest global oil producer within
the next few years, exceeding Saudi
EDITORS
LETTER
ALLISTER HEATH
Americas energy renaissance will transform China as well
TUESDAY 13 NOVEMBER 2012
Arabia for a period that is expected
to last until the mid-2020s. It wasnt
what you were taught at school, to
be sure. Few stories are more impor-
tant than this, especially in the con-
text of the UKs own confused,
erratic and short-sighted energy poli-
cy.
Somewhat less surprisingly, but
equally importantly, the shift in eco-
nomic activity from West to East
means that non-OECD countries will
account for 65 per cent of all energy
consumption by 2035, up from 55
per cent in 2010. China will be the
largest global energy user, with its
demand rising 60 per cent by 2035,
followed by India (where demand is
set to explode by over 100 per cent)
and the Middle East. OECD energy
demand in 2035 is expected to end
up just three per cent higher than in
2010.
All of these predictions and figures
come from the World Energy
Outlook 2012, the bible in such mat-
ters, released yesterday. It is testa-
ment to the paucity of our debate
surrounding energy in the UK that
very little of this is common knowl-
edge. Increasingly, it will be China
and Asian nations, not America,
which will depend on Middle
Eastern resources; it is they who will
begin to have an incentive to ensure
stability in that region. This suggests
by an editor-in-chief in charge of
supervising all content, news as well
as other forms of programming. The
former needs to be a formidable
business executive; the latter a dis-
tinguished, experienced and inde-
pendent-minded journalist.
ABU QATADA REPRIEVED AGAIN
It is a disgrace that radical cleric Abu
Qatada has been granted bail. This
saga has been ongoing for years and
never seems to end, with lawyers the
only winners. Our democratically
elected government is not in control
of criminal justice. We need a new
bill of rights to protect human rights
while allowing sensible law enforce-
ment. It is shocking that the coali-
tion has done nothing about this.
a more assertive China international-
ly over the next decade, and a possi-
ble US retrenchment. This shift is
crucially important. It is time the
City and the UK political establish-
ment woke up to it.
BBC IN CRISIS
An outsider must be hired to run the
BBC. All of the candidates being
lined up are long-standing execu-
tives who have spent years climbing
the greasy, bureaucratic pole; but to
appoint internally in the current cir-
cumstances would be wrong.
Outsiders with fresh ideas who are
not bogged down by the troubled
organisations ways of doing things
are often the best solution in times
of corporate crisis. The role of direc-
tor general should be split, replaced
by a CEO tasked with running the
corporation as a business, as well as
cent royalty on profits paid by UK
stores to its main European business.
He also said that all of his firms coffee
is bought by a team of 30 workers in
Switzerland, where they benefit from
a favourable tax regime. The traders
charge a 20 per cent mark-up before
selling it to UK stores.
Andrew Cecil, public policy director
at Amazon, defended his companys
decision to send all its European trans-
actions through one Luxembourg busi-
ness, which meant the firm paid no
UK corporation tax last year.
But he could not answer questions
on the value of UK sales or who owned
the Luxembourg business.
Google vice president Matt Brittin
told MPs his firm pay the tax were
required to pay in every country we
operate in, including the UK. He
explained almost all UK purchasers of
its products dealt directly with its sales
force in Ireland which has a low cor-
poration tax rate while all the tech-
nology which creates the economic
value comes out of California.
Brittin said that sending worldwide
profits through a Bermuda subsidiary
helps the firm manage costs efficient-
ly in order to satisfy our shareholders.
THE FORUM: Page 23

The new jobs website for London professionals
CITYAMCAREERS.com
WHAT THE OTHER PAPERS SAY THIS MORNING
PARENTS will be able to share out
maternity leave, Deputy Prime
Minister Nick Clegg confirmed
yesterday.
As part of a general package of
reforms designed to make hours
more flexible, mothers will be able
to share out their maternity leave
after the first two weeks with a
partner.
But Nick Pearce at the Institute of
Public Policy Research slammed the
plans, and suggested they would be
unlikely to help spread the burden
of childcare more evenly across
both parents. Although this leave
may end up being called flexible
parental leave, it will in fact be
nothing of the sort, Pearce said, it
will be transferred maternity leave.
Fathers will have no entitlement
to leave unless the mother has
accrued maternity leave rights with
an employer herself.
But businesses gave a cautious
welcome to the broader thrust of
the flexible work proposals, judged
not just a question of equality, but
also of economic necessity, by the
Institute of Directors.
However, employers could be left
with absent staff at short notice if
the plans are not put in place
properly, the IoD added, while the
British Chambers of Commerce said
it could damage employer-staff
relations.
Parents will be
able to share
mothers leave
BY BEN SOUTHWOOD AND
MARION DAKERS
Top executives quizzed
by MPs on tax avoidance
THE FINANCIAL Services Authority
and energy watchdog Ofgem are
investigating claims that the
wholesale natural gas market has
been manipulated.
Energy secretary Ed Davey said
he is extremely concerned about
these allegations and has been
working closely with the
regulators since the gas contract
trades were flagged to his
department last week.
A whistleblower from price
reporting service ICIS Heren has
raised concerns about quotes
submitted in Europes biggest gas
market on 28 September that
were below the ordinary market
trend, which might have forced
the price lower and given scope
for a trader or traders to profit
from the drop.
Ofgem confirmed yesterday it
had been handed information on
such trades, and will consider
carefully any evidence of market
abuse that is brought to our
attention as well as scope for
action under all our other
powers.
Several of the big six UK
energy suppliers issued
statements last night denying any
involvement in the trades.
Davey plans to make a
statement on the subject to the
House of Commons today.
FSA and Ofgem
probe natural
gas markets
BY MARION DAKERS
THE BBC faced anger over the size of
departed director-general George
Entwistles payoff yesterday, as cul-
ture secretary Maria Miller raised the
possibility of the National Audit
Office (NAO) investigating the
450,000 package.
The NAO is empowered to conduct
a value-for-money review, Miller told
the House of Commons yesterday. In
this day and age people expect all
public institutions to be open to the
widest possible scrutiny, she added.
It is of course for Mr Entwistle him-
self to decide whether it is appropri-
ate to keep those payments.
The NAO said it would question the
BBC Trust over the payoff, but did not
confirm it would be conducting a for-
mal review. An NAO spokesperson
denied that Miller had encouraged
the independent office to look into
the matter, saying it had only been
notified that she would raise the
issue shortly before Miller addressed
MPs.
In an earlier statement regarding
Entwistles leaving package, Miller
BBCs Entwistle
payoff blasted
as more depart
BY JAMES TITCOMB
said: This is a large amount of money,
and tough to justify considering the
circumstances of Mr Entwistles depar-
ture and his contractual arrange-
ments. The Trust will need to justify
this. Her comments echoed the views
of David Cameron, a Downing Street
spokesperson said.
The BBC was yesterday criticised by
its own internal probe into the
Newsnight episode on child abuse
that sparked Entwistles departure on
Saturday.
The inquiry found that basic jour-
nalistic checks were not completed
before the screening of the controver-
sial documentary, and found evidence
of unacceptable editorial failings.
Acting director-general Tim Davie
vowed yesterday to get a grip on the
corporation.
Helen Boaden, the BBCs director of
news, and her deputy Stephen
Mitchell temporarily left while an
internal review is conducted into why
current affairs programme Newsnight
did not screen an investigation into
child abuse allegations surrounding
former BBC presenter Jimmy Savile.
THE judge in the trial of alleged
UBS rogue trader Kweku Adoboli
told the jury yesterday not to let
their views about the banking
industry influence their
judgment, as the long running
trial enters its final stage.
Adoboli, 32, has been blamed for
a loss of $2.3bn (1.4bn) at the
Swiss bank in September 2011. He
denies two counts of fraud by
abuse of position and four of false
accounting.
You dont need me to tell you
that this case has been no
ordinary trial, Justice Brian Keith
Adoboli trial enters final stage
as judge warns against biases
BY CITY A.M. REPORTER told the jury as he began his
summing-up, the final leg of the
long-running trial before they
retire to consider their verdict.
Dont let what some of you may
think about banks and the people
who work for them influence you
unduly, Keith told the jury.
Theres been a lot of talk in
recent years about the bonus
culture, failing banks having to be
bailed out, he said, adding that
there were always two sides to
every argument. You should not
approach the case on the basis
that banks have only themselves to
blame, he added. The judge will
continue his summing-up today.
THE FORUMPage 22-23

TUESDAY 13 NOVEMBER 2012
3
NEWS
cityam.com
Former UBS trader Kweku Adoboli has been on trial at Southwark Crown Court
THE US will lead a sweeping transfor-
mation in oil and gas production
and will overtake Saudi Arabia and
Russia as the worlds top oil producer
before 2020, the International
Energy Agency (IEA) said yester-
day.
Its World Energy Outlook said
that the US, which currently
imports around 20 per cent of its
total energy needs, would buy in
less and less to eventually
become a net exporter of
natural gas by 2020, and
become almost self-suffi-
cient in energy terms by
2035.
The resurgence of oil
production in the US
in the last few years is
projected to contin-
ue, the report said, as
the rise in light oil
production in the US
has been nothing
short of spectacu-
lar.
The energy agency
forecasts the States oil
US to become
biggest global
producer of oil
BY CATHY ADAMS
production to grow to 11m barrels of
oil a day before 2010 before falling to
around 9m barrels a day by 2035 a
significant upward revision from
last year, it said.
Energy developments in the US are
profound and their effect will be felt
well beyond North America and
the energy sector, the IEA said in
the annual long-term report, giv-
ing one of the most optimistic
forecasts for US energy production
growth to date.
Meanwhile, the agency
predicted that global
energy demand will
increase as regional
dynamics change, and
will grow by more
than a third by 2035.
China, India and the
Middle East will
account for 60 per
cent of the growth,
and there will be a
pronounced shift
towards gas and
renewables, it said.
Lawyers pay slows as services
firms join banks in City slump
LAWYERS and accountants have
seen pay slip behind that of the rest
of the workforce through the
financial crisis, according to data
out yesterday from Randstad
Financial and Professional.
Pay in law rose by 8.1 per cent
while accountancy earnings
increased 7.5 per cent well below
the 11.4 per cent UK average and
illustrating that bankers are not
the only City workers who have
seen their pay readjusted relative to
BY TIM WALLACE
other sectors.
Associate legal professionals such
as paralegals and executive
assistants are among the hardest
hit, with pay falling 8.6 per cent in
the last six years. And the lowest
skilled accountants too have been
hit newly qualified chartered
accountants have seen incomes
stagnate, rising just 1.3 per cent
since 2006.
At an entry level, pay has
remained relatively static as firms
reduced their graduate intakes,
said Randstads Tara Ricks.
President Barack Obama
was re-elected last week
TUESDAY 13 NOVEMBER 2012
4
NEWS
cityam.com
King Abdullahs Saudi Arabia looks set to lose its crown as the top oil producer by 2020
THE US IS SET TO BECOME THE LARGEST OIL PRODUCER
CHINA
RUSSIA
EUROPE
2015
3.4mbarrels
2020
2.9m barrels
2035
2.1m barrels
SAUDI ARABIA
2015
10.9m barrels
2020
10.6m barrels
2035
12.3m barrels
2015
4.3mbarrels
2020
4.3mbarrels
2035
2.7m barrels
USA
2015
10m barrels
2020
11.1m barrels
2035
9.2m barrels
2015
2020
2035
10.5m barrels
10.1m barrels
9.2m barrels
* barrels per day produced by each region
PAY IN LAW AND ACCOUNTING
HAS DRAGGED BEHIND OTHER
INDUSTRIES SINCE 2006
Average UK up 11.4%
Lawyers and solicitors up 8.1%
Accountants up 7.5%
Tax experts up 9%
Paralegals and assistants down 8.6%
S
O
U
R
C
E
:

