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Issue 1,363 Wednesday 13 April 2011 www.cityam.com FREE

Probe into
FIRMS HIT AS CITY inflation
figures leak
TURNS OFF THE TAP

▲
MARKETS
BY JULIAN HARRIS
CAPITAL MARKETS SUSPICIONS that yesterday’s shock
▲

BY DAVID HELLIER & RICHARD PARTINGTON inflation figures were leaked prior to
their release are being investigated by
London’s IPO market, in which compa-
nies raise funds through the issue of
UNSETTLED IPO MARKETS the government’s independent statis-
tics office.
new shares, was in a state of intensive Economists widely anticipated con-
care last night after the online pay- COMPANY EXPECTED DATE WHAT sumer prices to have edged up to 4.6
ments group Skrill became the latest VALUE HAPPENED per cent in March, yet the figure unex-
issuer to pull its listing plans. pectedly fell to four per cent.
The UK online payments provider While sterling dipped when the
postponed its London offering, blam- Skrill Looked to raise Announced on Suspended offer last news was officially released at 9:30am
ing “adverse IPO (Initial Public BST, there were movements against
Offering) market conditions”. about £80m 28 February night due to “adverse the currency prior to that time, stok-
It had earlier cut the size of its share IPO market conditions” ing rumours of a leak.
offer, in a last-minute and doomed Sterling dropped to a low of $1.6265
scramble to salvage the listing. Topaz Energy Looked to raise Announced Suspended IPO shortly after 8am, while the euro rose
Existing investors in Skrill, operator to £0.8855 shortly after 9am.
of online payments system & Marine approximately on 16 March due to uncertainty The statistics office later claimed
Moneybookers.com, cut the offer to £306m in the markets their initial investigation showed “no
£30m of shares in the float, down evidence of such a leak,” but said they
from £80m. Yet frenzied talks all day to are “continuing to review the situa-
save the sale were in vain, after man- Perform Group Looked to raise Announced Lowered price to tion.” The Financial Services Authority
agement resolved to put the plans on up to £175m on 24 260p per share, declined to comment.
hold after an eleventh hour meeting ECONOMICS: P4
last night. March raising £146m Skrill CEO Martin WEALTH MANAGEMENT: P19
Skrill’s failed battle to persuade Ott has pulled its
investors to back it comes days after Edwards Co Planned to raise Announced Pulled offer because of planned £80m
Edwards, the vacuum technology firm, float due to mar- ANALYSIS l The euro soared against
was forced to pull its share offer. Last about £375m on 14 March uncertainty in markets ket uncertainty. 0.88880 €/£sterling yesterday morning
week the media group Perform
0.88740
became the first UK-based company to
press ahead with a flotation in the night: “I’ve been speaking to a lot of problems currently being experienced Europe. It had attempted to stage an 0.88600
whole of 2011 to date, according to investors but basically the trust with by identity security group CPP, whose IPO market offer to boost its profile
International Financing Review (which them has been broken. They just think shares have dived in the past few days and help fund its expansion into new 0.88460
tracks transactions of more than we are trying to get them.” He cited the on regulatory issues around a year products and locations.
£50m). But its shares have dived by flotations of Promethean, Betfair and after its flotation, had not helped. The firm is majority owned by pri- 0.88320
around 20 per cent since the deal went Perform as examples of companies Skrill, led by chief executive Martin vate equity group Investcorp Source: Spread Co.
ahead last Thursday. that had seen falls in their share price Ott (pictured) has more than 15m regis- Technology Partners, who were due to 0.88220
5:00 6:00 7:00 8:00 9:00
One equity markets banker said last soon after their floats. He also said the tered users and mainly operates in be among those selling shares.

FTSE 100 t5,964.47 -88.97 DOW t12,263.58 -117.53 NASDAQ t2,744.79 -26.72 £/$ 1.63 unc £/¤ t1.12 -0.01 ¤/$ ▲1.45 +0.01 Certified Distribution
31/01/11 - 27/02/11 is 107,265