I
N
T
E
R
N
A
T
I
O
N
A
L

E
N
E
R
G
Y
A
G
E
N
C
Y
SIR JOHN Vickers yesterday acknowl-
edged his widely welcomed banking
reforms were too heavy handed, hurt-
ing banks unnecessarily in some
areas, including on capital levels.
And he praised the governments
tweaks to his proposals, despite initial
fears from the Labour opposition that
the coalition has watered down the
reforms excessively.
Sir John led the Independent
Commission on Banking (ICB) which
last year proposed a shake up of bank-
ing regulation, including the require-
ment for large banks to be partially
split, with a ring-fence drawn around
retail banking arms to separate them
from investment activities.
We concluded on balance that we
were not persuaded of the need for a
[minimum size] thresh-
old, he told the
P a r l i a me n t a r y
Commission on
Banking Stan-
dards yesterday.
In consulta-
tion a cost ben-
Vickers says
Bank reforms
were too tough
BY TIM WALLACE
efit analysis was done and found good
reasons for a minimum level, with the
government thinking of exempting
firms with up to 25bn of mandated
deposits. I suspect the government
position is right, though my instinct
says the limit is on the high side.
The ICB had also initially proposed
that banks must hold extra capital in
case they collapse, to reduce the bur-
den on the taxpayer.
But following lobbying from banks
including HSBC, the government
removed this requirement for banks
which have strong
resolution process-
es in place anoth-
er step Sir John
agreed with.
But he did
object to his
planned leverage
cap being weakened
from 25 times to 33
times, as he fears that
could leave banks over-
stretched in future.
Sir John Vickers agreed to
tone down his reforms
BANCO Popular shares rose yester-
day after Spains sixth biggest bank
secured a 2.5bn (2bn) capital
increase, averting the need to seek
state aid.
At a special meeting in Madrid on
Saturday, large shareholders backed
the plan, seen as a key test of
Spanish banks ability to tap mar-
kets.
Shares rose around five per cent
yesterday to trade around 1.20.
Spains Banco Popular sees its
shares rise after capital increase
BY DAVID HELLIER One banker said the early trading
set a nice tone for people in the
market to see.
The lead banks on the issue are
Deutsche, Bank of America Merrill
Lynch, JP Morgan, Santander and
UBS.
There was some consternation
late last week when it emerged that
Banco Popular had appointed STJ
Advisors to the deal.
STJ brought in a competitive
rights issue auction process which
the banks objected to.
5
NEWS
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Cameron heaps praise on Citys
contribution to the UK economy
DAVID Cameron cheered the
central role the City plays in the
UK economy, in a wide-ranging
speech to the Lord Mayors banquet
last night.
The Prime Minister highlighted
the huge contribution the City
makes through taxes, trade and
employment though he lamented
utterly terrible mistakes made
and promised to crack down on
law-breaking, boost transparency
and clear up the regulatory mess.
He warned those who think the
answer is just to trash the banks
BY BEN SOUTHWOOD
would end up trashing Britain,
pointing out that the sector
contributed one-eighth of the
exchequers tax revenues, even
during the recession.
I say recognise the enormous
strength and potential of our
financial sector; regulate it
properly and get behind it, he
added.
Cameron also defended his role
in securing defence contracts for
UK firms, made the case for free
trade and against economic
nationalism, and for green
enterprise. Winning abroad
actually begins at home, he told
the Guildhall.
And while explicitly disavowing
the 1970s industrial strategy
known as picking winners the
PM suggested the government was
willing to intervene to boost UK
business, in line with
recommendations in the Heseltine
Review.
The new Lord Mayor of the City
of London, Roger Gifford, also
hailed the role of the Square Mile
especially its most troubled sector,
banking as crucial to the
security, safety, and happiness of
the whole society of which we are
part, in his speech at the event.
TUESDAY 13 NOVEMBER 2012
6
NEWS
cityam.com
Prime Minister David Cameron highlighted the Citys huge tax contribution
Bank of England governor Mervyn King and new Lord Mayor Roger Gifford attended
ITALIAN prosecutors are seeking
trial for seven current and former
employees at rating agencies
Standard & Poors and Fitch over
downgrades of Italy, paving the way
for the first European court case
over sovereign rating cuts.
Prosecutors in the southern
town of Trani, launching a case
which bigger Italian courts have
refused to back, probed five
analysts from S&P and two from
Fitch for alleged market
manipulation and abuse of
privileged information.
S&P rejected all the claims made
by the prosecutors.
Italy accuses
S&P and Fitch
BY CITY A.M. REPORTER
EUROZONE leaders will grant
Greeces government the extra couple
of years it requested to reach its
deficit targets, a key document pro-
posed last night.
Yet ongoing disagreements over the
next tranche of Greek bailout cash
caused crunch meetings to spill into
the rest of this week.
Greeces parliament voted through
an austerity budget for 2013 last week,
yet finance ministers from its euro
area peers remain worried about
reducing debt to sustainable levels.
Disagreements over the best way to
achieve Greek debt sustainability have
caused cracks to emerge from within
the troika of bailout providers the
European Union, European Central
Bank (ECB) and International
Monetary Fund (IMF).
Eurogroup boss Jean-Claude Juncker
sounded upbeat yesterday, but admit-
ted early on that the meeting would
not produce any definitive deci-
sions, with leaders requiring further
Greeks may get
extra time to
hit deficit goals
BY JULIAN HARRIS talks throughout the week.
And German finance minister
Wolfgang Schaeuble sounded less pos-
itive. Id like to see if Greece has ful-
filled all its obligations and then hear
the troika report because it depends
on the Greek government having
found a solution with the troika, and I
havent read anything on that.
A draft copy of a memorandum of
understanding revealed a crucial con-
cession that may be granted to Greece.
The two-year extension of the adjust-
ment period will mitigate the impact
on the economy, while securing a sus-
tainable fiscal position, it read.
The ECB has agreed to broaden the
framework for allowing Greek banks
to tap emergency loans from Greeces
national central bank, German daily
Die Welt reported yesterday, citing
central bank sources.
The net increase in available liquidi-
ty funding for Greek banks would
allow them to buy more Greek sover-
eign bonds, helping Athens bridge a
funding gap, the paper said in a pre-
release of an article to run today.
Merkel showers Portugal
with praise for austerity
ANGELA Merkel yesterday sang her
praises for Portugals resilience in
tackling the debt crisis that
required a 78bn (62bn) bailout.
Speaking during a six-hour visit
to Lisbon, the German Chancellor
hailed the countrys commitment
to austerity and pledged solidarity.
Despite the praise, Merkel was
greeted by hundreds of protestors
who blamed cuts for worsening
economic hardship, or saw the loan
conditions as a violation of
Portugals national sovereignty.
Though hundreds took to the
street in protest against the
lending conditions, the protests
bore little resemblance to the
violence that met Merkel when she
visited Athens a month ago.
The programme is being
fulfilled by Portugal in an excellent
way, said Merkel at a press
conference with Portuguese head
Pedro Passos Coelho.
I sense a great sense of
determination here in Portugal to
overcome this difficult phase.
But Portugals apparent
consensus on austerity has broken
up. Yesterday business newspaper
Diario Economico said Merkel was
experimenting with Portugal like
an economic Frankenstein.
IN BRIEF
Lamprell picks new CFO
n Rig maker Lamprell yesterday
appointed Frank Nelson as interim chief
financial officer with immediate effect.
Nelson, who joins from housebuilder
Galliford Try, has over 25 years of
experience in construction and energy.
Last month, Lamprell axed three execs
after its fourth profit warning since the
spring, with chief exec Nigel McCue,
CFO Jon Cooper and chief operating
officer Chris Hand leaving.
Safeland uncovers more fraud
n Property developer Safeland
yesterday said it has unearthed more
fraudulent transactions at the firm after
first discovering cases of fraud last
month. The group told investors it has
been a victim of another 265,000 of
frauds in the year to 31 March.
Victoria struggles to break even
n Carpet firm Victoria said yesterday it
hoped to break even at best in the year
to April as the war-torn retailer attempts
to regroup following a six-month power
struggle between the directors. The
group said it has launched a detailed
review of the business and that trading in
Australia and the UK remained weak
and significantly behind budget.
Eurogroup chief Jean-Claude Juncker said talks would continue this week
TUESDAY 13 NOVEMBER 2012
9
NEWS
cityam.com
BY BEN SOUTHWOOD
LLOYDS of London insurer Catlin yes-
terday revealed that its New York
office remains closed following
Hurricane Sandy and it does not
know how much it will have to pay
out to those affected by the storm.
The firm said it would be some time
before the true cost of the damage is
assessed due to the sheer size of the
storm and the many different types
of claims it has created.
Existing catastrophe models are
unlikely to predict the quantum of
insured damage with a high degree of
certainty, the firm explained.
Although the hurricane took the
lives of around 200 people across the
Caribbean and the United States, the
cost to the insurance industry does
not appear to have hit the Lloyds mar-
ket on the same scale as last years
Japanese tsunami and New Zealand
earthquake.
Catlin yesterday announced an 11
per cent rise in gross premiums writ-
ten to $4.1bn (2.6bn) for the first
nine months of this year. Due to a
change in accounting procedures, the
increase on a like-for-like basis was
eight per cent.
Sandy casts a
shadow over
Catlin growth
BY JAMES WATERSON On this basis gross premiums writ-
ten in the US grew 12 per cent thanks
to rate increases and new business,
particularly in the energy, casualty
and reinsurance classes.
Business written in the UK passed
$2bn in the first nine months, up
from $1.86bn for the same period in
2011.
Mark Williamson, an analyst at Peel
Hunt, said the uncertainty surround-
ing the bill for North American storm
damage had caused him to lower the
stocks rating from buy to hold.
The prospects of earnings upgrades
now appear much diminished follow-
ing superstorm Sandy, and Catlin is
unlikely to return capital beyond its
ordinary dividend, he explained.
Reverend Carmel Jones had previously been honoured for his work
Catlin Group Ltd
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LOGISTICS firm Stobart Group will
today launch a 25m bond issue
targeting retail investors.
The business, famed for its
Eddie Stobart lorries, has
appointed Canaccord Genuity to
market the bonds, which have a
six year maturity and pay 5.5 per
cent. Chief financial officer for
Stobart Group Ben Whawell
yesterday said the issue could help
fund infrastructure projects to
boost its logistic capabilities.
Whawell added he hoped
recognition of the Stobarts brand
name would help boost take up.
Stobart in gear
for bond issue
BY MICHAEL BOW
REVEREND Carmel Jones was
yesterday banned from working in
finance after he spent years
directing funds from a credit union
into The Church Organisation,
rather than to the members who
were supposed to get the loans,
losing the union hundreds of
thousands of pounds.
Jones was a director of the
Pentecostal Credit Union based in
Balham, where he approved loans
totalling 1.2m to The Church
Organisation, largely for repairs
and property purchases.
The union is only allowed to
make loans to its members, not
Reverend banned from finance
for making illegal church loans
BY TIM WALLACE
outside groups, and it lost 670,000
when the Church Organisation
failed to repay the loans.
This is a disgraceful case of a
credit union putting the interests
of another organisation before
those of its members, said the
Financial Services Authoritys (FSA)
Tracey McDermott. Credit unions
are vital institutions for the
communities they serve, and the
members of The Pentecostal Credit
Union deserved better.
All of the directors have since
changed, and the union has
introduced new audit procedures
to monitor compliance. The union
was not fined as the FSA feared this
would hurt its members.
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WALKER Crips boosted pre-tax
profits to 7.7m between April and
September on the back of the 10m
sale of its asset management
business earlier this year, it said
yesterday.
The business, which offers
broking and wealth management
services, saw revenues fall 17 per
cent down to 8.8m for the six
months ending 30 September but
boosted profits from the proceeds of
the sale.
Chairman David Gelber said the
firm was well positioned to
benefit from better market activity.
Walker Crips
reaps sell-off
BY CITY A.M. REPORTER
THE UKS ailing housing sector has
begun to show signs of life,
according to two widely-regarded
reports released yesterday and this
morning.
Interest in residential properties
from potential buyers grew at its
fastest rate for nearly three years in
October, the Royal Institution of
Chartered Surveyors (RICS) revealed
this morning.
The number of agreed sales also
jumped at the quickest pace since
December 2009, RICSs latest
housing market survey said.
The report contained further
good news, with the supply of
homes coming onto the market
rising at its highest rate since April
2011, while prices were fairly stable.
A net balance of seven per cent of
surveyors reported lower prices,
RICS said.
Meanwhile the Council for
Mortgage Lenders (CML) yesterday
reported a 13 per cent hike in home
purchase loans in the third quarter
of the year.
Yet the lending market remains
choppy, the CML data showed, with
loans falling sharply in September
after a strong July and August. First
time buyer loans also fell, CML said.
Surveys reveal
housing sector
activity boost
BY JULIAN HARRIS
HOUSEBUILDERS Taylor Wimpey
and Bovis Homes yesterday said they
had continued to make steady
progress since the first half of the
year as their focus on margins paid
off.
In a third quarter update, Taylor
Wimpey said housing market condi-
tions remained stable and while
mortgage lending was still con-
strained, it had seen incremental
improvement since the first half as
a result of government schemes.
We welcome the governments
recent announcements recognising
the housebuilding industrys impor-
tance to the UK economy and hope to
see further improvements in mort-
gage lending over the coming
months as the Funding for Lending
scheme gains more traction, it said.
The FTSE 250 firm said it has taken
467 net reservations under the
scheme and its equivalent in
Scotland MI New Home.
Homebuilders
welcome rise
of green shoots
BY KASMIRA JEFFORD It said its order book of future com-
pletions stood at 1.1bn, up 100m
from the same time last year.
Meanwhile Bovis said it remained
on track to deliver a strong increase
in revenue in 2012 and expects to
meet its full-year guidance for the
number of homes sold.
The group said sales prices in the
year to 9 November rose to 190,000,
compared with 180,100 last year,
while prices in the housing market
remained broadly stable but
stronger in the south of England.
Taylor Wimpey PLC
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A GROUP of rebel shareholders
failed to oust one of Redrows
senior non-executive directors
yesterday over his handling of
founder and chairman Steve
Morgans failed attempt to take the
housebuilder private.
Alan Jackson saw a 24 per cent
vote against his re-election at the
firms annual meeting in Wales,
after investors voiced concerns
over his alleged failure to protect
the interests of smaller investors.
Morgan, who owns 40 per cent of
Rebel shareholders fail to oust
Redrow non-executive director
BY KASMIRA JEFFORD the firm, withdrew his bid ahead of
the Takeover Panel deadline last
month amid the protests led by
fund manager Fidelity, which owns
10 per cent stake.
One retail shareholder, Simon
Cussons of the soap dynasty, spoke
out yesterday against attempts to
scupper the bid, proposing a vote
of no confidence in the Takeover
Panel.
The meeting came as Redrow
said trading in the first 19 weeks of
the year was challenging but
stable, with house sales up 22 per
cent from the same time last year.
TUESDAY 13 NOVEMBER 2012
11
NEWS
cityam.com
Almost a quarter of Redrow investors voted against non-executive director Alan Jackson
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T
HERE were glimmers of
optimism from the
housebuilders yesterday. Bovis
Homes reported its average
selling price up from 180,100 in
2011 to 190,000 and its operating
margin expected to be 13 per cent,
up from 10 per cent in 2011. Redrow
and Taylor Wimpey also both
backed the picture of a sector facing
tough but not immediately
deteriorating conditions. Redrow
saw prices up 18 per cent, and 22 per
cent including London. Taylor
Wimpey saw margins up both year
on year and compared to the first
half of 2012.
Both Redrow and Taylor Wimpey
made a point of curtsying to the
governments assorted initiatives to
subsidise their embattled
businesses. NewBuy and FirstBuy
seem to be having an impact,
although funding for lendings
contribution will play out over the
coming months. Reforms to ease
planning laws have also helped.
The short-term benefits of state
favours aside, these improving
numbers seem to have been mainly
driven by the firms improving their
sales mix, focusing on areas of high
growth in the southeast and using
plots bought at low prices post-crisis.
Some are suggesting that mix of
government favours and canny
business decisions could see
housebuilders outperform the FTSE
All-Share in the fourth quarter. But
the real question is how sustainable
the trend is into 2013 and beyond,
with the economy likely to contract
again this quarter and few signs of
soaring growth on the horizon.
Mortgages remain a ticking
timebomb for the sector.
Repossessions are at their lowest
level for five years and access to
lending is improving, thanks to
record low interest rates and all that
government assistance. But it is a
temporary reprieve. When interest
rates correct upwards, repossessions
will rise and lending will shrink
again. Housebuilders might be in for
a good quarter, but it is hard to see
them as a good long-term bet.
FRIENDS UNITED
What is the opposite of a hostile
takeover? Perhaps the $2.76bn
(1.74bn) merger of Jefferies and
Leucadia, announced yesterday in
the chummiest of terms. The
outgoing chief executive of Leucadia
Ian Cumming called the head of
Jefferies simply Rich. Richard
Handler, who will run the combined
group, wasnt to be outdone, calling
Leucadias president, soon to be
chairman of the board, Joe.
It is easy to see why Jefferies
should be relaxed about the deal. It
not only gets to keep its man at the
head of the group, but can also
continue to operate in its current
form, its autonomy marked by a
separate credit rating and SEC
reporting company, while also
enjoying the necessary funding for
the bank to continue to grow.
There must be a sting in the tail
somewhere, and it may lie in that
abiding autonomy, which leaves
open the option of Jefferies being
spun out again sooner rather than
later. Current shareholders of the
investment bank will end up with
their man at the top but only just
over a third of Leucadias shares. If
things turn unfriendly, Leucadias
old owners will still be powerful.
BOTTOM
LINE
MARC SIDWELL
Bright signs can also be an indication of danger ahead
BRITAIN will have wider access to
high-speed 4G mobile services from
late spring next year, the communi-
cations regulator confirmed yester-
day, as it published final terms for an
auction of airwaves to be held in
January.
The auction of 4G-approved spec-
trum, some of which was previously
used for analogue TV signals, will
raise at least 1.3bn for the public
purse, Ofcom announced yesterday,
as it set reserve prices for the lots of
spectrum to be sold. Estimates put
the true amount the auction will
bring in at up to 4bn, although this
still pales in comparison to the
22.5bn raised in 2000s 3G bidding.
The likes of O2 and Vodafone are
looking to launch 4G networks as
soon as possible, after Orange and T-
Mobile parent EE stole a march on
rivals by gaining approval to have
some of its current mobile spectrum
reassigned earlier this year.
The 4G data networks, which will
Ofcom sets out
the rules for 4G
airwaves sale
BY JAMES TITCOMB
only work on certain handsets, offer
speeds between five and seven times
faster than current 3G networks,
Ofcom says.
The countrys four operators O2,
Vodafone, EE and Three will in
December lodge applications to be
approved as suitable candidates to
operate the 4G spectrum before it is
sold off in chunks in January. Ofcom
has introduced measures to make
sure all four providers grab a slice of
the new airwaves.
Although EE already runs a 4G net-
work on its existing spectrum, it will
still be bidding in the auction so that
it can bolster its current service.
The date that networks will be able
to operate 4G services some time in
May or June was recently brought
forward by six months after govern-
ment-brokered peace talks between
the companies.
The entire industry is now focused
on the auction itself, with a shared
goal of delivering new and improved
mobile services for consumers,
Ofcom head Ed Richards said.
Aveva looks to new software to
drive growth as sales improve
SOFTWARE firm Aveva said
yesterday it expects healthy growth
in the coming years, driven by its
recently-launched design software
Everything3D (E3D).
Feedback from existing and
prospective customers on this
ground-breaking technology has
been universally positive, Aveva
said, as it posted a 15 per cent rise
in revenue in the six months to
October.
The firm, whose software is used
to design oil and gas facilities,
BY JAMES TITCOMB
nuclear power plants, and ships,
posted profits up eight per cent
year-on-year to 25.8m, on turnover
of 97.6m in the period.
We are convinced of the strong
growth opportunity E3D offers,
Aveva said. The company has
outperformed the rest of the IT
sector this year, even as budgets
have been hit in Europe. The
company saw revenues rise 21 per
cent in Asia, much of which was
down to Chinese growth.
These results highlight the
breadth, quality and scale of our
global business today, with
multiple growth drivers across
geographies and industries, said
chief executive Richard Longdon.
We see Aveva as a core sector
holding due to its strong
sustainable growth outlook, said
Julian Yates, an analyst at Investec,
reiterating a buy rating and
saying that the results displayed
positive momentum despite delays
to its projects in Brazil. Aveva
shares have risen to an all-time
high in recent weeks.
The company also hiked its
dividend by 13 per cent to 4.5p per
share.
Ofcom head Ed Richards said the operators now have a shared goal of 4G access
TUESDAY 13 NOVEMBER 2012
12
NEWS
cityam.com
TIMELINE FOR UK ROLLOUT OF 4G SERVICES
21 August 2012
Ofcom gives EE permission to reassign its
current spectrum for 4G use
30 October
EE switches on UKs rst 4G network,
months ahead of rivals
12 November
Ofcom announces nal proposals for
auction of 4G spectrum
11 December
Prospective bidders apply to be candi-
dates to buy spectrum and place deposits.
These are likely to be the UKs four mobile
networks, although others could enter.
Applicants are then reviewed by Ofcom to
decide if they are t and proper
January 2013
Auction begins, although Ofcom has
warned this could take weeks to
complete. The bids are placed over secure
internet connections using specially-
developed software
February/March
Bidders are informed what slices of the
airwaves they have won and how much
they will cost. Operators then pay licence
fees for spectrum and can plan for rolling
out their 4G networks
May/June
Mobile operators are expected to roll out
4G networks after testing earlier than
originally planned but months after EE
launched its service
VODAFONE will finally get its divi-
dend payout from Verizon
Wireless, after its US partner said
last night that its board has agreed
to dole out a bigger-than-expected
$8.5bn (5.4bn).
The announcement follows
months of investor speculation as
to whether Verizon Wireless,
which is controlled by Verizon
Communications, would choose to
pay a dividend this year.
In the past the dividend has been
a bone of contention for Vodafone
shareholders, anxious to get a
return on their ownership in the
top US wireless service.
The standoff had become an
increasing source of tension, with
Vodafone shareholders calling for
further payouts at Julys annual
meeting and chairman Gerard
Kleisterlee admitting that the rela-
tionship sometimes meant diffi-
cult discussions between the firms.
Verizon Wireless, which is 55 per
Vodafone gets
dividend from
Verizon venture
BY HARRY BANKS
cent owned by Verizon and 45 per
cent owned by Vodafone, said the
distributions would be paid in one
or more tranches, with each
tranche paid in proportion to the
owner' partnership interests.
The payout compared with a
$10bn dividend announced by the
company in July 2011. The divi-
dends are due to be paid on or
before 31 December, Verizon
Wireless said.
Verizon had suspended the divi-
dend from 2005 until 2011 while it
focused on paying down debt at
Verizon Wireless.
Last month, Verizon Wireless
posted strong third quarter results,
with earnings up 17 per cent, rais-
ing hopes that a bumper dividend
was around the corner.
Verizon Communications chief
Lowell McAdam had been taciturn
about the prospect of a payout,
however.
FTSE 100-listed Vodafone shares
closed 0.6 per cent lower at 166.6p
yesterday.
Research in Motion to unveil
latest BlackBerry in January
BLACKBERRY maker Research in
Motion (RIM) will unveil the next
generation of its smartphones in
January, the troubled Canadian
company announced yesterday.
The BlackBerry 10 (BB10)
software, which has been
repeatedly delayed by technical
problems, will be a radical overhaul
of the operating system used on its
phones.
RIM is pinning its hopes on the
success of the software to revive
BY JAMES TITCOMB sales, which have slipped in recent
years due to competition from
Apples iPhone and phones running
Googles Android operating system.
Microsoft has also made a renewed
push into smartphones with the
release of its Windows Phone 8
Software, in tandem with Nokia.
RIM is looking to find a unique
position in the market by continuing
to offer phones with QWERTY
keyboards, and with new features
such as app multitasking.
Our team has been working
tirelessly to bring our customers
innovative features, chief executive
Thorstein Heins said.
Although the company did not
reveal release dates or pricing of
BB10 handsets, it said a showcase
event will be held on 30 January.
Shares in RIM, which lost a fifth of
their value when the company
delayed the release of BB10 earlier
this year, opened up 4.5 per cent
yesterday. The software had
originally been scheduled for release
in time for the Christmas shopping
season, but was delayed after
teething problems.
TUESDAY 13 NOVEMBER 2012
13
NEWS
cityam.com


INDEPENDENT film studio
Entertainment One has ploughed
more money into movie
production and promotion ahead
of the release of its latest lucrative
Twilight movie and its acquisition
of Alliance Films.
The investments pushed the
Canadian companys profits down
to just 1m in the first half of the
financial year, it said yesterday.
This was down from 9.8m in the
same period last year, even as
Entertainment Ones revenues
rose eight per cent to 220.5m.
Id expect some pretty chunky
numbers in the next half, chief
executive Darren Throop told City
A.M.. He called the last six months
Entertainment One investment
hits profit in breakthrough year
BY JAMES TITCOMB
a breakthrough period, in which
the firm agreed a C$225m (142m)
deal for movie distributor Alliance
Films and rolled out licensing and
merchandising deals for the wildly
popular Peppa Pig childrens
cartoon in the US.
The final chapter in the Twilight
movie saga, Breaking Dawn Part
Two, is expected to be a huge
success when it screens later this
month, but Throop said an end to
the series would not harm the
studio. We are not going to see
any downward revenue pressure,
he said, pointing to the Alliance
Films acquisition as a driver of
growth.
Entertainment One expects the
deal to be approved by Canadian
competition authorities shortly,
and to be completed in early 2013.
TECH CITY BECOMES LONDONS GROWTH HUB
BUSINESSES in East Londons Silicon Roundabout area are set to be the key drivers of
growth in London over the coming years, according to research released yesterday by
the Centre for Economics and Business Research. The research claims that technology
and media companies in the East End are growing twice as fast as those in the City.
HEATHROW Airport yesterday reported
a rare fall in traffic for October as
Hurricane Sandy wrought havoc with
its schedule.
But there was a ray of sunshine for
Britains biggest airport, as a survey
suggested that MPs would prefer to see
expansion at Heathrow than a new
hub in the Thames Estuary.
Forty-six per cent of politicians sur-
veyed by Ipsos Mori either strongly sup-
ported or tended to support an
expansion of Heathrow, including a
third runway. Thirty-four per cent
opposed such a move.
Conservative and Labour MPs were
equally supportive of a bigger
Heathrow, though the Liberal
Democrats surveyed were less enthusi-
astic.
But the Thames Estuary option,
backed by London Mayor Boris
Johnson, garnered just 16 per cent sup-
port across all parties. Nearly six in 10
MPs either strongly opposed or tended
to oppose a major new airport to the
Heathrow gains
support of MPs
as traffic slides
BY MARION DAKERS
east of London.
The coalition has asked Sir Howard
Davies to assess the options for improv-
ing Britains air capacity, with an inter-
im report due next year.
In October, Heathrow passenger traf-
fic fell 0.1 per cent on a year ago to 6m,
which the airport said was due to storm-
related disruption and the late falling of
UK schools half-term break.
Stripping out these events, Heathrow
thinks its traffic for the month would
have been up 1.7 per cent year on year.
The number of planes taking off and
landing at the west London hub fell 3.2
per cent to 39,638.
Stansted continued to suffer falls in
passenger numbers. Traffic at the air-
port, which BAA is selling after a com-
petition ruling, fell 3.1 per cent to 1.59m
passengers in October, while 3.5 per
cent fewer aircraft passed through.
For the airports formerly grouped
under the BAA name, including
Glasgow, Aberdeen and Southampton,
total traffic was flat on a year ago at
8.75m passengers. Gains in the Scottish
airports offset the slide in London.
14
NEWS
cityam.com
IN BRIEF
Costain wins Welsh contract
n Costain has won a four-year
technology contract with the Welsh
government worth around 15m, it said
yesterday. The contract, which is for the
maintenance of road network
communications and tunnel systems
across Wales, will begin early next year.
Gem Diamonds hit by low output
n Gem Diamonds was hit by falling
production at its Lesotho operations over
the third quarter, it said yesterday, with
the amount of ore mined down 13 per
cent year on year. Carats recovered from
the mine was down nine per cent year on
year as severe winter snow conditions
hindered production.
Eurotunnel settles fire claim
n Channel tunnel operator Groupe
Eurotunnel yesterday said its insurers will
pay out 253m (203m) following its
2008 fire claim. Eurotunnel spent around
48m on repairs after the 16-hour fire in
September 2008, with full service
resuming in February 2009.
Hibu extends debt restructure
n Yellow Pages publisher Hibu yesterday
extended the time it needs to win approval
from creditors for a restructuring of the
firms colossal debts. The firm originally
gave creditors until 9 November to
approve the amended repaying structure
but extended that deadline until 23
November. Shares fell 15 per cent.
Non-European flights
get a green tax break
THE EUROPEAN Union has suspended
its controversial carbon emissions tax
for non-EU flights, after fierce
protests from authorities around the
world.
Airlines operating routes within
the EU will still have to pay, but the
bloc has issued a year-long
exemption for flights linking EU
airports to the rest of the world.
The Emissions Trading Scheme
was introduced on 1 January to
intense opposition. Beijing
instructed its airlines to refuse to
pay the tax on carbon emissions,
while India and the United States
have also hit back, calling instead for
talks about a global levy.
BY MARION DAKERS The European commissioner for
climate action Connie Hedegaard
said yesterday the bloc was stopping
the clock on the charge in light of
very good news last week, when the
International Civil Aviation
Organisation agreed to progress with
talks.
The EU has always said it will alter
its rules if the ICAO can agree on a
similar green tax. Hedegaard said
yesterdays freeze will help create a
positive atmosphere around the
global negotiations leading up to an
ICAO meeting next autumn.
But some European airlines, such
as Ryanair, used the moratorium as a
chance to lobby the EU to instead
exclude all air travel from the anti-
competitive green tax.
15
NEWS
COBHAM, the London-listed maker of
sophisticated military equipment,
yesterday issued a profit warning for
next year due to declining revenues
from the US defence market.
The firm, which got 40 per cent of
its revenues from sales of defence
and surveillance equipment in the
US this year, said group revenues
would decline by low-to-mid digits
in 2013.
The FTSE 250 company posted rev-
enues of 892m in its last set of
results, leading to a 10 per cent fall in
profits to 90m in the first half of the
year. It blamed a cyclical downturn in
the $500bn (314bn) US defence and
security market for the predicted
drop.
Chief executive Bob Murphy said:
Cobham is more focused in taking
actions today in recognition of the
likely longer term trend. US spending
is likely to decline for an extended
period.
Although we see decline coming
US defence cuts
prompt Cobham
profit warning
BY MICHAEL BOW
we know that this is a market which
is strategically important.
The US defence budget will be cut by
$24bn next year and almost double
that in 2014, unless newly re-elected
President Barack Obama and
Congress can come to an agreement
over the countrys looming fiscal cliff.
Cobham said it would invest in organ-
ic growth in the future to improve its
prospects going into 2014 and 2015.
In areas like South America and the
Middle East we do have opportunities
there where we can leverage from our
current technologies, Murphy added.
Dubai-based airline Emirates has defied the gloom weighing down the aviation industry by
more than doubling its profits to 1.7bn dirhams (291m) for the six months to the end of
September. The state-owned firm carried 18.7m passengers in the period, up 15.4 per cent
from a year ago. Revenue rose 17 per cent on the same period last year. Emirates hopes its
location a third of the worlds population is within a four-hour flight radius will continue
to attract passenger traffic away from other global hubs such as London and New York.
PROFITS AT EMIRATES SOAR
Olympus puts accounting fraud
behind it by swinging into black
TROUBLED Japanese electronics firm
Olympus swung to its first profit since
2010 yesterday as it put a 1.1bn
accounting scandal behind it.
The company, which makes optical
medical equipment as well as digital
cameras, reported an 18bn (143m)
pre-tax profit in the six months to
October, compared to a 6.6bn
loss in the same period last year.
However, it warned of further
troubles in its camera business,
which has suffered as the
popularity of smartphones
BY HARRY BANKS has risen.
The company is still reeling from
an accounting scandal. In
September it admitted to
covering up losses
linked to risky
investments in the five
years leading up to 2011.
Olympus boss Hiroyuki
Sasa said the
medical business
was the key driver
of growth.
Olympus president
Hiroyuki Sasa
Cobham PLC
12Nov 6Nov 7Nov 8Nov 9Nov
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215
220
225
190
195
200
205
p
190.6
12Nov
cityam.com
CITY workers swapped their sheets
for the street last week to help raise
250,000 for homeless charity
Centrepoint.
The Capitalist chatted to Gordon
Taylor, managing director of mar-
kets at RBS, andJon Millward, part-
ner at Drivers Jonas Deloitte, before
they bedded down for the night.
When asked what provisions he
had brought along, Taylor said:
Not as many warm clothes as my
colleagues, some of whom look
like theyre going on a polar expe-
dition. But luckily I have some ear
plugs to drown out their snoring,
and a hip flask for emergencies.
Aside from our Square Mile stars,
celebrity sleepers such as Downton
Abbey cast members Sophie
McShera and Allen Leech, DJ Sara
Cox and television presenter
Richard Madeley were also rough-
ing it on the streets of Broadgate.
The Capitalist hears there was plen-
ty of entertainment laid on for our
charity sleepers, celebrity or other-
wise, including a special perform-
ance by the cast of Shrek The
Musical.
With bedtime stories
like that, somehow it
sounds more
like urban
gl ampi ng
t h a n
sleeping
rough.
KIGU, a company that makes animal onesies
favoured by everyone from the cast of Made
in Chelsea to Lily Allen, has been voted
Britains brightest small business by
business network Smarta. Kigu founder
Tom Cohn was awarded a novelty cheque
for the very real 10,000 cash prize at the
awards, run with O2. BBC Dragon and
judge Theo Paphitis said: I
hear their dragon costumes
are one of their best sellers.
A reminder that starting from October 2012, all employers must enrol eligible workers
into a qualifying workplace pension scheme. The date you have to do this by depends
on the size of your company, but to give yourself time to prepare, visit The Pensions
Regulator at www.tpr.gov.uk/actnow where youll nd out all you need to know.
Workplace pensions. Were all in.
16
cityam.com
THE Brewery in the City was the
venue for the Futures and Options
Associations (FOA) 10th annual Power
Trading Dinner. The dinner is an
opportunity for firms, brokers and
exchanges in the industry, including
Alex McDonald and David Clark
(pictured left to right above), the chief
executive and chairman respectively of
the London Energy Brokers
Association, to indulge in some power
networking. The new chair of FOAs
Committee, Stephen Harris, is pictured
above giving the keynote speech.
TUESDAY 13 NOVEMBER 2012
cityam.com/the-capitalist
THECAPITALIST
EDITED BY CALLY SQUIRES
Got A Story? Email
thecapitalist@cityam.com
Gordon Taylor,
director at RBS
(left) and Jon
Millward, partner
Drivers Jonas
Deloitte (right)
Judges Kypros Kyprianou, chief
executive of Rymans (left) and
Theo Paphitis, BBC Dragon and
retail entrepreneur (right)
The FOAs Stephen
Harris holds court
London Energy Brokers Associations
Alex McDonald and David Clark
Left to right: Ben Dowd, business director of the O2; Shaa Wasmund, founder ofSmarta;
Tom Cohn, founder of Kigu; Stephan Eyeson of the Bright Ideas Trust and Jane Howard
Kigu is crowned smartest small
business at Smarta 100 Awards
City sleepover
in Broadgate
H
a
r
r
ie
t
A
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r
o
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In fact, they put your interests at the heart
of everything they do. Because anything else
would be selling you short.
Forex, spread bets and CFDs are high risk
and losses can exceed your initial deposit.
IN BRIEF
Indias economic woes worsen
nIndias economic gloom deepened
yesterday with a surprise contraction in
industrial production, a fall in exports
and higher retail inflation. Industrial
production shrank an annual 0.4 per
cent in September, according to the
Central Statistics Office (CSO). Exports
fell an annual 1.6 per cent to $23.2bn
(14.6bn) in October, while the
consumer price index rose an annual
9.75 per cent in October, a little faster
than 9.73 per cent rise a month ago.
OECD bullish on UK prospects
nGrowth is due to pick up in the new
year in the UK, according to OECD
predictions released yesterday. The
Paris-based groups leading indicator
ticked up to 100.2 for the UK in
September from 100.1 in August,
where 100 represents the long-term
average. The indicators continue to
forecast weak growth across the
Eurozone and in Japan, although
prospects in the US remain better.
Sudden fall in charitable giving
nDonations to charity fell by 20 per
cent in real terms during 2011-12,
according to a report released this
morning by the National Council for
Voluntary Organisations (NCVO). The
British public gave 1.7bn less to
charity than the previous year, it said.
Id ask people to commit to regular
donations through direct debit, and
give using Gift Aid, so charities can
plan properly, said the groups chief
executive Stuart Etherington.
INFLEXIBLE labour markets mean
that many countries suffer from a
combination of high unemployment
and considerable skills shortages,
the recruitment firm Hays has said.
Governments could help solve the
paradox by reforming restrictions
on immigration, Hays said while
launching its latest global skills
index yesterday.
Governments should focus on
the skills their economies lack and
take appropriate measures to
attract the relevant people through
targeted immigration, Hays said.
This would in many cases
require an overhaul of existing
work visa arrangements.