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 2 News
Ministers in office but not in power
EDITOR’S LETTER
ALLISTER HEATH
THERE is nothing more depressing
than a good idea that is badly execut-
ed. The government is right to seek to
regain control of the public finances –
but its inability to implement austerity
properly could yet destroy the coali-
tion. The wrong cuts are happening –
and far too little meaningful restruc-
turing of the public sector is taking
place. Even well-managed private
firms are usually able to reduce costs
by 5-10 per cent in an emergency with-
out consumers noticing. After years of
spending increases, the generally
bloated, monopolistic and badly man-
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WHAT THE OTHER PAPERS SAY THIS MORNING
CITY INVESTOR CHIEFS BACK BANKING
REVAMP
City fund managers have broadly wel-
comed the reform drive sweeping
Britain’s banking sector, in spite of
vocal criticism from some institu-
tions. “There is a largely silent majori-
ty of investors who believe that
structural reform and tougher capital
requirements are a good idea,” said
James Alexander, head of equity
research at M&G.
CHINESE COMPANIES GO ON GLOBAL
BOND SPREE
Chinese companies have this year
embarked on an unprecedented bor-
rowing spree in international bond
markets, a trend driven by property
developers starved of credit by state-
owned banks. Mainland groups have
already borrowed $12.2bn from inter-
national investors so far in 2011 –
more than five times the amount they
aged public sector ought to be able to
absorb much larger cuts while preserv-
ing essential services. Services could be
outsourced (including overseas) or pri-
vatised, councils could merge, all
unnecessary functions and staff could
be eliminated, management could be
streamlined, new working practices
could be introduced, departments
could move into cheaper offices and so
on – all the things that private firms
do when they need to make substan-
tial savings while still continuing to
please their customers.
The tragedy is that the public sector
doesn’t have to compete for paying cus-
tomers – its resources are extracted
forcibly via the tax system. The incen-
tive structure is thus very different: top
managers need to meet their budgets –
but how they do it does not matter as
much. In fact, if they cut vital services,
the resulting outcry can actually end
up boosting their resources over time.
It is a very different game to that faced
by the private sector. Ministers have
discovered, to their horror, that they
Swaps curbs
to hit US firms
REGULATION
▲
BY KATIE HOPE
LARGE non-financial US companies
will be required to post collateral for
derivatives transactions if they
exceed a predetermined limit for
credit exposure, according to propos-
als issued by regulators yesterday.
The Federal Deposit Insurance
Corp (FDIC), which along with the
Federal Reserve and other regulators,
has produced the rules as part of the
Dodd-Frank reform Act, said the new
rules won’t hurt companies provid-
ing that they don’t engage in overly
speculative bids.
“We do not want to blow up the
healthy and needed parts of the mar-
ket,” said FDIC chairman Sheila Bair.
But companies, which have fiercely
fought against the swaps market
reform – financial contracts between
had secured by the same point last
year, according to data provider
Dealogic.
MEDVEDEV TO DECIDE SOON ON
SECOND TERM
Dmitry Medvedev, the Russian presi-
dent, has said he will soon decide
whether to seek re-election in 2012
and that it is time to draw a line
under building state capitalism in the
country. Painting himself as the can-
didate for change, Mr Medvedev
underlined the differences between
his style of rule and that of his prede-
cessor and mentor, Vladimir Putin,
the prime minister.
HIGH-FREQUENCY BOOM TIME HITS
SLOWDOWN
Low market volumes and stiff compe-
tition have led to a sharp fall in “high-
frequency” trading as industry
experts warn that the past two years
of rapid growth may be coming to a
halt. High frequency traders are
instead flocking to emerging markets.
have even less control over the public
sector than they feared in their worst
nightmares. There are few levers that
they can pull to ensure that change
takes place; the bureaucracy is desper-
ate to put its own interests first.
The result is a looming disaster for
the coalition. Take cuts: yesterday,
London Ambulance said that it would
be cutting 560 frontline positions over
the next five years, which is very bad
news. Yet at the same time local coun-
cils are still recruiting politically cor-
rect non-jobs. One recent investigation
revealed that “walking coordinators",
“obesity strategy officers”, and “active”
workers are still being recruited. One
council has just hired an “age friendly
communities” manager, a walking
and cycling officer, a “community con-
servation”officer and an “Energy
Island” administrator. Meanwhile,
many bureaucrats prefer to shut servic-
es such as libraries rather than seek
the help of more efficient private
providers to keep them going at a
much cheaper cost. Earlier this year,
two parties to exchange one asset or
liability for another at a future point
in time – said applying margin
requirements to corporate users, who
require them to hedge against cur-
rency or fuel price fluctuations, was
counter to the purpose of Frank-
Dodd.
The Coalition for Derivatives End-
Users, an umbrella group of business
interests, warned that the proposals
could “divert working capital from pro-
ductive uses at the costs of economic
growth and jobs, or send a vibrant,
secure swaps market overseas.”
JP Morgan chief Jamie
Dimon warned US
firms would take
business overseas to
avoid draconian rules
BUSINESS GIANTS TAP GROWTH FUND
Some of the world’s largest compa-
nies have won a share of a £450 mil-
lion fund designed to boost regional
growth, provoking accusations that
ministers froze struggling small busi-
nesses out of the scheme. General
Motors, Procter & Gamble, Thales, the
defence company, and Durham
County Cricket Club were among a
list of grant recipients described as
bizarre by Labour and Tory MPs yes-
terday.
BLACKBERRY MAKER TURNS ON IPAD
The Playbook tablet computer will be
the saviour of Research In Motion,
according to the co-chief executive of
the maker of the BlackBerry. Analysts
have claimed that the company is on
the verge of decline after being out-
flanked in the smartphone market by
Apple’s iPhone and devices based on
Google’s Android operating system.
Library Systems and Services, a US
company, offered to run libraries for
35 per cent less than councils are
spending. Book borrowing would
remain free, while add-on services,
such as coffee shops, IT and book
stores would be used to generate rev-
enues. Others have suggested purchas-
ing second hand books. Yet many
councils aren’t interested.
The coalition should legislate to
force local authorities to seek to put
services out to tender – or even to pri-
vatise them completely – before they
shut them. An independent consultan-
cy should be hired to analyse all the
staffing of all government depart-
ments – and to make a list of non-
essential jobs. The government should
legislate to cut these as a priority, to
protect nurses and teachers. Unless
radical action is taken, and fast, the
wrong cuts will be made – with disas-
trous consequences for consumers as
well as for the coalition.
allister.heath@cityam.com
Follow me on Twitter: @allisterheath
Barack Obama is being urged to act quicker to cut the US deficit.
IMF urges faster US cuts
US BUDGET
▲
BY RICHARD PARTINGTON
THE INTERNATIONAL Monetary Fund
(IMF) has urged the United States to
come up with credible measures to
reduce its record budget deficit, heap-
ing pressure on the White House.
President Barack Obama will today
outline fresh plans for reducing the
nation’s debt, which is on track for hit-
ting $1.4 trillion (£857bn) this year, as
he attempts to seize the high ground
in a debate with Republicans over how
LUBRIZOL TIMETABLE SHEDS MORE
LIGHT ON WARREN BUFFETT DEAL
David Sokol, a former key lieutenant to
Warren Buffett at Berkshire Hathaway,
knew in December that Lubrizol's
board was aware of Berkshire's interest
in a possible takeover, according to a
new filing with US regulators. A more
detailed timetable of the events that
led to Berkshire's $9bn (£5.5bn)
takeover of the US chemicals company
last month is in the document.
BRITONS ENJOY EASY LIFE, SAYS OECD
Britons work fewer hours than the
Spanish, Portuguese and Italians once
cooking, cleaning and caring are
included in the daily grind. When it
comes to shopping, though, the UK can
hold its head up high – only the
Germans, Canadians and French spend
more time on the high street, accord-
ing to the Organisation for Economic
Co-operation and Development (OECD).
CITYA.M. 13 APRIL 2011
NEWS | IN BRIEF
LSE eyes FTSE futures trading
The London Stock Exchange is forging
ahead with a plan to challenge the domi-
nance of NYSE Euronext's Liffe and
Deutsche Boerse's Eurex by expanding its
futures trading business. The exchange
said yesterday it will start trading FTSE
100 index futures, subject to regulatory
approval, in the first week of June, a
direct challenge to its domestic rival Liffe,
the main FTSE futures exchange. The
June launch will mark a milestone for the
LSE which has been working hard in the
past two years to diversify its revenues.
SABMiller faces India tax fee
Indian regulators have demanded
London-listed firm SABMiller pays out
$39.5m (£24m) in tax for its 2006
acquisition of assets in the country from
Australian brewer Fosters. The firm
argues it is not eligible for tax as the
deal was struck between two non-resi-
dent firms. Yet New Delhi is seeking ret-
rospective tax on deals completed
outside of India, with the SABMiller
claim the latest in a string of attempted
tax clawbacks – including Vodafone’s
deal with Hong Kong-listed firm
Hutchison for assets in India.
best to cut costs.
But the IMF said in its latest ‘Fiscal
Monitor’ report that a further delay of
action to cut the country’s deficit
could be “fiscally costly”. It added that
a “major” adjustment will be needed
next year to put the budget back on
track. The US posted a monthly budget
deficit of $188bn (£115.5bn) in March,
the Treasury Department reported yes-
terday. The deficit will reach 10.8 per
cent of its gross domestic product this
year, the largest among major devel-
oped economies.
HIGHER OIL PRICES CURB DEMAND
The highest oil prices in two and a
half years have begun to trigger
some deterioration in demand, oil
producers and consumers said, a
surprising fallout from the disrup-
tion in oil production that has
resulted from unrest in the Middle
East. Opec slightly downgraded its
annual forecast on Tuesday for glob-
al oil consumption growth for the
first time this year, as it emerged
that kingpin Saudi Arabia had cut
back production on lackluster
demand for extra barrels.
FIAT INCREASES CHRYSLER STAKE
Fiat Tuesday boosted its stake in
Chrysler Group LLC to 30 per cent
from 25 per cent after the Italian auto
maker met the second of three U.S.
government-mandated requirements
that automatically trigger increases
in its ownership stake.
CITYA.M. 13 APRIL 2011 News 3

Lloyds chief
executive Antonio
Horta-Osorio
lashed out at the
EU pension scheme
rules could hit UK
banking
commission
yesterday

Picture:
MICHA THEINER
/CITY A.M.