The report also says employers
should do more to enhance the
training they offer.
Open borders
to help solve
skills shortage
BY CITY A.M. REPORTER
RETAILERS yesterday sent a list of
demands to George Osborne ahead
of the chancellors Autumn
Statement next month, calling for
measures to save the struggling sec-
tor.
Osborne should freeze business
rates, scrap the delayed plans to
increase fuel duty, and ensure that
the minimum wage does not rise at
a rate that does not exceed long-
term movements in average earn-
ings, the British Retail Consortium
(BRC) said.
Rates have risen by over 10 per
cent in the last two years, and are set
to rise by 2.6 per cent in April next
year if they are based on Septembers
Retail Price Index (RPI), BRC director
general Stephen Robertson said.
This would add over 175m to
retailers bills at a time of relentless-
ly tough trading conditions.
Yet Osborne is unlikely to hint at
many fiscal giveaways in his
Autumn Statement, due on 5
December, as he struggles to
reduce the governments
annual deficit to the extent
that he promised on entering
office in May 2010.
Yet the deficit could appear
35bn lower than previously
expected, after Osborne
announced plans at
the end of last week to claim surplus
cash from the Bank of Englands
quantitative easing scheme.
The move is likely to cost the
Treasury more in the medium run,
but could provide some immediate-
ly relief and allow scope for fis-
cal stimulus.
The BRC also suggests aban-
doning the 3p a litre hike in
fuel duty, planned for
January, to support hard-
pressed consumers and busi-
nesses.
The chancellor should
not pile more pain
onto struggling
households or
retailers by
adding extra
costs, Robertson added.
The retail sector, which employs a
large proportion of young people,
could be stimulated by being
offered a one year holiday from
National Insurance Contributions
(NIC) for all employers taking on a
young person.
The BRC added that the coalitions
Carbon Reduction Commitment
(CRC) Energy Efficiency Scheme is
too costly to administer and needs
simplifying for all participants.
The final argument in the BRCs six
point plan called for the govern-
ment to roll out high speed broad-
band in order to encourage online
shopping. The costs could be covered
by cash from the forthcoming 4G
auction, the BRC suggests.
Shops tell Osborne to lift sector
by going easy on new tax hikes
BY JULIAN HARRIS
Japan edges towards recession
JAPANS economy shrank in the
September quarter for the first
time since last year, data released
yesterday showed, adding to signs
that slowing global growth and
tensions with China are nudging
the worlds third-largest economy
into recession.
The 0.9 per cent fall in GDP was
in line with expectations, although
a fall in capital expenditure was far
steeper than forecast.
Domestic firms including Sony
and Panasonic have slashed
BY CITY A.M. REPORTER
spending plans to cope with
massive losses as they struggle with
competitive markets and a strong
yen.
GDP was down 3.5 per cent
compared to the third quarter of
last year, the data showed.
External demand was the main
drag, as exports fell by five per cent,
but shrinking domestic demand
also weighed on activity, Capital
Economics said in a note.
Capitals economists forecast a 0.2
per cent drop in Japans GDP for the
final quarter of the year.
Many analysts expect the Bank of
Japan to leave policy unchanged at a
review next week, but some see it
boosting stimulus again at a 19-20
December meeting, shortly after
the US Federal Reserve is due to
meet.
A row with China over
sovereignty of some islands in the
East China Sea have sparked violent
protests in China and the boycott of
Japanese goods, which added to the
slide in exports, particularly for
automakers such as Nissan.
Masamichi Adachi of JP Morgan
Securities said business investment
would fall again in quarter four.
Japanese manufacturing has been hit by consumers in China boycotting its products
A WESTMINSTER think tank
will today call on Brussels to
help development in poorer
countries by scrapping non-
tariff barriers to trade.
The Institute for Economic
Affairs, which argues in favour
of free trade, will also urge
governments in developing
countries to boost growth by
slashing measures that stifle
international trade.
EU urged to drop barriers to
trade with poorer countries
BY JULIAN HARRIS There is an urgent
requirement for the EU to
remove protectionist import
barriers erected against poor
countries, the new report says.
Extortionate trade tariffs also
thwart development in less
wealthy parts of the world.
India has a tariff barrier of
99 per cent on roasted coffee
and Mexico 71 per cent, it says.
Barriers trap firms in poor
countries into less profitable
areas of business, the IEA argues.
BRITISH businesses will gain a
boost from increasing export
opportunities in emerging
economies, the latest HSBC trade
forecast said yesterday.
Exports to eastern Europe, the
Middle East and north Africa are
expected to rise over the next
three years, while demand from
Chinas middle classes will also
prove to be a boon for the UKs
economic growth.
UK exports to the Middle East
and north Africa... are set to rise
by 10 per cent a year during
Emerging economies set
to boost UK firms exports
BY JULIAN HARRIS
2013-15 and by seven per cent a
year during 2016-20, it says.
And trade to traditionally
wealthier countries should also
recover from 2016 onwards, the
report expects.
The forecast predicts that the
US will overtake Germany to
become the most important
market for UK exports by 2030,
HSBC said.
Ireland, France and China
complete the UKs top five
destinations for exports, and
will still produce the most
demand for British companies
goods in 2030, the report says.
TUESDAY 13 NOVEMBER 2012
18
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The chancellor is finding
it tough to cut the deficit
IN BRIEF
Wincanton swings back to profit
nSupply chain company Wincanton
returned to profit in the six months to
September, posting pre-tax profits of
13m, up from a loss of 13.6m over
the same period in 2011. Over the past
six months, it has won several
contracts in the retail sector, notably
with B&Q and with Morrisons to
operate a convenience distribution
centre. Meanwhile, revenue over the
half year dropped slightly to 551.2m,
down from 625.4m a year ago.
Interserve confirms guidance
nSupport services and construction
firm Interserve yesterday said trading
remained in line with expectations,
and it reiterated its guidance for 2012.
Since 1 July, it has won more than
500m worth of new work from
clients such as the NHS, Viridor,
Scottish Power Networks and the
Ministry of Justice. Interserve has also
netted 124.5m in cash from the sale
of private finance initiative
investments over the period.
Kentz eyes strong growth in 2013
nFTSE 250-listed engineering and
construction group Kentz said
yesterday it expected to deliver 2012
earnings in line with expectations and
hit double-digit growth next year. Its
prospect pipeline increased to $13.1bn
(8.2bn) in the period since 1 July.
Kentz, which has operations in 29
countries, had a backlog of $2.53bn
at the end of September, up from
$2.54bn at the end of July.
ALUMINIUM producer Rusal made a
net loss of $118m (74.3m) over the
three months to September, against
a profit of $432m a year earlier, as it
eyed a rebound in consumption of
the metal in the fourth quarter.
Revenue came in at $2.56bn during
the quarter, down from $3.16bn over
the same period in 2011, the firm
said yesterday.
Aluminium production for Rusal
was flat at 1.042m tonnes for the
third quarter, compared to 1.041m
tonnes a year ago.
Tepid demand for the metal used
in drink cans, aircraft and electron-
ics equipment has pushed prices
down 19 per cent during the first
nine months of 2012 to an average of
$2,025 a tonne.
Global aluminium consumption
during the nine months to
September hit 35.5m tonnes, a five
per cent increase on the previous
year, although Rusal said global
demand moderated in the quarter.
Rusal drops to
a loss on weak
metal outlook
BY CATHY ADAMS
A rebound in Chinese growth, a
resilient US automotive sector and
worldwide monetary stimulus
should drive consumption of the base
metal, Rusal said.
Chief executive Oleg Deripaska said
yesterday that while the short-term
outlook for the aluminium sector
remained uncertain, the steps
taken to address oversupply along-
side growing demand from the US
and emerging markets enables
Rusal to remain confident in its cur-
rent strategy and the outlook for the
wider sector.
Explorers San Leon and Aurelian
agree 150m all-share merger
OIL AND gas explorer San Leon
Energy is to acquire fellow Aim-
listed explorer Aurelian in an
all-share merger worth around
150m.
Under the terms of the tie-up
which represents a compelling
strategic and cultural fit
according to the boards of both
companies shareholders will
receive 1.3 new San Leon shares for
each Aurelian share.
Existing Aurelian shareholders
will hold approximately 34 per
cent of the enlarged company, and
San Leon shareholders will hold 66
BY CATHY ADAMS
per cent.
Both firms hold significant
acreage positions in Poland, and
the enlarged group will become the
largest foreign acreage holder in
the Eastern European country, both
firms said yesterday.
The enlarged group will also have
assets in Morocco and Albania.
Oisin Fanning, executive
chairman at San Leon, is lined up
to take the same role in the merged
group. San Leons Paul Sullivan will
be appointed managing director
and John Buggenhagen will become
exploration director.
Upon completion of the merger,
five directors including chief
executive Rowan Bainbridge will
step down from Aurelian.
Oisin Fanning said yesterday:
The combination of cash resources
and the Polish asset base alone
creates an obvious and exciting
opportunity to realise substantial
growth.
Both management teams have
built up a tremendous amount of
experience and we can now employ
that to pursue a best-of-portfolio
near term value creation strategy.
Shares in San Leon closed 12.83
per cent down at 8.36p and shares
in Aurelian closed 6.82 per cent
down at 10.25p, as investors reacted
negatively to news of the merger.
Cape dives on profit warning as
its chief financial officer departs
SHARES in energy support service
provider Cape plunged yesterday as
it issued a profit warning,
prompting the departure of its chief
financial officer.
Finance director Richard
Bingham stepped down with
immediate effect. It is understood
he was close to the former chief
executive, and the latest profit
warning was a catalyst to his
departure.
Cape, which also issued a profit
warning in May, has been
struggling with slow progress at a
project in Algeria, and worsening
BY CATHY ADAMS
margins at its Australian business.
The company was also hit by a
1.5m bad debt provision in the
Middle East, relating to a potential
bad debt with a Saudi Arabian
customer.
The groups operating margin
was impacted by a substantial
deterioration in the performance
of the onshore Australian division,
causing some uncertainty over the
full-year performance for this
business, Cape added.
The company, which is reviewing
its Australian business, added that
it had identified a number of issues
related to the valuation of certain
balance sheet items in the division.
The review will be completed by the
end of the year.
Shares closed down 29.01 per cent
yesterday at 186p as investors
reacted badly to the warning.
RUSAL
12Nov 6Nov 7Nov 8Nov 9Nov
4.40
4.45
4.50
4.55 HKD
4.47
12Nov
Cape PLC
12Nov 6Nov 7Nov 8Nov 9Nov
220
240
260
280
180
200
p
186.00
12Nov
EXPLORER Heritage Oil yesterday
confirmed it would exit its
Kurdistan asset, by selling its
remaining 49 per cent interest in a
gas field to Genel Energy to repay
a $294m (185m) loan.
FTSE 250-listed Heritage will sell
its stake in the Miran gas field in a
deal that will see it exiting
Kurdistan completely and focusing
on a new project in Nigeria.
In August, the oil and gas
explorer agreed to sell a 26 per
cent stake in the block to Tony
Haywards Genel, with Genel
Heritage Oil exits Kurdistan as
it sells interest to Genel Energy
BY CATHY ADAMS
lending Heritage $294m.
Should the deal be approved by
Heritage shareholders, Genel will
own 100 per cent of the Miran
field.
The divestment of our
remaining 49 per cent interest in
Miran will allow Heritage to
monetise the asset at an attractive
valuation and the total proceeds
will have funded a significant part
of the completed acquisition of
OML 30 in Nigeria, Heritage Oil
chief executive Tony Buckingham
said yesterday.
Heritage shares closed down
1.69 per cent at 197.6p.
TUESDAY 13 NOVEMBER 2012
19
NEWS
cityam.com
Former BP chief executive Tony Hayward created Genel Energy in 2011
Westhouse Securities is the nominated
adviser to San Leon Energy, having taken
on the role when Westhouse bought
Arbuthnots investment banking arm earlier
this year. Richard Johnson and Antonio
Bossi, both directors of corporate nance at
Westhouse, are leading the banks team.
Bossi joined Arbuthnot in 2003, and has
over 16 years of M&A and capital markets
experience. He has advised FKI, BICC
General Cable, Clarity Commerce, GE, Tyco
International on a number of cross-border
and public UK transactions and on their
European expansion plans. Antonios cur-
rent quoted clients include SQS Software
Quality Systems, Northbridge Industrial
Services, EIIB, Andes Energia, Sound Oil
and Quadrise Fuels.
Johnson joined Greig Middleton & Co in
1996, which became Arbuthnot before
turning into Westhouse.
He has 16 years of corporate nance expe-
rience and has transacted across a wide
range of sectors including oil and gas, tech-
nology, logistics and nancial services.
His current clients include Pan European
Terminals, Gresham House, Daniel Stewart,
Goodwin and Cardiff Property.
Fox-Davies Capital was nancial adviser on
the deal and joint broker to San Leon, with
Susan Walker and Daniel Fox-Davies lead-
ing the team over there.
Greenhill & Co, Oriel Securities, RFC
Ambrian also had roles on the deal.
ADVISERS WESTHOUSE SECURITIES
ANTONIO BOSSI
WESTHOUSE SECURITIES
RICHARD
JOHNSON
WESTHOUSE SECURITIES
The issues now appear more than just simply deterioration in trading,
and raise questions on the internal controls in the business rst highlighted with
issues experienced on a project in the UK followed by the larger cost
overrun in Algeria.
ANALYST VIEWS

We have placed our recommendation under review as we revisit both

our 2012 and 2013 earnings forecasts. Overall, signicant uncertainty remains for
this years earnings. We expect the prot warning and earnings uncer-
tainty to lead to a de-rating whilst legacy issues are fully resolved.

The statement from Cape does not make for very happy reading.
Overall, the statement will do nothing to instill condence amongst investors,
who would have been hoping to see evidence of progress on the resolu-
tion of various operational issues.

WHAT ARE YOUR

THOUGHTS ABOUT CAPES
TRADING STATEMENT? Interviews by Cathy Adams
ANDY HANSON NORTHLAND CAPITAL PARTNERS

SANJEEV BAHL NUMIS SECURITIES

CRAIG HOWIE SHORE CAPITAL

TUESDAY 13 NOVEMBER 2012
20
US stocks flat
ahead of policy
debate on tax
U
S stocks ended little changed
after a lightly traded session
yesterday as investors hedged
bets before a policy debate
aimed at heading off US tax hikes and
spending cuts early next year.
Firmer economic data from China
and delays to an installment of Greek
aid also were trading day topics.
News that Chinese exports rose
sharply in October, signalling the econ-
omy was strengthening, argued for
buying riskier assets. The safe-haven
US Treasury market was closed yester-
day in observance of Veterans Day.
But stock market gains were limited,
made tentative by concerns about the
Eurozone and possible higher US taxes
and spending cuts that could kick in
early next year.
On Wall Street, the benchmark S&P
500 index remains up 10 per cent for
2012.
In Chicago, grain futures tumbled
amid a wave of technical selling, with
soybeans sinking to a 4-1/2-month low
that nearly erased gains from this
summers devastating drought.
Prices had already been under pres-
sure after the US Department of
Agriculture on Friday raised its esti-
mate for US soybean production more
than expected and increased its fore-
cast for global inventories.
The Dow Jones industrial average
ended down 0.23 point, or 0.00 per
cent, at 12,815.16. The Standard &
Poors 500 Index was up 0.15 point, or
0.01 per cent, at 1,380.00. The Nasdaq
Composite Index was down 0.62 point,
or 0.02 per cent, at 2,904.25.
Overseas, a weekend report showing
Chinas export growth climbed to a
five-month high added to recent data
suggesting the countrys seven
straight quarters of slowing economic
growth have ended.
B
RITAINS FTSE 100 finished flat but
outperformed European stocks
yesterday, led by a financials sector
that bucked the broader European
trend as investors sought refuge from
Eurozone debt distress.
Financials, the broad sector which
includes banks, insurers and asset man-
agers, added 9 points to the FTSE 100 and
ensured the blue-chip bourse finished in
positive territory.
The solid gains, which resulted in Lloyds
Banking Group adding 3.5 per cent and
Barclays two per cent, also helped the
STOXX Europe 600 Banking index to close
up 0.1, as they were able to offset a 0.5 per
cent fall in Eurozone banks index.
The Greek parliament passed an austeri-
ty budget for 2013 late on Sunday, but the
EU said it was not ready to authorise a new
loan tranche yesterday, maintaining a posi-
tion first staked out last week.
However, Athens was set to get two more
years to achieve a primary budget surplus.
The FTSE 100 closed down just 2.41
points, or 0.04 per cent, at 5,767.22, open-
ing the week steady after losing 1.7 per
cent last week and outpeforming a 0.2
drop in the top European stocks.
Banks aside, there was little evidence
that the appetite was there among
investors to propel riskier stocks those
which tend to rise more when economic
condition improve and fall more in times
of economic distress higher.
Miners shed 0.7 per cent as the uncertain-
ty in the Eurozone mixed with weak GDP
data from Japan to take the sheen off
slightly better trade data from China.
Platinum producer Anglo American lost
two per cent, the top faller in the FTSE 100.
BESTof theBROKERS
Lloyds Banking Group PLC
p 46.0
45.5
45.0
44.5
44.0
43.5
43.0
6Nov 7Nov 8Nov 9Nov 12Nov
44.80
12 Nov
LLOYDS BANKING
GROUP
UBS upped the banks
target to 46p, from 44p,
citing solid progress
and improving
momentum. But
analysts kept their rating
at neutral.
DASHBOARD CITY
YOUR ONE-STOP SHOP FOR JOB MOVES,
BROKER VIEWS AND MARKET REPORTS
cityam.com
FTSE
6Nov 7Nov 8Nov 9Nov 12Nov
5,950
5,900
5,850
5,800
5,750
5,767.27
13 Nov
Diageo PLC
p 1,820
1,815
1,810
1,805
1,800
1,795
1,790
1,785
6Nov 7Nov 8Nov 9Nov 12Nov
1,807.87
12 Nov
DIAGEO
Nomura boosted its target
from 2000p to 2100p on
predictions that slashed
Indian import tariffs could
boost profits on whisky
sales by $400m
(252m) and Diageo is
in a good place to benefit.
Land Securities Group PLC
p 830
820
810
800
790
6Nov 7Nov 8Nov 9Nov 12Nov
794.60
12 Nov
LAND SECURITIES
Espirito Santo warned
that the property
investment groups retail
portfolio was a drag on
net asset value growth
and cut its fair value
assessment from 818p to
800p with a neutral
rating.
KNG Securities
The fixed income product
provider has appointed Andrea
Podesta as managing partner and
head of fixed income. He joins
from Bank of America Merrill
Lynch, where he was managing
director and head of southern
Europe fixed income sales.
BNY Mellon
The financial services firm has appointed Alan Cottam as
regional business head for corporates and sovereigns in
Europe, Middle East and Africa. He was most recently head
of relationship management at the Depositary Trust and
Clearing Corporation, and has also held senior roles at
Lloyds TSB Financial Markets.
Rowan Dartington
Kevin Bowhay has been appointed to the role of
discretionary fund manager at the wealth management
firm. He joins after 25 years at Lloyds TSB Private Banking,
where he advised ultra-high net worth clients.
Towers Watson
Lisa Stay has been appointed to the professional services
firms international consulting group. She is a financing
specialist and most recently worked as a senior account
manager in the Maxis Global Benefits Network.
Simmons & Simmons
Simon Hilditch has been appointed as an insurance litigation
partner in the law firms London office. He joins from
Berrymans Lace Mawer, where he was a partner. Hilditch
focuses on defending UK and international claims against
insurers.
Menzies Business Recovery
The insolvency arm of the accountancy firm has appointed
Robert Pick as a director. He joins from a boutique corporate
recovery practice. Pick has also been a partner at Grant
Thornton.
WHOS SWITCHING JOBS Edited by Tom Welsh
+44 (0)20 7092 0053
morganmckinley.com
SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT
CITY MOVES
in association with
LONDONREPORT
NEW YORK
REPORT
in association with
in association with
Banking shares lead FTSE as debt
in Eurozone makes UK a safe haven
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T
HE Bank of England may have
recently decided to call a halt
on the expansion of its
quantitive easing (QE)
programme. But the debate
over the costs and benefits of QE
continues. A full 375bn has already
been injected into the UK financial
system, and its still possible that
more might follow.
The benefits of QE tend to be
quickly visible. The evidence suggests
that it has raised asset prices by 20
per cent, kept interest rates lower
than they otherwise would have
been, and boosted output by up to 2
per cent. If the goal was to loosen
monetary policy in response to a
financial crisis, it has succeeded. But
the main danger of QE is that the
I
T BEGAN with anger at bankers,
intensified during the MPs
expenses crisis, and continued
during the phone hacking
scandal. Now the BBC finds
itself at the brunt of a long-running
mob mentality. This latest extension
of the Saville Affair has seen the
BBCs director general George
Entwistle resign, and senior
executives set aside. It all follows a
mistaken identity scandal at
Newsnight that led to false
allegations of paedophilia against a
senior politician.
What went wrong? they cry! In
the wake of this scandal, some say
we must have press regulation and
closer supervision of the media.
Because state involvement prevented
all previous scandals at the BBC, did-
nt it? And extensive regulation has
worked out so well in the financial
sector, hasnt it?
In fact, we already have extensive
regulation of press activities
through existing law things like
libel and slander and anti-corrup-
tion rules (all of which were criti-
cityam.com/forum
There is a case for
the license fee to enter
a general pot, available
to all broadcasters
THEFORUM
Twitter: @cityamforum on the web: cityam.com/forum or by email: theforum@cityam.com
Agree? Disagree? Got a sharp comment?
The Forumwants you to join the debate.
Top responses will be reprinted in The Forum.