▲
EU REGULATION
BY RICHARD PARTINGTON
NEW pension rules being considered
by the European Union could force UK
employers to pay off deficits more
quickly, according to City law firm
Towers Watson.
The European Commission wants to
revise rules on the funding of pension
schemes, making them equal across
member states.
Towers Watson warned that the
future of some UK companies could be
under threat if they were forced to
divert more cash into their pension
funds.
John Ball, head of UK pensions, said:
“The Commission’s position may well
change the way that funding targets
are calculated but it’s too early to con-
clude that it will make them more
prudent overall.”

Lloyds puts
switching
cost at £2bn
part of the infrastructure that banks
▲

BANKING
BY JULIET SAMUEL
DESIGNING a system to make switch-
ing accounts easier would cost the
banking industry £2bn and take two
years, according to a confidential
report given by Lloyds to the
Independent Commission on Banking
(ICB).
The eight-page document and 21-
page appendix, seen by City A.M., lays
out several options for introducing a
new account switching service, with
the bank favouring a seven-day redi-
rect service that would enable all
direct debits and other payments to be
automatically re-routed.
Notably, the bank suggests that such
a system could also be introduced as
part of a resolution process for failing
banks: “In the event of bank failure,
one of the imperatives may be to
migrate substantial numbers of
accounts quickly to another provider,”
it says. “The switching remedy which
we propose could be developed and/or
used to reduce the risk of payments
going to the wrong accounts following
migration.”
This suggests that a portable switch-
ing service for retail deposits could be
are required to include in the ring-
fenced retail subsidiaries that the ICB
has suggested .
If the ring-fenced subsidiary were to
consist solely of retail deposits and a
payments system, it would in fact be
closer to “operational” subsidiarisa-
tion (ring-fencing of essential infra-
structure) rather than a full-scale
division of banks along business lines.
However, this is unlikely to consist
of “full account number portability”
of the kind available to mobile phone
users. The Lloyds paper concludes that
such a system would cost £2bn-£5bn
and take five to ten years to implement
as it would require a redesign of the
entire payments system.
The introduction of a switching
service that could improve competi-
tion in retail banking was one of the
ICB’s proposals in its interim report
released on Monday. In line with the
Lloyds recommendations, the report
suggests that “a radically improved sys-
tem for switching accounts could and
should be introduced at a reasonable
cost within a short timescale” and that
this would be “less costly” than full
account number portability.
Lloyds declined to comment.

Private sector High bank pay

hire rate jumps reforms needed
▲

EMPLOYMENT
THE RATE at which the private sec-
tor in London took on staff hit its
quickest pace for almost three years
in March.
A survey by Lloyds TSB and Markit,
which indicates growth with a score
above 50, shot up to 57.7 last month.
The last time the private sector in
the capital hired at a quicker rate
was in April 2008.
The jobs market also grew for a
second consecutive month for the
first time since last April. The capi-
tal’s service driven economy helped
to boost employment, as the sector
continued to take on new staff.
BANKING
BANKS need to do more to shift away
from a culture of risk and the exces-
sive pay structures that prevailed
before the financial crisis, an indus-
try report has said.
Banks have made progress since
2008 as top management and boards
have become more involved in setting
risk policy, according to the survey of
62 firms released on Tuesday.
But reforms were far from com-
plete, with risk appetite across the
firms broadly unchanged, said the
report by Ernst & Young, conducted
on behalf of the Institute of
International Finance.
 4 Focus on Inflation CITYA.M. 13 APRIL 2011

WHY DID INFLATION FALL, AND WILL THE DECLINE CONTINUE? ANALYSIS l Inflation in the UK remains above the Bank of England's target

THE EASTER EFFECT
This year we will have the latest
Easter since 1996. Bank holiday
Easter Monday falls on 25 April,
while last year it was on 5 April.
Prices in the run up to Easter tend to
increase. “As is well known retailers
tend to push up prices in the two
weeks ahead of Easter (and other
holidays), in order to institute the
ostensible sharp discounts over holi-
day weekends,” said Marc Ostwald of
Monument Securities. Last year’s
Easter was close enough to March to
affect its inflation figures, while this
year’s Easter will primarily influ-
ence the April numbers. “The later
timing of Easter compared to last
year played a key role in this drop [in
inflation],” added Vicky Redwood of
Capital Economics.
VALUE ADDED TAX
January’s 2.5 per cent rise in VAT
increased prices by 0.76 per cent, the
Office for National Statistics (ONS)
said yesterday. While this was far
more than last year’s “pass-through”
of 0.4 per cent, a change in the way
the ONS weighs some sectors in its
statistics affected the change. From
next January the VAT effect falls out
of the year-on-year statistics. The
pass through was higher than
expected, offering some comfort to
inflation doves, yet Henderson’s
Simon Ward warns otherwise. “This
blows apart the claim that inflation
would be close to the target but for
the VAT hike, based on the mislead-
ing ‘CPI at constant tax rates’ meas-
ure, which assumes that tax changes
are passed on in full,” Ward said.
6
OTHER TAXES AND DUTIES
Some new duties introduced by
chancellor George Osborne came 5
into effect on 23 March. These were
not counted by the March figures,
however, as the Office for National 4 CPI
Statistics bases much of its data on
one “index day” during the month. 3
Last month this was 15 March – CORE CPI
before the extra duties came into
effect. The duties will therefore be 2
Bank of England CPI target
counted in next month’s inflation
figures. However, last April there
1
was also a 0.6 per cent monthly RPI
increase in prices, attributed to
some extra duties in the final 0
Labour budget – so the annual rate
of inflation may not be boosted so
much this month. Duties typically -1
bolstered by chancellors are on alco-
hol and tobacco. -2
Sep 2009 Dec 2009 Mar 2010 Jun 2010 Sep 2010 Dec 2010 Mar 2011

Inflation dips
on food prices
cent respectively.

▲
UK ECONOMY
BY JULIAN HARRIS
INFLATION surprisingly slowed to four
per cent in March, down from
February’s 28-month high of 4.4 per
cent, the Office for National Statistics
(ONS) said yesterday.
Consumer prices rose 0.3 per cent
from February to March, yet compared
to the same months last year inflation
slowed by 0.4 per cent.
Food discounts by the UK’s super-
markets were largely cited for the
decline. Food prices dropped by a
record 1.4 per cent from February to
March, the ONS said.
Core inflation, which excludes food,
energy, alcohol and tobacco, dipped
from 3.4 per cent in February to 3.2
per cent last month.
The retail price index (RPI), which
includes mortgage payments, and the
tax and prices index (TPI), which
includes direct taxes, also fell by 0.2
per cent – to 5.3 per cent and 5.8 per
“Markets have now moved to almost
totally remove the possibility of a rate
hike in May or June,” said Citigroup’s
Michael Saunders, following the news.
“This seems rather premature in our
view.”
The consumer price index average
for the first-quarter of the year (4.1 to
4.2 per cent) remains slightly above the
level predicted in the Bank’s last infla-
tion report (four to 4.1 per cent),
Saunders said.
“This effect from the food dip is like-
ly to prove temporary,” said
Henderson’s Simon Ward. “Food com-
modity prices and fuel costs have
climbed more in recent weeks.”
Transport was the biggest contribu-
tor to the four per cent annualised rise
in prices, with fuels and lubricants
soaring by 15.9 per cent in the 12
months to March. Food prices rose
0.49 per cent over the period, despite
the slip from February to March.
WEALTH MANAGEMENT: P19

CITY VIEWS: HOW WORRIED ARE YOU ABOUT

INFLATION?
Interviews by Robert Leedham and Eric Wilkens

GAVIN SUMMERS | XL INSURANCE

“I'm quite worried because the cost of
living is going up. My pay increase
was below inflation so it was essentially
a pay decrease.”

ANDY PEACOCK | AXA INSURANCE

“I'm not worried. I have a mortgage and
credit card but it is not that bad if you con-
sider the cost of oil and VAT. Take taxes out
of the equation and it is to be expected.”

MATTHEW FAWL | LORIEN RESOURCING

“Reasonably worried. I am looking
to buy a house and I have already
got a loan out but inflation makes
that difficult.”
CITYA.M. 13 APRIL 2011
Goldman calls
top of rally in
commodities
▲
COMMODITIES
BY MARION DAKERS
COMMODITY prices dipped yesterday
after long-term bull Goldman Sachs
advised clients to close their long
positions on a basket of commodities
including copper, platinum, soy
beans and crude oil.
Goldman’s “CCCP basket” has
made a 25 per cent gain over the last
four months, but the bank warned
clients to take profits before an
expected cooling of the market.
“Although we believe that on a 12-
month horizon the CCCP basket still
has upside potential, in the near term
risk-reward no longer favours being
long the basket,” Goldman’s com-
modity research team, led by Jeffrey
Currie, said in a note.
Crude oil fell from a two and a half
year high yesterday, with Brent spot
prices closing down 4.4 per cent at
$120.83 a barrel in London trading.
Copper prices fell two per cent yes-
terday while platinum edged down
one per cent.
Mining firms were the top fallers in
the FTSE 100 after the note’s release,
though the sector was also pushed
down by a wider flight to safer stocks.
Across the Atlantic, the Dow Jones
Industrial Average lost 117.53 points,
led by energy stocks, on fears falling
oil prices could set off a reversal in
the high-flying energy sector
A spokesman for diversified miner
Anglo American, which saw its shares
fall 4.6 per cent yesterday, said that
while metal prices are expected to be
unsettled in the near-term, “our view
is that demand pace is sufficiently
robust and supply sufficiently chal-
lenged, with the resources in increas-
ingly difficult geographies” to ensure
price rises. MARKETS: P18
FAST FACTS | COMMODITY BOOM
l FTSE giants like BHP Billiton, Rio Tinto and
Shell reported huge profits for the last year on
soaring commodity prices.
l Demand from new markets and uncertain
long-term supply have recently pushed prices.
Have your say on Portugal’s bailout
– join our London business panel
THE latest Voice of the City survey, in
association with PoliticsHome.com,
would like to know what you think
about the Portuguese bailout, and
the role you think the UK should play.
To participate, simply go to
www.cityam.com/panel and answer
the questions below. Results will be
published in Monday’s paper. All of
the data provided is confidential and
will not be shared with any other
party.
1. The UK may have to contribute
£4bn towards the European bailout
of Portugal. Do you think contribut-
ing is the right or wrong step for the
UK to take?
l Totally right
l Somewhat right
l Somewhat wrong
PoliticsHome.com
In association with
PoliticsHome.com
l Totally wrong
2. Do you feel the Portuguese govern-
ment’s request for a bailout has justi-
fied the coalition’s level and speed of
cuts to public expenditure?
l Yes. The level and speed of cuts have
been justified.
l No. The cuts need to be more drastic.
l No. The cuts are being made too dras-
tically.
3. Labour shadow chancellor Ed Balls
has expressed scepticism towards UK
participation in bailouts of European
countries. How does this make you
feel towards him?
l Much more favourable
l Somewhat more favourable
l Neither more nor less favourable
l Somewhat less favourable
l Much less favourable
Apply to join today at
www.cityam.com/panel
News 5
Lisbon bailout
to be in place
by June vote
EUROZONE CRISIS
▲
PORTUGUESE voters will have a fully
negotiated bailout package ready
before their June elections, said
finance minister Fernando Teixeira
dos Santos yesterday, giving them the
chance to accept or reject it at the
polls.
The loan is likely to be around
€80bn (£71.2bn) with conditions based
on the austerity package that was
rejected by parliament, Teixeira dos
Santos said.
IMF and EU officials kicked off nego-
tiations in Lisbon yesterday. Portugal is
expected to get a less punitive rate on
its rescue than either Ireland or
Greece, whose bailout costs are widely
thought to be unsustainable.
The aim is to get the rescue in place
before Lisbon faces a €4.9bn bond
redemption in mid-June. Teixeira dos
Santos said: “We are covered until
June. But in June we will be needing
the activation of this program.”
The speedy schedule is due to
Portugal’s rapidly diminishing pile of
cash. Analysts estimated that the treas-
ury had €5.6bn left after its early April
debt sale, leaving it far short of the
€9.6bn it needs between now and June.
Meanwhile, Chinese Premier Wen
Jiabao reiterated Beijing’s intention to
support Madrid by buying Spanish
debt during a state visit yesterday.
 6 News CITYA.M. 13 APRIL 2011

BP faces US LONDON DEPUTY MAYOR DIES NEWS | IN BRIEF

Leicester Tigers consider IPO
Leicester Tigers are plotting an initial
public offering (IPO) to raise more than

shareholder £4.4m to develop their stadium. Rugby

league’s Aviva Premiership champions
had planned an IPO two years ago, but
are now reviving the plans to pay for
work at their Welford Road ground. The
fundraising would help to build a multi-

revolt at AGM storey car park and could be used to

improve changing-room facilities.
Former CBI chief Lord Digby Jones has
been brought onto the board to advise
on the listing, which could be set for this
autumn.