22
TUESDAY 13 NOVEMBER 2012
ANDREW LILICO
BBC in crisis: This is no excuse to
destroy a respected broadcaster
cised following the Saville allega-
tions). The only thing that more
explicit regulation of broadcasting
would achieve is to protect the well-
connected from investigation, while
making the regulator the arbiter of
probity.
It would force black-and-white
determination of what would be bet-
ter grey. For example, the police and
journalists have often worked close-
ly together in the past, sharing
sources and intelligence. The press is
rightly used to broadcast police mes-
sages. No rule could specify exactly
when this healthy symbiosis crosses
the line into corrupt practice.
Demanding transparency and clarity
everywhere makes these into false
idols, at the expense of more prag-
matic virtues.
Others say that the BBCs failings
demonstrate why state involvement
in broadcasting is a bad idea, and
the BBC is attacked for reflecting the
virtues of a liberal establishment
fighting more popular opinion. But
in Britain there has always been an
equivalent of the BBC, transmitting
the establishments ideas, while the
publics fears and hopes are commu-
nicated back to the state.
The BBC is an established national
institution its a respected, semi-
official voice in a national discourse,
but only one voice among many
competitors. It faces its own vibrant
competitors in Sky, the internet, and
elsewhere. Its establishment status is
relatively harmless indeed it is use-
ful. It can at least aspire to offer
what it considers to be objective
comment (even if its not), and a
national voice.
The BBC also faces huge competi-
tion from other parts of the media
indeed, never before in British histo-
ry has media competition been so
intense. Where there might be scope
for structural change, however, is in
the public service funding concept.
There is a strong case for the license
fee to enter into a general pot, avail-
able to many broadcasters bidding to
produce public service content.
And alongside this,the BBC should
be permitted to raise vast sums by
selling its back catalogue over the
internet. It should also be allowed to
franchise the World Service around
the world (it has been restricted
from receiving private funds for the
latter, even as donations). It could
raise other (highly non-trivial) sums
from voluntary donations or special-
ist funders. The loss of exclusive use
of the license fee need not mean it
starts to show adverts.
When the BBC began, television
and radio were regarded as subject
to a market failure without regula-
tion, broadcasters would all produce
mass interest content, and niche or
educational material would be
missed. But in a world of hundreds
of channels and bespoke charities,
that concept is no longer sustain-
able. It isnt necessary for the BBC to
be the sole focus of public funding.
Indeed, the opposite is true. With
competition, journalistic and ethical
standards would need to be even
higher. The BBC has many great
shows that would surely attract char-
itable funding if not public funding.
Who doesnt love Strictly Come
Dancing, Match of the Day or the
Today Programme? The BBC doesnt
need to be in crisis, even if its fund-
ing model should change. Lets just
hope our mob thinks its guillotine
has now drunk enough blood.
Andrew Lilico is chairman of Europe
Economics.
costs are likely to emerge over time,
and will be harder to spot. Some of
the main costs are as follows:
1. Low interest rates force investors
to look for more exotic ways to
generate returns. They may take on
more risk to prevent the emergence
of destabilising capital flows into
developing countries.
2. Interest rates give entrepreneurs
an important signal about the time
preferences of consumers. If the
signal gets disrupted, there is a risk
that they will invest in the wrong
projects.
3. Low rates delay rebalancing, and
entrench capital in inefficient uses.
4. There are also significant exit
risks to QE. At some point in the
future, the Bank of England has to
sell almost 40 per cent of the total
stock of conventional gilts back onto
the market. Its new territory for
central banks with no experience.
5. Inflation has been above target for
a long time, which damages the
credibility of the central bank, and
could lead the public to question
whether its keeping inflation in
check.
6. The Bank of Englands emergence
in the gilt market has reduced
incentives for the government to
maintain fiscal discipline. QE looks a
lot like our central bank is simply
printing money to cover a profligate
government. In monetary policy,
perception is as important as reality.
The threat of inflation leads the
market to lose confidence in
monetary authorities.
7. Current monetary policy is
generating regime uncertainty. It is
more about announcements and
new ideas than sticking to simple
rules that were already anticipated
and understood. When the Bank of
England signals that rates will
remain low over the medium term,
the public could respond positively
and think it means things under
control. On the other hand, the
public could worry that the
economy will stay weak over the
medium term. When emergency
policy becomes permanent, it harms
expectations about recovery.
That inflation is close to 2 per cent
does not mean that QE hasnt caused
damage: the previous boom
happened under a stable price level.
By the time inflation increases it
will be too late. Interest rates must
now return to more normal levels
before even more harm is done to
the economy.
Anthony J. Evans is associate professor
of economics at ESCP Europe Business
School. Web: www.anthonyjevans.com,
Twitter: @anthonyjevans.
FRONTLINE
ECONOMICS
ANTHONY J. EVANS
Short-term benefits should not disguise the damaging side effects of QE
MORNING UPDATE
A.M.
23
TUESDAY 13 NOVEMBER 2012
The Forum is open for you to take part. Got a sharp comment on
one of todays columns? Do you have another subject you want
to share your opinion on? We want to hear your views.
Email theforum@cityam.com or comment at cityam.com/forum
Open for business?
[Re: Will the City struggle to retain its
position as the worlds financial centre?
Friday]
It is important that London retains its status
as a major international financial centre, but
it faces many challenges. London has
always been seen as an automatic choice of
location for foreign banks, but there are
concerns that it may be moving from an
automatic choice to a considered option. It
is a challenging time for banks anywhere,
but many factors are influencing their
choice of location. Firstly, regulation: the
dangers of regulatory arbitrage are
increasing as global centres seek to attract
financial and related professional services
business. The benefit from consequential
employment by this sector cannot be
ignored. Secondly, taxation: corporate fiscal
revenues from the foreign banks in the UK
have run into the billions of pounds in recent
years, and they are an attractive boost to a
nations economy. More tax-friendly
regimes, with a certainty of fiscal
legislation, can appear attractive. Thirdly,
immigration: a huge number of non-
European nationals are employed in this
sector and it is important that the UK is seen
as open for business and visa friendly to
these influential inward investors. The
position of the UK outside the Schengen
Agreement on European free movement
makes the UK less attractive for investors
looking to expand throughout Europe.
John Treadwell, chief executive, Association
of Foreign Banks
E
XECUTIVES from Google and
Starbucks were summoned
yesterday to give evidence to
the UKs public accounts
committee on their approach
to UK taxation. Grilled by Margaret
Hodge MP an outspoken critic of
the tax strategies adopted by
multinational companies their
treatment reveals two myths about
corporation tax that continue to
confuse MPs and the general public.
The first myth is that all multina-
tional companies are compulsive tax
dodgers, to the detriment of local
businesses. Actually, multinational
companies do pay corporation tax.
Quite a lot of it.
A report by the Oxford University
Centre for Business Taxation shows
that, of the 40bn that corporation
tax brings the Treasury each year,
over 80 per cent is paid by multina-
tional companies. That 80 per cent is
roughly half from foreign multina-
tionals and half from UK-based firms.
This isnt small change; its a signifi-
cant contribution to our coffers.
By contrast, small businesses only
pay about 10 percent of the overall
corporation tax take. This isnt a triv-
ial amount, but its untrue that inde-
pendent businesses are shouldering
the burden of corporation tax.
The second myth is linked to the
idea that big companies only pay a
fraction of their sales in tax, so they
must be avoiding it. This stems from
comparing the profit in financial
accounts to the tax paid. Yes, the way
taxable profit is calculated does have
similarities to the way profit in finan-
cial accounts is reported. But there
are also some differences.
First, taxable profit uses capital
allowances not depreciation.
Imagine a business that buys a new
building for 100m. If it intends to
use that building for 100 years, it
would write off the cost of the build-
TOP TWEETS
The BBC needs to install a strong director
general and sort out problems. Its essential
to restore trust in our great national asset.
@Ed_Miliband
The BBC needs to be more accountable
not to itself, not to MPs, but to us. That has
to mean a change in how its funded.
@RyanCPS
George Entwistle will be getting 450,000
for 55 days work. Thats 8,181 per day.
Thats 340 per hour. Thats lunacy.
@ciaran_o_connor
George Osborne must surely scrap increase
in fuel duty in Autumn Statement 350m is
nothing in the grand scheme of life!
@truemagic68
As problems at the BBC continue to damage
its reputation, should Lord Patten step down?
YES
The crisis at the BBC is a crisis of leadership and management. As
chairman of the BBC Trust, Lord Patten wasted hundreds of
thousands of pounds on consultants in recruiting George Entwistle
from under his nose. He has now wasted hundreds of thousands of
pounds paying off George Entwistle just 55 days into the job.
However it is not just Lord Pattens judgment that is faulty; he has
clearly been asleep at the wheel. He claimed he knew nothing of
Newsnight dropping its Jimmy Savile investigation until last
September, yet it was widely reported in the media back in January
this year. Many feel that his other outside interests mean he cant
give this job the time it deserves. The chairman of the trust is
responsible for trust in the BBC that trust has never been lower.
Lord Patten is part of the problem, not the solution, and it is time for
him to go with his director general but not with the same pay-off.
Philip Davies is Conservative MP for Shipley.
Philip Davies
NO
Atholl Duncan
Lord Patten should not resign. But he does need to get a grip. He
must be seen to be acting decisively, now. He should axe the
Newsnight programme now a damaged brand to save the global
reputation of BBC journalism. He should move as swiftly as possible
to appoint a new director general from outside the BBC. He should
split the role of the chief executive and editor-in-chief as it is clearly
too large a brief for any single executive. He should reform the
governance of major journalistic investigations. Crucially, Lord Patten
needs to change the perception that the BBC is a rudderless ship out
of control. He must call on all his political, diplomatic and leadership
skills to rescue the BBC from the worst crisis in its 90 year history.
The stakes could not be higher. Audiences at home and abroad need
to have their confidence restored in trusted, accurate BBC journalism.
Atholl Duncan is former head of news at the BBC and executive
director of the Institute of Chartered Accountants of Scotland.
RAPIDresponses
How corporation
tax myths poison
the wider debate
ing over those 100 years in its
accounts, at a rate of 1m per year.
But if the tax system adopted this
basis, the company would have a cash
outflow of 100m but would only
receive tax relief of 1m. This would
discourage companies from invest-
ing, which would in turn potentially
hinder economic growth. Instead,
the tax system has a more generous
scheme capital allowances which
give a larger deduction for tax pur-
poses than the company gets for
accounting purposes. Profits are
taxed eventually. But they just dont
get taxed in the same year as the
accounting profits are reported.
Second, taxable profit also allows
companies to make deductions.
Almost every expense with a legiti-
mate business purpose gets deducted
in the calculation. Interest payable,
royalty payments and directors
salaries are all allowable. So commen-
tators who compare anything other
than pre-tax profit to tax paid will
end up with a daft answer, because
theyre omitting real deductions that
the company, in accordance with tax
law, is allowed to make.
Im not apologising for tax evasion,
or even avoidance. If the way we tax
companies is unfair on other taxpay-
ers, then it should be changed. But
its vital that any changes in tax poli-
cy are based upon a sober analysis of
the facts about corporation tax,
rather than tired myths.
Christie Malry is a pseudonym. The
author is a chartered accountant. He blogs
at www.fcablog.org.uk
Printed by Iliffe Print Cambridge, Winship Road, Milton, Cambridge CB24 6PP
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CHRISTIE
MALRY
TUESDAY 13 NOVEMBER 2012
24
cityam.com
I
F UK government bond yields
jumped rapidly, the UK could
be plunged into a credit crisis
that would make the last time
look mild. Institutional investors
would be lumbered with illiquid
assets that they could not shift,
paralysing money markets. The
chances are slim; but previous
crises have taught us to be
prepared.
The UK has never defaulted on its
debt. As John Pattulo of Henderson
puts it: The UK is AAA-rated, with
a credible, independent central
bank, that can print its own cur-
rency, reducing the likelihood of
bond investors losing money.
Helped by the Eurozone crisis, UK
yields are at historic lows: the aver-
age yield on ten-year debt over the
last 20 years was 5.23 per cent;
today, it is around 1.70 per cent.
Low rates and quantitative easing
(QE) which focused on buying
government bonds are the main
drivers. The Bank was, until recent-
ly, the chief buyer, and now holds
26 per cent of all gilts issued.
Since the onset of the crisis, ster-
ling has devalued by 20 per cent.
One way to get through a crisis is
to have a currency that you can
print and devalue, says Pattulo,
making the UK more flexible.
Euro countries do not enjoy this
flexibility.
From a valuation perspective,
gilts are expensive, says Pattulo.
The retail price index measure of
inflation is 2.6 per cent. Investors
are therefore receiving negative
real yields, in effect paying the
government to hold their money.
And not only are gilts expensive,
they are underperforming: the
FTSE UK Gilts Total Returns Index
has delivered 5 per cent in the last
12 months, compared to 9 per cent
from the FTSE All-Share Total
Return Index.
A marked improvement in the
UK economy could trigger a rise in
UK gilt yields may be
ready to spike higher
UK bonds, shaken not stirred
Always have a plan
for the worst, says
Yogesh Chandarana
TRADING MANAGEMENT WEALTH
THE TIPSTER
MINER TO HIT A ROCK
S
HAREHOLDERS in copper
miner Antofagasta have had
a mixed year, with the current
rally hitting a solid rock around
the 13.50 mark. Although
production updates point to continued
progress, doubts still persist whether
the company can meet its full-year
target. A slowing Chinese economy
continues to cast a long shadow over
the share price. IG quotes a price of
12.48-12.52 for Antofagasta.
Energy company SSE may have
taken the lead in slashing its complex
tariffs, but it was the first to hike prices
last month. Traders will be keen on
seeing how tariff simplification has
affected its bottom line when the
company reports interim results
tomorrow. GFT Markets quotes a price
of 1,393.6p-1,397.4p for SSE.
Vodafone is expected to announce
a decline in its half-year revenues when
it reports on Friday. The mobile phone
giant is playing catch with EE after the
latters 4G launch in the UK. However,
there has been buying action near six-
month lows around 166p, as traders
believe that the stock will claw its way
back upwards. Spreadex quotes a price
of 166.2p-166.7p for Vodafone.
Traders are expecting a respectable
set of numbers from Carphone
Warehouse Group when it reports
its interim results tomorrow. The
company has increased its marketing
spend and management seem to be
focused on its European business. Sales
of the new iPhone5 are likely to have
given the company a boost. The
product pipeline has also improved,
particularly for prepay phones. But
traders will want clarification about its
relationship with American retailer Best
Buy. ETX Capital quotes a price of
175.54p-177.71p for Carphone
Warehouse Group.
YOGESH CHANDARANA
Spain and Italy. But Pattulo
believes that this could only hap-
pen if the Bank begins cancelling
its holdings. Last weeks move to
return interest earned on gilts
back to the Treasury did not cause
a violent reaction.
If yields were to rise sharply, the
euro crisis has shown us a blue-
print of how traders could position
themselves: short bonds and
banks; seek safety in US dollar, and
potentially gold. But protection of
your capital becomes the priority,
warns Curtin.
Recent monetary policy has been
designed to keep yields low, and
there is speculation that more QE
will come. Therefore, betting on a
sharp correction is risky. If any-
thing, yields will move up gradual-
ly, and only after the economy
improves. That is the theory; but
we have seen markets lose patience
with theory before. It pays to be
prepared.
yields: A sharp rise in inflation
coupled with a rise in growth,
hence the need for a rate rise
could lead to a spike in yields, says
Pattulo. But this can only happen if
the economy improves sufficiently.
Currently, central banks are
unlikely to increase rates rapidly,
and rates will remain low for some
time, supporting a low-yield envi-
ronment. David Curtin of
BlackRock says that wed need to
see a repaired banking sector and
household deleveraging before this
happens. This could be a long
process, and were only about half-
way through the adjustment.
Positive news from the Eurozone
has the potential to impact gilts. As
the situation improves and money
markets resume normality, money
will move out of gilts putting
upward pressure on yields.
There is also a possibility that
markets will lose faith in the UKs
economic policy as they did with
fx360.com
HOW TO TRADE A POTENTIAL
GREEK EXIT FROM THE EURO
Euro-dollar
Dec2011 2012 Feb May Apr May Jun Jul Aug Sep Oct Nov
1.22
1.24
1.26
1.28
1.30
1.32
1.34
1.36
$
twitter.com/fx360 facebook.com/fx360
The contents of this column are provided for general information purposes only. One should consider the appropriateness
of the information in light of their own objectives, financial situation or needs before trading. CD11UK.074.010612
NEAL GILBERT
SENIOR MARKET STRATEGIST, GFT
T
ODAY Greece goes to the market
with a 6bn (4.8bn) bond auction.
The country is looking to pick up
sufficient funds to pay back the 5bn
that falls due on Friday. Although the
budget cuts that were approved on Sunday
should be enough to release another tranche
of emergency aid, theres still the outside
possibility that the unmentionable could
happen on Friday Greece defaults on its
debt.
This would send shockwaves through
financial markets. The euro would arguably
face very heavy selling as a result. If Greece
goes, which fringe state could follow next and
does that leave a whole house of cards ready
to tumble to the ground? Although the euro-
dollar may be trading at around $1.2710
presently, a default would have the potential
to send this significantly lower. In contrast,
the generally expected outcome that the
debt is repaid and the wheels keep turning
would leave the same currency pair climbing
higher, on the assumption that traders can
find some optimism on the back of this news.
So how can you position yourself to take
advantage of a market movement like this? A
normal short bet on euro-dollar would see
you losing out and potentially quite quickly -
if the debt is repaid and the euro rallies. But
financial markets are fortunately a little more
sophisticated, and you could exercise a
widely-used instrument known as the option.
This, in other words, gives you the right but
not the obligation to trade an underlying
asset at a pre-determined price at some point
in the future. This particular Greece example
refers to a currency pair, but options can be
applied to a wide range of assets. Options
markets are full of jargon, but here is an
example of how to apply an option to an
actual trade.
If you believe that euro-dollar is going to
fall, you could buy a put option, giving you
the right to sell euro-dollar at a pre-set price
in the future. The cost of buying these options
(the premium) is calculated using a
sophisticated model that takes into account a
number of factors including the time until
the expiry of the trade and the volatility of the
underlying asset. To sell euro-dollar at a strike
price of $1.2600, for example, with an expiry
of 21 November, the premium would amount
to $252 (158). The longer the time until
expiry, or the more volatile the underlying
asset, the higher the premium would be.
Lets say that the euro plummets to $1.2500
on Thursday night. You can trade out of the
option at any time you want, and for each pip
below the strike price assigned in the option
in our case $1.2600 - you stand to make
$10. At $1.2500 the move is 100 pips, so the
profit would be $1,000, minus the $252
premium paid for the option. The total
balance would therefore be US$748. Should
the move be less pronounced on the
downside say euro-dollar only trades down
to $1.2580 by expiry although you settle 20
points beyond the option price (giving a
profit of $200), you paid an initial premium
of $252, resulting in a final loss of $52. So
long as you trade out of the option or the
option expires - when the price is lower than
$1.25748, your premium will be covered and
you will make a profit. In the rather
descriptive words of option traders across the
globe, youre in the money.
Trading foreign exchange options does
come with one key advantage. If the market
moves against you, your losses are always
capped at the initial premium paid.
Furthermore, any underlying market volatility
while the option is running wont have any
adverse impact the position wont be
stopped out.
This brief introduction is merely scratching
the surface of trading with options. In
addition to the put described above, if you
think the underlying asset will increase in
value you buy a call option. Combine the two
and you get a straddle. This means that, as
long as the underlying instrument moves far
enough in either direction, youre back in the
money. The list goes on from here and the
subject is one certainly worth returning to in
the future.
UK 10-year Gilts, 20 year chart
Jan 12 Jan 08 Jan 04 Jan 00 Jan 96
0
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6
10 Yield, %
S
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: T
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A
D
IN
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/
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Y
J
UST days after the re-election
of Barack Obama in the
worlds biggest economy,
China is deciding who will
run the worlds second largest. For
investors looking to put their
money into this fast-growing
market, understanding both the
views and backgrounds of Chinas
new leaders is of the utmost
importance.
Hopes are high that this leader-
ship change will bring about a new
economic direction for China. Since
the National Congress of the
Communist Party opened on 8
November, senior officials have
made it clear that Beijing intends to
push ahead with economic reform.
The idea is to encourage average
Chinese consumers to spend more
and to eventually rebalance the
nations growth away from the
decades-old investment-led model.
As part of this, during his speech to
over 2,000 handpicked delegates,
25
Some things dont change
TUESDAY 13 NOVEMBER 2012
Some industries, like financial services, are still
largely closed to outside competition 10 years
after China joined the World Trade Organisation