the Russian venture are looking to sue Cisco to close Flip camera arm
▲

ENERGY
BY MARION DAKERS
CALPERS the biggest US public pen-
sion fund, and its Florida equivalent
have said they will vote against man-
agement ahead of BP’s annual general
meeting tomorrow, over anger at the
Gulf of Mexico oil spill.
Calpers and the Florida State Board
of Administration, which between
them own almost 83m shares, or 0.4
per cent of BP’s shares, said they will
oppose the approval of the company’s
annual report and against the re-elec-
tion of Bill Castell, non-executive direc-
tor and head of the safety, ethics and
environment assurance committee.
The shareholder rebellion comes as
BP tries to secure a last-minute deal
with Rosneft. Sources close to TNK-BP
yesterday confirmed that executives at
BP management over their planned
£10bn deal with oil giant Rosneft.
Bosses at TNK-BP are hoping to enforce
the firm’s alleged rights as BP’s pre-
ferred partner in the country, on top
of a separate lawsuit being fought by
investor AAR.
TNK-BP is also preparing to sue BP
chief executive Bob Dudley, who it
argues helped the directors.
AAR, the vehicle used by the
Russian oligarchs who jointly run
TNK-BP, started a separate lawsuit back
in January to block BP’s £10bn share
swap and exploration deal and cur-
rently has an interim injunction halt-
ing further progress. BP has until
tomorrow to secure an extension to its
share swap and exploration plans with
Rosneft before the original deal
expires.
Networking firm Cisco is to close its
embattled consumer products business,
as it looks to revive its fortunes. The
firm will close down its Flip video cam-
era business, the portable device it
acquired through buying manufacturer
Pure Digital in 2009. Closing the arm
will help it to refocus on its core busi-
ness network, as part of the firm’s
restructuring plans, it said yesterday.
Citi ordered to pay out $54m
An arbitration panel has ordered
Citigroup to pay a group of investors
$54.1m (£33m) for losses from munici-
pal securities funds that cratered
between 2007 and 2008, the biggest
LONDON mayor Boris Johnson yesterday paid tribute to his deputy mayor and chief of staff award yet involving the funds in a long
Sir Simon Milton, who has died at the age of 49 after a short illness. Johnson said: “He was series of legal claims against the bank.
a wonderful colleague and friend and will be much missed.” Milton led Westminster City The products were sold as low-risk, yet
Council for eight years and was appointed deputy mayor in 2008. Picture: PA plaintiffs alleged they were misled.

German lenders
expected to fail
Signal work goes to Retailers at risk of going
under are on the increase
EU stress tests Metronet partner
▲

RETAIL
More than 8,000 retailers were
THE NUMBER of retailers at risk of shown to be in danger of going under
▲

BANKING
TWO German public-sector lenders
are set to fail European stress tests,
should they be unable to find a way
round new rules on core capital
ratios.
NordLB and Helaba survived the
financial crisis without state aid, yet
hold low levels of capital once special
subordinated debt they hold is dis-
counted.
The banks must restructure their
debts by the end of April, although
there are doubts as to whether they
will be able to do so.
TRANSPORT
TRANSPORT for London has chosen
its preferred bidder to overhaul the
Tube signalling system, handing
work worth an estimated £25m a year
to one of the firms involved in the col-
lapsed Metronet operator.
The award came on a day of severe
delays on the Underground following
a signal failure on the District Line.
Bombardier Transportation had
long-term refurbishment contracts
worth £3.4bn before Metronet, a ven-
ture between five companies, fell into
administration in 2008 after an
expected £2bn overspend.
Bombadier has seen off competi-
tion for the new contract from
Invensys, whose shares dropped 2.5
per cent yesterday.
“It may cost Invensys about £25m
of revenues a year, which in the grand
scheme of things isn’t that much,”
said Nomura analyst Michael
Hagmann. “The question is whether
the firm will be able to make up for it
with other contracts.”
Bombardier and TfL said they could
not comment on the deal until it is
formally signed in a few weeks’ time.
going under shot up for the second
consecutive month in March, accord-
ing to insolvency firm RSM Tenon.
The number of companies deemed
to be at high risk of insolvency
jumped by four per cent in March,
compared to the month before, and
jumped two per cent compared to
this time last year.
The development comes following
the worst fall in sales since records
began in 1996, with a drop of 1.9 per
cent in March compared to the same
period last year, findings by the
British Retail Consortium show.
last month, according to RSM Tenon’s
‘traffic light report’.
Head of recovery Carl Jackson said:
“We may technically be out of reces-
sion, but it is clear that the high
street is struggling at the moment.
Retailers are suffering as their costs
soar with increased fuel and manu-
facturing costs and shoppers remain
thrifty with their purchases. It
appears people just aren’t spending
unless they have to – and who can
blame them as they struggle with the
cost of increased tax burdens and ris-
ing inflation.”

HOME EVENT
WEDNESDAY 6TH APRIL – MONDAY 2ND MAY
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 8 News
Helicopter company is latest
Russian to seek London float
▲
COMPANIES
STATE controlled JSC Russian
Helicopters yesterday confirmed its
intention to raise $500m (£308m) in a
joint flotation in London and Moscow.
The offering is expected to consist of
the sale of existing shares, primarily
by the firm’s major shareholder
Oboronprom, as well as up to $250m
of primary shares in the form of
Global Depository Receipts.
It will begin an initial public offer-
ing (IPO) roadshow in the week of 25
April, and says it will use the proceeds
to pay off existing debt and to “fund
certain mandatory tender offers for
shares in its subsidiaries” which it
does not already own.
Chief executive Dmitri Petrov said:
“The IPO will help us to increase fur-
ther our global market share and to
continue to meet the needs of our cus-
tomers around the world.”
MEET THE ADVISERS
RICCARDO ORCEL
BANK OF AMERICA
MERRILL LYNCH
Russian Helicopters is the latest in a BANK of America Merrill Lynch
string of Russian firms looking to (BofAML) is joint global coordinator and
London to float as market volatility, joint bookrunner on the IPO of Russian
heightened by the Japan nuclear disas- Helicopters, alongside BNP Paribas and
ter, begins to dissipate. VTB Capital.
Mid-size bank Nomos confirmed Leading the team is Riccardo Orcel,
plans to float 20 per cent of its stock, BofAML head of CEEMEA corporate &
and mobile phone retailer Euroset investment banking. Riccardo is the
said this month it is seeking up to brother of Andrea Orcel, BoAML’s head
$1.52bn. Real estate developer Etalon of emerging markets excluding Asia and
began roadshows for a $650m float executive chairman of global banking
last week.
Star investor
builds stake
in IG Group
▲
HEDGE FUNDS
BY RICHARD PARTINGTON
A STAR New York investor has
emerged as a significant shareholder
in London-based spread-betting firm
IG Group.
William von Mueffling, one of Wall
Street’s so-called “hedge-fund elite”,
has seen his holding in the firm rise
above five per cent.
Placed through his Cantillon
Capital investment vehicle, the 5.01
per cent stake is worth £80m at the
current share price.
Sources close to von Mueffling,
who turned his back on hedge-fund
management two years ago, say
Cantillon’s share increased due to
fresh inflows, which have pushed up
the size of its assets under manage-
ment. The input of von Mueffling will
be seen as a boost to IG, which has
struggled in tough market conditions
so far this year.
The spread-betting firm revealed a
half-year loss in January, after it was
hit by a £143m write-down on its
Japanese foreign exchange FXO.
MAM Funds increases profits as
it starts on the road to recovery
▲
FUND MANAGEMENT
FUND management firm MAM
Funds showed it was on the road to
recovery yesterday, with a 39 per
cent increase in pre-tax profits in its
preliminary results for the year to
31 December 2010.
The firm, which had suffered at
the hands of the financial crash,
increased pre-tax profits to £4.4bn,
on revenues of £20.4m.
Funds under management at the
firm increased to £1.7bn, up from
£1.5bn a year earlier.
The firm said it had freed itself
from restrictive banking covenants
since the year end and was now set
to strengthen its business.
CITYA.M. 13 APRIL 2011
and markets.
Also advising for BofAML was
Andrei Arofikin, managing director of
Russia investment banking. Arofikin
returned to the bank in 2010 after leav-
ing in 2008 to join the state savings
bank Sberbank. He had previously
worked for BoAML in Moscow for two
years. Before this he worked at Credit
Suisse’s Russian arm for six years.
Aukse Jurkute, head of Russia and
CIS equity capital markets and Alex
Reznik, vice president of Russia invest-
ment banking were also on the team.
BofAML was number one in M&A
and equity capital markets in Russia for
the first quarter of 2011.
It has led both major privatisations in
Russia this year.
Von Mueffling made his name at
Lazard running its European
Opportunities Fund.
He predicted the end of the
dot.com boom and made millions for
investors, before he fell out with boss
Bruce Wasserstein.
He quit in 2003, leaving to found
Cantillon – a firm he grew into one of
the most successful Wall Street hedge
funds before quitting hedge funds
two years ago.
He turned the firm into a long-only
investor, focusing on a select number
of companies.
ANALYSIS l IG Group
520 p
500
438.68
480 12 Apr
450
440
420
17 Jan 4 Feb 24 Feb 16 Mar 5 Apr
The appointment of former
Gartmore fund manager Gervais
Williams, and the listing of his
Diverse Income Trust on the London
Stock Exchange next week, will add
further strong future prospects, the
firm said.
Williams added: “The business
had a core operation held back by
debt and the need to repay that
debt.
“Now that it has raised sufficient
capital, the business is now in a net
cash position, so we can now dedi-
cate cashflow and the increased
scale of the management team to
realising the potential of the busi-
ness.”
 10 News CITYA.M. 13 APRIL 2011

Break-up for National Express A new man to bear the

looms as Elliott gains support Southern Cross
SUPPORT SERVICES come under

▲
add three new directors to the board. “Based on those discussions, Elliott BY EUGENIO MONTESANO pressure due
▲

TRANSPORT
BY ALISON LOCK
TRANSPORT Group National Express
edged closer to being broken up yes-
terday after an activist investor
claimed a crucial shareholder sup-
ported its cause.
Hedge fund Elliott Advisors, now
the largest shareholder with 17.5 per
cent of National Express, said it
expected second-biggest investor the
Cosmen family to vote for its bid to
The Cosmens, who sold the Alsa
bus company to National Express in
2005, have not spoken publicly in
favour of either side, but Jorge
Cosmen, the group’s deputy chair-
man, has effectively been a signatory
to the board’s opposition to Elliott.
“Elliott has had a number of discus-
sions with representatives of the
Cosmen family in relation to its pro-
posals to appoint three new directors
to the board,” Elliott’s statement said.
expects that the Cosmen family and
its nominees will vote their shares in
favour of the resolutions.”
City A.M. has learned that Elliott
will meet National Express sharehold-
ers in London this week. Based on last
year’s annual vote it would need the
support of just one more top ten
shareholder to pass its proposals.
The Cosmen family is likely to want
to break up the group to regain con-
trol of its Spanish assets.
to its recent
TROUBLED healthcare group troubles.
Southern Cross has appointed a new Southern
chairman, the second reshuffle Cross shares
within the company’s top ranks in have lost
just three weeks. more than
Ray Miles, who was chairman of 97 per cent of
the group for three years, has been their value
replaced by Chris Fisher (right), as since 2008.
the company continues its restruc-
turing. Fisher has over 25 years expe-
rience in investment banking. He
was a managing director for Lazard
until 2003 then served as vice chair-
man at KPMG until 2006, when he
joined the board of Southern Cross
as a non-executive director.
Britain’s largest care home opera-
tor is struggling to reduce its rent
burden and is on the hunt for capi-
tal after profits were hit by cuts in
local authority spending.
The Darlington-based firm said
proposals had been made to
landlords on the restructuring
of its rent payments, but that
its full-year outlook has
CHRIS FISHER

Alliance hits
back at Laxey
are motivated purely to make a short-
▲

FUND MANAGEMENT
BY ALISON LOCK
EMBATTLED investment firm Alliance
Trust reported a 16 per cent rise in net
asset value in 2010 and raised its divi-
dend as it rallied support for its battle
with activist investors yesterday.
Net asset value reached a three-year
high of 439p per share by the end of
January, almost 17 per cent more
than its 364p share price at that time.
The persistent discount has
become a lightning rod for activist
funds such as Laxey Partners, which
has told Alliance to use share buy-
backs to reduce the discount whenev-
er it goes above ten per cent.
Alliance chairman Lesley Knox hit
back at the rebels yesterday, telling
investors to vote down Laxey’s propos-
als as the board was “focused on man-
aging the trust in the best interests of
long-term shareholders, not those who
term gain.” Alliance says a sustainable
share price will result from better
overall performance at the firm. Knox
said management had taken “firm
actions” to do this that were “driving
an improved performance.”
Total shareholder return was 19.2
per cent and third party assets rose to
£83m in 2010. The dividend rose three
per cent to 8.4p per share in 2010.
ANALYSIS l Alliance Trust
380
p 372.30
12 Apr
360
340
17 Jan 4 Feb 24 Feb 16 Mar 5 Apr

Fighting talk signals time is running out

“THE fight starts today”. Stirring
words from Alliance Trust chief exec-
utive Katherine Garrett-Cox yester-
day, but is the hyperbole justified?
Management has launched a
series of rather overblown argu-
ments against Laxey’s demands,
resisting a buyback commitment
once its shares slip below a 10 per
cent discount to net asset value.
It’s what (some) shareholders
want but Garrett-Cox says the so-
called discount control mechanism
would restrict investment flexibility.
Understandably the Trust would
prefer to boost investment and con-
tinue buybacks on an impromptu
basis.
But the two aren’t mutually exclu-
sive. Investments can be planned
around the discount, and since F&C
adopted the trigger in 2005 its share
price has stabilised.
Shareholders have until 20 May to
decide what to do, but with Alliance
running out of excuses, it looks like
the time is right to drive through
change.
BOTTOMLINE
Analysis by Elizabeth Fournier