CURRENCY STRATEGIST
CHRIS VECCHIO
My pick: Long Aussie dollar-yen, euro-dollar and gold
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few days
New trades were initiated on Friday, with the intention of
looking for 1 to 2 per cent bounces from each. Although the risk
environment has been increasingly negative over the past few
weeks, were approaching major levels in a number of key
securities that will likely produce rebounds across asset classes.
With Chinese data improving and the US fiscal cliff garnering
attention, I like being long on gold, as well as holding small
long positions on Aussie dollar-yen and euro-dollar.
ANALYST PICKS
QUANTITATIVE STRATEGIST
DAVID RODRIGUEZ
My pick: Short Aussie-dollar against monthly high
Expertise: Systems trading
Average time frame of trades: 2 to 10 weeks
I want to long the US dollar against its major counterparts.
Trading crowds recently turned short on the US dollar against
the euro for the first time since September. I like selling euro-
dollar as well, but the best reward for the risk may actually
come from the Aussie dollar-dollar. Ill take a short entry with
a stop above month-to-date highs of $1.0480. First targets are
the $1.0300 mark, but Ill likely trail my stop instead of taking
full profits on said position.
CHIEF STRATEGIST
JOHN KICKLIGHTER
My pick: Short Aussie-dollar, long sterling-yen and dollar-yen
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 day to 1 week
Risk aversion is finding a better foothold in the currency and
capital markets. Long-term trends, however, may be problematic
due to fundamental conflicts. With a strong risk aversion follow
through, I expect the dollar to play catch up with an Aussie
dollar-dollar break below $1.0350 (which necessitates a 100 pip
stop). A long sterling-yen from channel floor and 100 day simple
moving average at 125 is an alternative view. Sterling-yen is non-
risk and the 79 pivot is a good interim floor.
Chinese President Hu Jintao reaf-
firmed past pledges to institute
market reforms including prom-
ises to loosen controls on interest
rates and Chinas currency, the
renminbi.
The presumed next president,
current vice president Xi Jinping,
is seen as a possible reformer. Xi
was sent to the countryside dur-
ing Chairman Maos terror-filled
political campaign of the 1960s,
the Cultural Revolution. On the
back of this, many China watchers
believe that his administration
could be more willing to embrace
reforms, given his firsthand knowl-
edge of how a liberalised economy
can improve peoples lives. The son
of a revolutionary leader, Xi also
has military connections and is
part of the educated elite.
Some analysts say Xi was chosen
because he is known to be a con-
sensus builder and would be able
to push through new policies. Any
efforts to open the Chinese econo-
my further would likely provide
greater opportunities for interna-
tional businesses looking to sell
products or services to Chinas
growing middle class.
But despite the governments
nod to the need for economic
reform, its unclear how serious
the new leaders will be about
implementing real change. Both
European and American business
executives complain that market
reforms have stalled in recent
years. Some industries, like finan-
cial services, are still largely closed
off to outside competition more
than a decade after China joined
the World Trade Organisation.
Beijing authorities have acknowl-
edged the need to deregulate inter-
est rates, a move that would
deepen capital markets and stop
encouraging investment at the
expense of savers and consump-
tion. But would the new leader-
ship be willing to allow foreign
financial institutions to compete
freely and widely in China if there
was a chance their own banks
wouldnt survive?
When it comes to true market
reform, the question is whether
the next generation of leaders will
see opening up and deregulation
as a positive for China. Theyll also
keep a close eye on ensuring the
long-term survival of the
Communist Party.
Eunice Yoon is CNBCs senior corre-
spondent based in China.
CNBC
COMMENT
EUNICE YOON
It is still not clear whether Chinas new
leaders will advance economic reform
We will likely see a repeat of last summers debt ceiling deadlock
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Congress may
kick the fiscal
can off its cliff
A
S WE rumble towards 31
December, US policymakers
seem to be doing little of
substance to address
Americas looming fiscal cliff. And
unless making speeches about the
problem is going to make it go
away, it is highly likely that we will
see the kind of market uncertainty
that we last witnessed in the
summer of 2011, when Congress
was deadlocked over the US debt
ceiling.
The fiscal cliff refers to the effects
of a raft of laws and changes to the
tax system that kick in from 31
December. Among them, the Budget
Act of 2011 requires the President
and Congress to agree to a nine year,
$1.2 trillion (750bn) deficit reduc-
tion programme, or cuts to defence
and non-entitlement outlays of
$54.7bn. At the same time, Bush-era
tax cuts, including the 2 per cent
payroll tax holiday, will expire and
new taxes relating to President
Barack Obamas health care laws
will come into effect.
With the US federal budget deficit
running in excess of $1.17 trillion
a gross debt to GDP ratio of 104 per
cent the US Treasury will struggle
to handle the 3.5 per cent drag on
GDP that this slew of measures is
forecast to create.
POSTPONING A SOLUTION
With a month and a half left until
this deadline (less if you allow time
for a plan to be tabled and debated),
there are three possible routes that
Congress may take. The first is to
simply let the measures, as they cur-
rently stand, go into force. This
would have the benefit of slicing the
US deficit in half. But the risks of a
recession triggered by job-killing tax
hikes may be bigger odds than poli-
cymakers are willing to play with.
The second option is for policymak-
ers to cancel some or all of the tax
increases and the spending cuts.
This may avoid the drag on GDP, but
it would increase the monstrous US
deficit and push America further
into debt not so much kicking the
can along the road as kicking the
can off the cliff.
The third, and most likely
response to the fiscal cliff is for
Republicans in the House of
Representatives to concede to
Democrat demands for increased
taxes on high income earners by
$100bn to $150bn. In exchange,
Democrats will back curbs in spend-
ing by an equal amount.
EASY OPTION
Politics will usually follow the line
of least resistance, and this tax and
cut response is just that giv-
ing a concession to
politicians on both
signs of the fence that
they can parade in
front of the party faith-
ful as a sign that they
sometimes live up to some
TUESDAY 13 NOVEMBER 2012
MANAGEMENT WEALTH
cityam.com
TRADING
26
of their promises. But the fiscal cliff
bickering detracts from the reality.
To mix geographic metaphors, the
fiscal cliff is just the tip of the ice-
berg.
The US national debt that falls
under the radar of the congressional
debt limit stands at over $16.05 tril-
lion. If Congress allows the spending
cuts in the Budget Act to kick in, it
will halve the deficit. But that still
equates to more than $500bn being
added to the US debt every year. And
with the US debt limit currently set
at $16.4 trillion, Congress is heading
towards another debt ceiling stand
off. At its current rate, the US will
hit the ceiling by January 2013
meaning that no sooner will it have
responded to the fiscal cliff than it
will face another bitter, drawn out,
market destabilising battle over rais-
ing this ceiling again.
GOLD BULLS
While all of this is bad news for
America, a re-run of history spells
good news for gold bulls.
When you have US fiscal uncer-
tainty, monetary expansion from
the Federal Reserve in the form of its
open-ended quantitative easing pro-
gramme (QE3), and capital controls
in safe havens like Switzerland, gold
is a buy.
Though it gets lumped in the com-
modity category, gold is more at
home as a currency or as a stand-
alone asset. Whereas commodity
prices stand at the mercy of the laws
of supply and demand, gold for the
most part occupies a space away
from the x and y axis.
Infinitely divisible, portable, and
highly liquid, gold is seen as the ulti-
mate haven asset. There is an esti-
mated 170,000 tonnes of gold above
the ground less than the amount
of steel produced each hour. There is
little or no natural industrial
demand and the majority of gold is
in private hands. This means that,
although 2,500 tonnes are mined
each year, there is still a 65-year over-
hang in supply. As a result, gold is
seen as a Giffen good meaning
that people paradoxically consume
more of it as the price rises violat-
ing the law of demand.
If the US starts to look shaky again,
investors will become nervous and
start shifting their holdings out of
riskier assets like equities, corporate
bonds and dollars and into the safe-
ty of the yellow metal.
Though it is down from its early
October highs of almost $1,800 per
ounce, gold has been trading near
multi-week highs. For the moment,
it is Fed chairman Ben
Bernankes QE pro-
gramme that is giv-
ing gold support. But
as we head towards
the fiscal cliff, and the
potential debt ceiling after-
math, look for gold to be kicked
back into action, thriving as the dol-
lar suffers.
While US politicians bicker, gold will soar
as the dollar suffers, writes Craig Drake
LIFE&STYLE
TUESDAY 13 NOVEMBER 2012
27
cityam.com
HEALTH & GROOMING
LOSING YOUR HAIR?
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THE CITY
LAURA WILLIAMS
www.laurawilliamsonline.co.uk
Twitter: @laurafitness
The rise and rise of the super
gym: how to work out in style
I
REMEMBER a time when posh
gym membership meant you
were given a towel on arrival.
Nothing so modest nowadays.
Weve moved on to scuba diving in
your lunch hour, technology that
allows you to measure and track
every heartbeat and swim stroke,
both in and out of the club, and
chilled eucalyptus towels on the
gym floor. Welcome to the super
gym.
Diane Kay, director of sales and
marketing at the Reebok Club in
Canary Wharf says: Super gyms
have something special. Often inde-
pendently owned and operated, they
try harder to provide an outstanding
service to their members, investing
heavily in their facilities and keep-
ing their clubs spotlessly clean and
well maintained, with bang up to
date equipment.
They are also innovative and imagi-
native with their programming.
Equinox, the US sports club, has
recently opened its first internation-
al gym in West London, below the
Kensington Roof Gardens. The
Equinox philosophy is: Its not just
fitness, its life (although Im not
entirely sure what that means).
Equinox claims it is not merely a fit-
ness club, but a temple of wellbe-
ing. Again, not entirely sure what
this means but Id love to try one of
their 24-carat gold facials to try and
get a better understanding.
So, I wonder, is the City worker a
target for the super gym? Yes, Kay
says: The City life is time poor and
fast paced. Super gyms provide an
outstanding range of facilities that
allow members to get in and out and
enjoy their workout in time to get
back to their desks. Waiting for
machines is not an option. Cutting
edge technology helps too: clubs that
offer the latest equipment and class
trends are well received by the com-
petitive high achiever. Elliott Lyons,
general manager at the newly
opened Virgin Active Classic Health
Club at 200 Aldersgate says: Our
new club raises the bar for a modern
day health club. We wanted to take
our Classic brand and push the
boundaries to provide something
even better for our members with
our new concept club. Everything
from the layout of the club, the
group exercise timetable and the
concierge service has put the mem-
ber first.
So which of these Disneylands-
with-dumbbells to go for, for your
New Year body blitz? Here are my top
three the city has to offer:
WHO: Virgin Active Classic
Health Club
WHERE: 200 Aldersgate,
EC1A
WOW FACTOR: Cutting edge
equipment and the very
latest technology is top of
the list on Virgin Actives
newest London club. The
club offers MYZONE and
Swimtag, technology that
allows members to store
details of heart rate and
swim stroke online, while
the gym floor is home to
state-of-the-art core kit,
Core-Tex and the Freedom
Climber (a rotating climbing
wall that provides a
challenging workout minus
the need for ropes,
harnesses and helmets).
Cost: From 110 per month
Contact: Tel: 0845 270 9119
virginactive.co.uk
WHO: Reebok Sports Club
WHERE: Canary Wharf, E14
WOW FACTOR: At 100,000 sq
ft, the Reebok Sports Club is
the largest gym in the UK.
Reebok offers an indoor golf
facility, a 13m indoor climbing
wall, scuba diving lessons and
is the only club in the UK to
offer Jukari Fit to Fly (Cirque
du Soleil workout).
Cost: From 102 per month;
40 membership admin fee
Contact: Tel: 020 7970 0900
reebokclub.co.uk
WHO: Equinox
WHERE: 99 Kensington High Street, W8
WOW FACTOR: With a US clientele that
includes the likes of Kanye West and
Cameron Diaz, Equinox
was always going to appeal to those
lusting after the A-List experience.
Locker rooms come equipped with
Kiehls products while the clubs Green
Initiative means youre breathing
purified air and drinking ultra
filtered water. And if you break a sweat
during your Barre Burn class, you can
wipe your brow with a chilled
eucalyptus towel.
Cost: 180 per month; 500 joining fee
Contact: Tel: 0207 666 6000
equinox.com/clubs/Kensington
TUESDAY 13 NOVEMBER 2012
28
cityam.com
LIFE&STYLE FOOD & DRINK
Some like it hot
HOT PUNCHES are not in vogue. However,
while it might not look as impressive as
coolly flipping your cocktail down to
freezing, a warm cocktail can better suit our
intemperate climate.
Even more tainted than the suggestion of a
hot cocktail is the practice of making a
punch. Punches are all too often the
desperate actions of a well intentioned host.
Sadly the prime intention is usually the
desire to clear out the dodgy liqueurs at the
back of the cupboard. The addition of
sickening fruit juices only masks the painful
hangover that lurks innocuously at the
bottom of your glass.
The Classic 1,000 Cocktails should come
pretty high on a list of uninspiring titles for
books. To make room for 1,000 cocktails, the
book is mainly just recipes; yet my 1996
copy serves its purpose and its battered and
beaten alcohol stained pages are testament
to some hidden gems. One I return to again
and again is Trinidad Rum Punch:
INGREDIENTS
n1 litre water
n500 grammes sugar
n75cl dark (preferably Trinidad) rum
n40cl lemon or lime juice
n1 teaspoon of Angostura bitters
nNutmeg
Method
lBoil water and dissolve the sugar
l Add the rum and juice
l Serve hot and sprinkle with nutmeg
A new cocktail book thats a whole lot
easier on the eye than The Classic 1,000
Cocktails but fails again to concoct an
inspiring title is Worlds Best Cocktails. But
Tom Sandhams beautiful book deserves
your full attention. He imparts his precious
cocktail wisdom widely, and on the subject
of punches he explains that when traders
brought back punches from Southeast Asia
and the Middle East in the 1600s, sharing
bowls of liquor began to gain notoriety in
polite society. He notes that the word
punch derives from the Hindustani word for
five: paunch, referring to the five ingredients
used to make it: tea, arrack, sugar, lemons
and water.
The English took punches to heart (and
stomach), although they have now fallen out
of fashion. So find time this year to raise a
warm cup of punch to the Easts ancient
mixologists for inspiring this most civilised
of pastimes. After all, most like it hot.
STRAIGHT
UP
@PHILIP_SALTER
City A.M.s cocktail expert
A
FRIEND of mine has recently
taken up learning Japanese. So,
last month, I found myself
spending a surreal afternoon
watching a Japanese detective drama
series, Deka Kurokawa Suzuki, which
really cant be compared to any of its
Western counterparts (it has none of
the blood and gore of The Killing, for
instance). It is more like a pantomime
or a skit that unintentionally makes
fun of its own genre.
The episode opened at a wedding
ceremony in a Japanese pavilion, at
which one of the guests suddenly
keeled over, flailed his arms about,
choked, and died. The guests, includ-
ing the famous detective Kurokawa
Suzuki, gasped and his wife who
always pops out of nowhere to help
solve the crimes discovered an enor-
mous jar of peanut butter in one of
the guests handbags.
Its a murder! The detective
declared in Japanese and the whole
episode became a kind of spoof
Agatha Christie whodunit, with the
owner of the handbag professing
innocence. Its gripping stuff.
I am telling my colleague this long-
winded story when we sit down for
lunch at Chrysan, The Hakassan
Groups newly opened Japanese
restaurant near Broadgate in the City.
We were led down a long corridor
with the kitchen visible to our right
and a wooden panelled wall to our
left screening off a spacious but
empty dining area. It is lunch time,
after all, and it is still early days.
The rooms stiff and composed
atmosphere reminds me of the detec-
tive series and I found myself wishing
someone maybe a waiter would
break the silence and shout some-
thing silly for comic relief (Im aller-
gic to peanuts, too, so a repeat of the
whole scenario isnt beyond the
realms of possibility).
Despite the lack of dynamism, the
restaurants minimalist dcor and
design is rather beautiful. Chrysans
Kyoto-based architect Yoshiaki
Nakamura has stayed faithful to tra-
ditional and contemporary Japanese
design and the drab City office
blocks interior has been sculpted
with the features of a traditional
Japanese house.
Across the windows are Shoji-style
screens wooden lattices holding
thin rice paper squares that diffuse
the flat London light. Stepping in,
Im not sure whether I will be kneel-
ing to eat but, with some relief, find
the room is fully equipped with con-
temporary Scandinavian furniture.
Chrysan is a tie-up with Yoshihiro
Murata, one of Japans top chefs,
whose two Michelin-starred restau-
rants in Kyoto and Tokyo are shrines
to the ultra-refined art of Kaiseki cui-
sine. It is Muratas maiden overseas
partnership and his first attempt to
take what has, until now, been a local
and unexportable style of eating
6,000 miles away from home.
Kaiseki, which has its roots in the
elaborate 16th-century rituals of the
Japanese tea ceremony, is a highly
formalised multi-course meal that
requires painstaking preparation
and celebrates using fresh and sea-
sonal ingredients. Its Japans answer
to Western haute cuisine.
We opt for the Crystal Box lunch set,
which starts off with a Britain-meets-
Japan miso soup made with a strong
hint of mustard and a morsel of
Berkshire pork lurking in the depths
of the bowl (in keeping with Muratas
philosophy of using local ingredients).
And then came the Crystal (plastic)
box two in fact one with slow-
cooked duck, Devon crab, grilled lob-
ster, octopus rolled in egg powder,
sea bream with Parma ham and
kimizu sauce, and shitake mush-
rooms decked with a toothpick hold-
ing a marinated cherry tomato and
ball of miso-soaked avocado on top.
The second is a pick n mix of sushi
displayed like trinkets in a jewellery
box my favourite was a roll of mack-
erel and bitter lemon rind and a roll
of grilled eel and beetroot. The sushi
came with a 22-day dry-aged Angus
beef fillet steak served separately.
The puddings look good and they
dont disappoint unlike a lot of
desserts in Japanese restaurants,
which are frankly inedible. I go for
the soy caramel apple tatin with cin-
namon milk ice cream and yat-
suhashi biscuit. All this is washed
down with two different sakes from a
choice of 20 on the menu and a glass
of 2010 Juranon Moelleux, Domaine
Bellegarde.
Chrysan is an innovative and con-
temporary take on a conservative and
traditional style of Japanese cuisine
and it is one of the best Japanese
restaurants in London. But there is a
danger the thought-process and tra-
dition behind this elaborate cuisine
remains lost in translation and the
effort is under-appreciated.
RESTAURANT
CHRYSAN
1 Snowden Street, EC2A 2DQ
Tel: 020 3657 4777
FOOD hhhhi
SERVICE hhhhi
ATMOSPHERE hhiii
Cost for two people with drinks: 160
The food is delicious but is all the effort really appreciated, asks Kasmira Jefford
Chrysan: lost in translation?
THE BOTTLE
OPENER
NEIL BENNETT
T
HERE CAN be something very
impersonal about buying a
bottle of wine. You pull