CITYA.M. 13 APRIL 2011
UBS CHIEF’S
MOUNTAIN
MISSION
IMPOSSIBLE
IT’S NOT every day The Capitalist finds her-
self talking to a senior banker as he shel-
ters from the wind halfway up the
world’s tallest mountain.
But yesterday that was exactly the sce-
nario for an interview with David Tait,
managing director of macro directional
trading at UBS Investment Bank, as he
prepares to embark on his most “stupid
and dangerous” mission yet – climbing
Everest without oxygen.
“I only take calculated risks, but this
one is more ludicrous than calculated,”
said Tait, speaking from Base Camp at
5,250m in Nepal ahead of a four-stage
ascent to acclimatise him for tackling
the 8,950m summit in late May.
Tait has scaled Everest three times
before in a hat-trick for his two charities
the NSPCC and the Child’s i Foundation
– but without supplementary oxygen,
the climb is “harder to the power of ten”,
with a greater chance of developing
hypothermia or cerebral edema, the
potentially fatal swelling of the brain.
Despite the risks, Tait insisted he had
to up the stakes to “capture people’s
imagination”, not to mention the per-
sonal challenge of pitting himself
EDITED BY
HARRIET DENNYS
Got A Story? Email
thecapitalist@cityam.com
Follow The Capitalist
on Twitter: @citycapitalist
David Tait from UBS has upped the stakes for his fourth Everest ascent by climbing without oxygen
against “virtually impossible odds”.
No corporates are willing to be associ-
ated with the oxygenless expedition how-
ever – even though Tait has tried “all the
people who wouldn’t mind if I died up
there”. “Even B&Q sponsored Ellen
MacArthur when she sailed solo around
the world,” he complained.
MATCH MAKER
THE entire Cabinet and most of the
Shadow Cabinet have signed up to Robert
Peston’s new matchmaking service, but
he won’t be happy until he has 1,000
“leaders in their fields” on his books.
The BBC business editor had the idea
for his new introductions venture after
The Capitalist
11
David Tait
from UBS is
embarking on
the banker’s
most deadly
mission yet –
climbing
Test match: Alec Stewart and Paul Farrant
Everest with
Dunstone, Stuart Rose, the former chair-
no oxygen man of M&S, and his successor Robert
Swannell (pictured below left).
So what will Peston talk about?
“Globalisation and the economic chal-
lenges facing the UK,” he said. “The point
is to encourage kids to aim a bit higher.”
noticing that none of the requests he
received to speak to schoolchildren
STICKY WICKET
HERE’S Paul Farrant, director of JM Finn &
came from “the kind of comprehen- Co as you haven’t seen him before (above),
sive school I went to”. He said: “State batting above his average with the former
schools don’t have the time, the England wicket keeper Alec Stewart.
resources or the contacts to approach Farrant, known as one of the City’s
prominent people, so I decided to biggest cricket fans, assures The Capitalist
make things easier for them.” the signing of the Surrey and England
The result is the Speakers for Schools professional as the wealth management
scheme, due to launch this autumn, firm’s new brand ambassador had noth-
which will matchmake experts from the ing to do with securing free tickets for
arts, science, humanities, politics and Lords this summer and every-
business with schools in disadvantaged thing to do with “champi-
areas. So far, 203 members of oning the firm’s values of
Peston’s contacts book have a strong team culture and
agreed to give at least one talk independence of
per year, including Carphone thought”. Whatever you
Warehouse boss Charles say, Paul.
CITYA.M. 13 APRIL 2011 News 13

Omega expects
£25m losses so Japan nuclear
far this year
crisis deepens
▲

INSURANCE

CATASTROPHES in the first three JAPAN QUAKE ous diplomatic implications,” said

months of 2011 are expected to cause
losses of $40.7m (£25m) Lloyd’s insur-
er Omega Insurance, said yesterday.
Omega believes losses from Japan’s
dual earthquake and tsunami catas-
trophes will reach $23.6m, but
stressed that the “significant uncer-
tainty surrounding the total market
loss of this event” meant it was hard
to assess the final cost of the disas-
ters.
It based its estimate on a $25bn
global loss from the two disasters,
and said its losses were net of reinsur-
ance and payments needed to rein-
state its reinsurance protection.
The floods that devastated
Queensland in Australia in January
will cost it $7.6m in losses, while the
earthquake to hit Christchurch in
New Zealand in February will cost it
$9.5m, it said.
The losses also mean it has fore-
gone $5m of managing agency profit
commission on the events, it said.
A man is tested for radiation in Koriyama, Fukushima, Japan
▲
BY MARION DAKERS
THE NUCLEAR crisis in Japan was yes-
terday upgraded to the maximum
level of severity, on a par with the
Chernobyl disaster of 1986.
The problems centred around the
Fukushima Daiichi plant are now
classed as “a major release of radioac-
tive material with widespread health
and environmental effects”, the
International Atomic Energy Agency
said yesterday.
The partial meltdowns are now
rated as a level seven incident, up
from level five previously – though
the classification relates to the origi-
nal explosions after the quake and
tsunami on 11 March, and the ongo-
ing efforts to cool the reactors have
not altered.
The levels of radioactivity at
Fukushima are around 10 per cent of
those recorded at Chernobyl.
Picture: REUTERS “Raising the level to a seven has seri-
Osaka University professor Kenji
Sumita. “It is telling people that the
accident has the potential of causing
trouble to our neighbours.”
Global fund managers have cut
their exposure to Japanese equities
sharply this month following the dis-
asters, according to a Bank of America-
Merrill Lynch survey out yesterday.
The poll of 282 fund managers
showed a net 18 per cent now under-
weight compared with a net eight per
cent overweight a month ago.
Japan’s economic output continues
to suffer following the quake, with
supply chains still under pressure.
The government estimates the
material damage alone could top
£184bn, making it by far the world’s
costliest natural disaster.
Ford’s US shares were hit yesterday
after the carmaker warned that dis-
ruption to supplies could temporarily
halt production and eat into the com-
pany’s earnings.

Internet Explorer: the

best known browser
but not most popular
tive) and Safari on +53 (76.5 per cent
positive and 23.5 per cent negative).

COMPETITORS PERCEIVED AS BETTER

BRANDINDEX
STEPHAN SHAKESPEARE
A
recent addition to BrandIndex
has been internet browsers and
the data tells us an interesting
story about how the domi-
nance of Internet Explorer is not
matched by perceptions of it.
If we take the impression measure
and look at total impressions – i.e.,
people expressing both positive and
negative views – we can see that
Internet Explorer is still the browser
that most people feel able to have an
impression of with over 4 in 10 people
expressing some sort of view.
Firefox is not far behind with just
under 4 in 10, whilst Chrome has
around a quarter mentioning it and
Safari about 15 per cent.
PROPORTIONAL SCORES ALTER VIEW
This picture changes dramatically
when we look at proportional scores
(the number that disregards size and
looks at positive views minus negative
views amongst those that comment).
NEARLY AS MUCH NEGATIVE FEEDBACK
Internet Explorer now comes bottom
with a score on Monday of 14, show-
ing that they get nearly as many neg-
ative mentions as positive ones.
Contrast that with Firefox’s latest
score of +83 (which shows that 91.5
per cent were positive and 8.5 per
cent negative), Chrome on +58 (79 per
cent positive and 21 per cent nega-
Cass Masters
These numbers provide an insight
into why Internet Explorer has lost
Waiting for the upturn?
share over the past few years – essen-
tially people perceive its competitors
to be better. It still holds an advan-
Get out there and make
tage in terms of being the default
browser for many but will need to up
it happen
its game if it doesn’t want to see a
further decline; once people try That’s what Graham Taylor did by taking an MSc in
something else they tend to prefer it.
Finance and Investment at Cass Business School. Now
Stephan Shakespeare is chief executive of
YouGov he’s a Research and Statistics Analyst at the IMA. The
UK’s future prosperity depends on people like Graham,
ANALYSIS l Total Impressions who have the knowledge, skills and attitude to make
50 things happen.
Internet Explorer (IE)
40
Developed with the most current and relevant industry
thinking, designed around your busy lifestyle and
30 Firefox
delivered in state-of-the-art facilities close to the heart
of the City, a part-time MSc from Cass in Finance and
20 Chrome
Investment or Mathematical Trading and Finance could
10 Safari be your next step on the road to success.
Source: YouGov
0 Cass’s finance research is ranked third
16 03 2011 22 03 2011 28 03 2011 03 04 2011
in Europe by the European Financial
ANALYSIS l Proportional Impressions Management Report 2010.
90
Firefox
70 Join us at our next information
Chrome session on 20 April 2011. For more
details call 020 7040 5258 or email
50
Safari cass-masters@city.ac.uk
30
Internet Explorer (IE)
10
www.cass.city.ac.uk/skillup
Source: YouGov
15 03 2011 22 03 2011 29 03 2011
 14 Consumer News CITYA.M. 13 APRIL 2011