something off a shelf with a
nice label and some fancy writing
and take pot luck. Even if its
delicious, you dont really know a
great deal about it. There may be a
few uninformative notes on the
back, perhaps a trawl through the
internet can provide a few more
clues but it is hard to get a sense
where the wine came from or who
made it.
That is why I have become a bit
of a fan of Naked Wines, the
upstart online wine merchant that
has generated quite a following in
just four years. If you have not
come across it before, Naked Wines
was founded by Rowan Gormley (ex
bottle.opener@cityam.com
Virgin Money) in 2008 in an
attempt to change the whole
winemaker/ merchant/consumer
relationship, partly through its
financial model and partly through
clever use of the web. In doing so it
achieves two things: first it sources
some really rather tasty wines from
small, independent winemakers.
Second it supports young, newly
established winemakers by buying
their wine while still in barrel,
thanks to cash from its subscribers,
who deposit 20 a month.
Starting a wine business can be
financial daunting for one simple
reason cash flow. In many cases
you have to plant the vines, grow
the grapes, harvest them, press
them and turn them into wine
before you can sell a single bottle.
Naked allows winemakers to ease
that burden. It now has 100,000
subscribers, meaning it has 2m a
month to invest in early stage wine.
This enables young winemakers
the chance to strike out on their
own. Mike Paterson, for example,
was a head winemaker at Jackson
Estate. Naked invested 526,000 in
his start up and he now has his
own label Lay of the Land. I can
attest to his Pinot Noir, which is
remarkably delicious for a first
vintage.
The other enjoyable part of
Naked is its website, which
connects you with both the
winemakers, through their videos
and contributions, and other wine
drinkers who rate the wines. There
is no hiding place here for the
unpopular. Prices are discounted
25 per cent for subscribers (which
now includes me). While the wine
is not cheap, it still represents
extremely good value, which is as it
should be.
One for the weekend: Rod
Easthopes Hawkes Bay Pinot Gris
2012, 8.49. Good weekend
amusement.
One To impress: Lay of the Land
Pinot Noir 2011, 11.99. I tasted
this and fell in love. Would cost at
least twice the price if it came from
Burgundy.
One to Keep: Balthazar of The
Barossa 2007 Shiraz, 17.99. Has
the potential to go on improving
for a decade.
Reader Offer: Naked Wines has
five free pairs of tickets to offer
City A.M. readers to its next tasting
on 17 November at Lords Cricket
Ground. The event will be an
opportunity to taste some of its
wines and speak to its winemakers.
If you want to apply send an email
to bottle.opener@cityam.com
expressing your enthusiasm and we
will draw the first five entries out
of a champagne bucket.
Why making a business out of wine is no mean feat
29
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Fill the grid so that each
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COFFEE BREAK
Using only the letters in the Wordwheel, you have
ten minutes to nd as many words as possible,
none of which may be plurals, foreign words or
proper nouns. Each word must be of three letters
or more, all must contain the central letter and
letters can only be used once in every word. There
is at least one nine-letter word in the wheel.
Place the numbers from 1 to 9 in each empty cell so that
each row, each column and each 3x3 block contains all the
numbers from 1 to 9 to solve this tricky Sudoku puzzle.
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk
KAKURO
QUICK CROSSWORD
LAST ISSUES
SOLUTIONS
KAKURO
WORDWHEEL
SUDOKU
SUDOKU
QUICK CROSSWORD
WORDWHEEL
1 2 3 4 5 6
7
8 9 10
11
12 13 14
15 16 17 18 19
20
21 22
23
24 25
13 14
25 27
9 16
15 20 8
40
11 14
41
12 22 6
15 17
17 26
28 12
4
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29
21
10
24
21
15
11
43
7
8
41
11
6
16
23
16
38
30
12
3
ACROSS
1 Rod carried as a
symbol (5)
4 Bedtime beverage (5)
7 Meadow (3)
8 Line spoken by an actor
to the audience (5)
10 Search, as with a
dragnet (5)
11 Fireside mat (3)
12 Large basket (usually
one of a pair) carried by
a beast of burden (7)
13 Allege (3)
15 One of the supports
for a table (3)
17 Foolish (7)
20 Egg cells (3)
21 Yellow-brown colour (5)
22 Compare (5)
23 Light mid-afternoon
meal (3)
24 Frightening (5)
25 Capable of owing (5)
DOWN
1 Musical symbol (5)
2 Make parallel (5)
3 Quality of being
adaptable or
variable (11)
4 Larva of a
buttery or
moth (11)
5 Covers the
surface of (5)
6 Lessen the
intensity (5)
9 Debonair (5)
14 Existing (5)
15 Inland bodies
of water (5)
16 Tropical fruit
having yellow skin
and pink pulp (5)
18 Souvenir (5)
19 Sweet made
of avoured
sugar (5)
N
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S I N U S I C I L Y
H O P A O
R T A R T D E C O
E N E M Y U K
D P A S T I C H E
S W A N E E A R L
A D D E N D U M U
P O E S S E X
P I L L I O N T U
T I I E R
F I E N D M E R C Y
5 2 1 3 5 1
7 4 2 9 6 8 5
9 8 3 7 9 6 8 4
8 5 9 8 4 9 3
7 4 2 1 2 1
8 5 9 6 4 3 1 7 2
7 1 8 3 2 9
9 8 6 9 6 1 4
6 3 2 4 1 1 2 7
4 7 5 1 2 3 9
1 8 6 4 9 8
4
4
4
4
4
4
4
4
4
The nine-letter word was
QUIVERING
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BBC1 BBC2 ITV1 CHANNEL4 CHANNEL5
TUESDAY 13 NOVEMBER 2012
THE PARADISE
BBC1, 9PM
Denise returns to the Paradise, where
she and Moray finally admit their
feelings for one another. Joanna
Vanderham stars. Last in the series.
FRESH MEAT
CHANNEL4, 10PM
A field trip goes awry for Kingsley,
Vods future as a student is put in
jeopardy, and Oregon begins to fall
for Dylan.
BODY OF PROOF
CHANNEL5, 9PM
Ethan is conducting an examination
when he has to step out of the room
for a minute and returns to find the
body has gone.
TVPICK
KNOWING YOU: ZAHA
nMoved from the Ivory Coast to
south London aged four and was
signed by a Crystal Palace scout after
impressing at a school tournament
nMade senior debut at 18 in 2010 and
is the first outfield player from the
Championship to get an England call-
up since Jay Bothroyd in 2010
nMan of the match when Palace
defeated Manchester United in the
Carling Cup last season, before being
crowned Football League Young
Player of the Year in May
nChelsea legend Didier Drogba
called Zaha to try to persuade him to
pledge allegiance to the Ivory Coast,
who he will remain eligible for even if
he plays for England tomorrow night
CHELSEA captain John Terry faces a
race to be fit for their inaugural
appearance at the Club World Cup
next month, despite positive test
results on his knee injury yesterday.
Terry is expected to be sidelined
for weeks rather than months, the
club said, adding that scans had
detected no significant damage to
his cruciate ligaments, as first
feared. The former England centre-
back sustained the injury when he
collided with Liverpool striker Luis
Suarez during Sundays 1-1 Premier
League draw his first match back
following a four-game ban.
Terry is now set for another lay-off,
with next weeks pivotal Champions
League trip to Juventus, in which
Chelsea are likely to need at least a
draw to progress to the last 16, ruled
out. He will also miss Saturdays
league visit to West Brom, while the
home match against champions
Manchester City the following
weekend looks a forlorn hope too.
Further league fixtures against
Fulham, West Ham and Sunderland,
as well as the final Champions
League group game, against
Nordsjaelland, are also in doubt.
Chelsea medics will conduct
further tests on Terry this week to
determine whether the 31-year-old
will be fit for the Club World Cup in
Japan. The competition, featuring
the champions of the six continental
confederations plus the host league
winners, begins on 6 December, with
Chelseas first match a week later. A
second, either the final or a third-
place playoff, is on 16 December.
Blues manager Roberto Di Matteo
is confident the club can cope in
Terrys absence, with David Luiz set
to return at West Brom, Gary Cahill
an able deputy and Branislav
Ivanovic able to switch from right-
back. However, the positive bulletin
will be a relief to the Italian, as he
contemplates a hectic fixture list
that includes a run of 13 matches in
45 days before the end of the year.
Todays MRI scans on John
Terrys right knee thankfully show
no significant damage to the
cruciate ligaments, a statement
read. Chelseas medical team will
conduct further tests over the next
two or three days once the swelling
has subsided to determine how long
John will be out, but it will be a
matter of weeks not months.
Chelsea boost
as Terry only
out for weeks
TUESDAY 13 NOVEMBER 2012
30
SPORT
cityam.com/sport
BY FRANK DALLERES
CHELSEA striker Daniel Sturridge
has given Crystal Palace youngster
Wilfried Zaha a glowing reference
after seeing Englands latest call-up
in training with the national team
for the first time.
Versatile forward Zaha, 20, was a
late addition to the squad for
Wednesdays trip to Sweden, after
the withdrawal through injury of
Wayne Rooney and Theo Walcott left
Roy Hodgson desperately short of
attacking options.
The Ivory Coast-born starlet could
yet choose to represent the west
African nation even if he plays in
Stockholm, as the match is a
friendly, but Sturridge hopes he
sticks with his adopted country.
He is a very talented player and
he was sharp in training today, he
looked very good. He has got a lot of
skills and can bring a lot to the table.
I am looking forward to
playing with him, he said.
I think whichever
decision he makes is going to
be right for him as a person
but I think everybody would
love him to play for
England and it would be
great if he could.
Captain Steven Gerrard
looks set to become only the
sixth England player to
reach a century of caps
this week after a scan on
a knee injury suffered
in Sundays draw at
Chelsea allayed fears
of a serious problem.
Sturridge,
meanwhile, is hoping for a chance to
shine, as one of only two Premier
League strikers in the party, despite
the 23-year-old starting only once for
Chelsea this term.
Its just great to be in the
position where I am now, to be
involved in the England squad
even though Ive not been
playing regularly, and for
the manager to show
huge faith in me, he
added. I just want to
thank him for picking
me for this squad and
hopefully Ill repay him. Its a
huge window of opportunity
for everyone to show the
manager what they can do.
WORLD No1 Novak Djokovic brought
the curtain down on another vintage
year last night by beating Roger
Federer 7-6 (8-6), 7-5 in an enthralling
encounter to win the Barclays ATP
World Tour Finals at the O2 Arena.
Djokovic had lost their last two
matches but came back from a break
down in each set to win his second
season-ending championship, having
won the title in 2008 in Shanghai,
and claim the 1.1m prize.
The Serb swept to three grand
slams in 2011 compared to just one
this year but, following his defeat of
Federer, declared 2012 to be his most
satisfying campaign yet.
This is my time, my moment, and
throughout the season Ive had to
believe in my abilities, he said. Ive
had a lot of success but some disap-
pointing losses in the major events.
But all in all it was a fantastic year. I
had to face a lot of difficulties off the
court especially this week with my
[ill] father fighting his fight off the
court, which gave me extra strength.
I actually feel more satisfied right
now than last year, even though I
had an incredible 2011. I feel this
year, considering the circumstances
that I had to face on and off court,
expectations, all these things, has
been even more successful for me.
Federer, who was seeking to win
the trophy for a record seventh time
and claim a third successive crown
since the event has been held in
London, took the initiative in the
first set, winning the first nine
points and racing to a 3-0 lead with
some spectacular shot making.
However Djokovic responded in typi-
cal fashion, breaking back after some
relentless rallies to lead 5-4.
In response, Federer saved a set
point and forced the set into a dra-
matic tie-break, where the momen-
BY FRANK DALLERES
@cityam_sport
Palace youngster gets Sturridge thumbs-up
Terry injured his knee against Liverpool
Djokovic (right) came from a break down in both sets to beat Federer (left) and win his second season-ending championship
Masterful Djokovic ends
Federers London reign
BRITAINS Andy Murray admits
he doubted whether he would
ever win a grand slam, before
winning the US Open in
September.
Murrays bid to win the
Barclays ATP World Tour Finals
ended with defeat to Roger
Federer in the final four on
Sunday, but the Olympic mens
singles champion is convinced
that his breakthrough year was
worth the hard work.
Murray: I doubted I could win
a grand slam until US Open
Sometimes when you lose a
tough match or a big final, you
spend the next few days thinking,
Is it worth it? Is all the training
making a difference? Will I ever
be good enough to win one of
these big events?,said Murray,
who lost four Grand Slam finals
before his Flushing Meadows win.
Ive been through so many
highs and lows already
throughout my career, and to
experience the sort of highs that I
did in the summer made me
realise it absolutely was worth it.
BY ALEX SHARP
tum swung Djokovics way, forcing
the errors from Federer at 6-6, taking
the set at the third attempt.
The world No2, who ended Andy
Murrays hopes of a home triumph in
the semi-finals, once again took com-
mand, breaking in the first game of
the second set following some pun-
ishing rallies. He was 4-2 up and
looked to be forcing the captivating
final into a third and decisive set.
At 5-4 the Swiss had a set point but
casually hit a forehand wide and con-
sequently Djokovic broke back.
The match looked set for another
tie-break, however Djokovics outra-
geous defence made Federer go for
the corners, bringing up his first
match point.
Federer could no longer hang on
and Djokovic clinched victory with a
sensational passing shot on the run.
Zaha received a late call-up amid
a spate of forward withdrawals
BY ALEX SHARP
AT THE O2 ARENA
31
IN BRIEF
Coach Sutton going back to work
nCYCLING: British head coach Shane
Sutton could return to work at this
weeks Track World Cup in Glasgow.
Sutton suffered bleeding on the brain
and a broken cheekbone in a bike
accident last week, just hours after
Tour de France champion Bradley
Wiggins broke a rib in a crash with a
van while training in Lancashire.
HRT owners green light to sale
n FORMULA ONE: Struggling team
HRT have been put up for sale by their
owners, Spanish private equity group
Thesan Capital. The outfit, which
boasts drivers Pedro de la Rosa and
Narain Karthikeyan, is bottom of the
constructors championship. The
owners said they were in talks with a
number of potential buyers and hoped
for a deal in the coming weeks.
GOLF
COMMENT
SAM TORRANCE
McIlroy clinched the money list double
ENGLAND head coach Stuart
Lancaster has warned his team to
prepare to face Australia at their
best on Saturday, despite the
Wallabies crushing defeat in France
at the weekend.
Lancaster is wary of England
underestimating the task of beating
a team who held New Zealand to a
draw just weeks ago, regardless of
the 33-6 loss they suffered in Paris
hours after the Red Rose routed Fiji.
We recognise the challenge that is
coming our way, he said. There is
bound to be a reaction from the
weekends performance against
France. They are a side with
character and resilience. Im sure if
theyve got a few players coming
back as well they will be a different
animal on Saturday. We need to
make sure we are ready.
It was only a couple of weeks ago
they pushed the All Blacks and we
are expecting that type of
performance this weekend. In this
situation there is bound to be a
reaction. They are a nation full of
resilience in adversity and we need
to be ready for it.
Prop Alex Corbisiero and centre
Jonathan Joseph are back in
contention for the Cook Cup clash at
Twickenham, having recovered from
knee and ankle injuries, while wing
Chris Ashton is available again after
missing the 54-12 victory over Fiji
through suspension.
Former cyclist Lance Armstrong has cut all
remaining ties with Livestrong by stepping
down from the charitys board
cityam.com
TUESDAY 13 NOVEMBER 2012
BY FRANK DALLERES
BY ALEX SHARP
Beware Australia smarting from
France defeat, warns Lancaster
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patient, after
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McIlroys a one-off, sit back and enjoy him
Dont rely on spinners to beat
India, Harmison tells England
H
ES world No1, a multiple
Major champion and now
winner of the European and
American tours money list
double. Rory McIlroy has become a
megastar and hes improving in front
of our eyes.
People should sit back and enjoy
watching the Northern Irishman in
his pomp, because players as
talented as the 23-year-old only
come around once every 10 years.
While topping the Race to Dubai
as he did on Sunday and the PGA
Tours order of merit are fantastic
achievements, McIlroys next target
will be to add to his two Major wins.
If he wins more Majors, the orders of
merit will come on their own.
McIlroy has talked of targeting
Jack Nicklauss 18 Major titles, and
the Golden Bear is certainly the
yardstick. Tiger Woods had the
opportunity to match Nicklaus he
may yet and Id suggest McIlroy is
the next serious challenger.
He certainly has all the
ingredients, not least an old head on
young shoulders. He studies hard, is
looking to learn every minute of
every day, and is now dotting the Is
and crossing the Ts.
Another man deserves some of the
limelight this week, and that is
Matteo Manassero, whose win at the
Singapore Open makes him the first
teenager to win three titles on the
European Tour. The 19-year-old is
perhaps unique in that he is very
short off the tee. Once he finds a way
of adding 20 yards to his drive he
may be up there challenging McIlroy.
For now, his triumph over a valiant
Louis Oosthuizen in a play-off lifts
him into the world top 50, meaning
hes on course for a place at next
years Masters a fantastic bonus
and wonderful end to the season.
Sam Torrance OBE is a multiple Ryder
Cup-winning golfer and commentator.
Follow him on Twitter @torrancesam
Spinner Swann has rejoined the team
FORMER England bowler Steve
Harmison insists that seamers
must contribute wickets if
England are to be successful in
India, when the first Test begins
on Thursday in Ahmedabad.
England have not won a series
since 1985 on Indian soil, where
seamers have struggled to make
an impact in conditions widely
suited to spin bowlers.
They [seamers] all bowl well
with the reverse swinging ball
and I think thats going to be
the key for England, he said.
Im sure England are
banking on Graeme Swann and
Monty Panesar doing the bulk of
the wicket-taking. If you want to
be the best bowler that you can
possibly be youve got to go out
and perform in these countries.
Harmison believes England
can succeed in India, but only if
they find a way to stop their
formidable top-order batsmen
from scoring freely.
Im sure theyll have a
gameplan to stop boundaries
and cut off the big shots that the
Indians do like to play and build
pressure that way, he said.
The 34-year-old doubts
England can recreate the home
4-0 whitewash they inflicted on
India last year.
When England won 4-0 in
England, they bombarded the
Indians with short balls, he
added. They probably wont be
able to do that again as the ball
doesnt tend to bounce above
shin height.
Spinner Graeme Swann has
rejoined the side after a trip
home, while pacemen Stuart
Broad and Steven Finn are
fighting to be fit for Thursday.
THE ENGLAND camp has
shrugged off Indian hopes that
they could be undone by an
innovative type of spin when the
Test series begins this week.
India bowler Ravichandran
Ashwin is honing a carrom ball
similar to that used by Sri Lankas
Ajantha Mendis, in which the
thumb and middle flinger flick
the ball to achieve either leg or
off-spin, or even bowl straight.
But assistant coach Richard
Halsall insists Englands own slow-
bowling guru Mushtaq Ahmed
has allayed any fears about the so-
called mystery ball.
I was very fortunate to spend a
few years with Mushtaq at Sussex,
and Mushy would have a mystery
ball every week, Halsall said.
He would show it to the
opposition in the nets, and as
wed wander off hed say thats
just my leg-spinner.
Hosts honing
mystery ball
BY FRANK DALLERES
Results
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