NEWS | IN BRIEF
Oddbins poised for sale
WAITROSE SALES SIZZLE
Unilever likely to
face fine for fixing
Wine retailer Oddbins will be sold within
seven days, the company’s administrator
Deloitte announced yesterday. Oddbins
has an annual turnover of £75m, includ-
ing £2m of online sales, and has already

wash powder price

“received interest from a number of par-
ties”, said Deloitte. Oddbins called in the
administrators earlier this month and
400 jobs are at risk.

Flowers Foods in acquisition

Bakery company Flowers Foods is buy-
ing Tastykake-maker Tasty Baking Co, CONSUMER is a dominant force in detergents

for £21.09m in an all-cash deal. Flowers,
whose brands include Nature’s Own and
Whitewheat, will add between $115-
$125m (£70-77m) in 2011 sales with
the acquisition. Deals in the snack food
sector over the past year include the
acquisition of Pringles by Diamond
Foods from P&G.
Ocado hires eBay executive
Ocado has added eBay executive Doug
McCallum to its board. He joins the
online grocer as a non-executive director
on 3 October. McCallum is currently
European senior vice-president of eBay
and previously ran the internet giant’s
UK business for several years. Ocado
chairman Lord Grade added: “Doug’s
high-level background in e-commerce
and IT is a most valuable addition to the
skills and experience of the existing
directors.”
▲
Burger sales up BY JOHN DUNNE while P&G is the market leader.
The EU watchdog raided the three
87% CONSUMER goods giant Unilever,
which makes Persil, is expected to be
fined today by competition watchdogs
companies in June 2008 on suspicion
of price fixing, and also sought infor-
mation from US-based household
in the week for fixing prices in the washing pow- products firm Sara Lee.
to 10 April der market. The commission has imposed close
The Anglo-Dutch firm, together to €12bn (£10.6bn) worth of fines on
with Ariel maker Procter & Gamble, is cartels in the five years to 2010.
Pimms saw a understood to have struck a deal with
the European Commission that will
1,038% see it receive a reduced penalty in
exchange for admitting it participated
ANALYSIS l Unilever
1940
1920
p 1915.00
12 Apr
rise in a cartel. 1900
The Commission can fine compa- 1880
Source: Waitrose
nies as much as ten per cent of global 1860
sales. However, the figure is more 1840
often between two and three per cent 1820
SALES at Waitrose soared by 23.7 per cent for the week ending 10 April, it revealed yes- of sales. Germany’s Henkel, which 1800
terday, as the hot weather saw people head outdoors to eat. Sales of barbecue food were alerted the European Commission to 1800
up 566 per cent on the same period last year. Sales of side salads were up 128 per cent, the cartel in washing powder, will not 1780
dressed salads were up by 54 per cent and coleslaw up by 152 per cent. be penalised, the source said. Unilever 17 Jan 4 Feb 24 Feb 16 Mar 5 Apr

Punch profit falls

as business splits
LEISURE within both managed and leased Punch Taverns has been strug-
▲

BY JOHN DUNNE businesses. gling with falling profits and rising

PUNCH Taverns yesterday reported
a fall in half-year profits, as it splits
into two separate businesses.
Pre-tax profits for the 28 weeks
to 5 March came in at £61m, down
from the £66m recorded a year ear-
lier. Like-for-like sales at the group’s
managed pubs rose 4.9 per cent
over the period, and by 8.2 per cent
in the second-half.
The group is currently restruc-
turing and splitting its managed
and leased pubs into two separate
companies.
Chief executive Ian Dyson said:
“We are pleased that our opera-
tional initiatives continue to trans-
late into improved performance
“Despite the challenging UK con- debt, which hit £3.3bn last year.
sumer environment, we remain The group yesterday said Walker
confident of making further Boyd would be joining the board as
progress in the second half of the a non-executive director. He will
financial year.” eventually be non excecutive chair-
Last month, Punch announced it man of Spirit.
would sell thousands of pubs as
part of its restructuring plans. ANALYSIS l Punch Taverns
The size of the leased business, 80
in which landlords rent the pub p
and get their supplies from Punch,
75.30
76 12 Apr
will be halved to about 3,000 pubs.
Punch has suffered double-digit
declines in profits for the past two 72
years and is more reliant on the
declining drinking-out market. The 68
managed business, named Spirit,
will be expanded to about 1,000 64
pubs. 17 Jan 4 Feb 24 Feb 16 Mar 5 Apr

ANALYST VIEWS: HOW SHOULD INVESTORS VIEW PUNCH AHEAD

OF ITS DEMERGER? By John Dunne

SIMON FRENCH | PANMURE JAMES DAWSON | CHARLES STANLEY

“ The group will announce a finance

director for Spirit and a chairman for Punch
Taverns in due course. We reiterate our ‘Buy’
recommendation and 100p price target based
on our sum-of-the-parts analysis. The group
“ Having had the strategic review and
quarter-two updates within the last month
these results were always likely to be of lower
significance, although it has reaffirmed the rel-
ative performance of the two divisions and the

” ”
has made a good start to quarter-three merits of a demerger. We retain our
in both managed and leased divisions. ‘Hold’ view.

PAUL HICKMAN| PEEL HUNT

“ These (results) serve as a reminder that management is right to focus on rationalising the tenanted

”
estate. The main event remains the early July demerger, and meanwhile trading remains in line with previously indi-
cated levels, as does our target valuation.
CITYA.M. 13 APRIL 2011
Just three weeks to go to get your
entries in for the City’s best awards
This prestigious panel THE JUDGES: OUR 12 JUDGES WILL PICK THE CITY’S TOP PERFORMERS
will pick the winners of
City A.M.’s 2011 annual
awards, celebrating the
best and brightest firms
and people in the City
T
HERE are just three weeks left
to get those entries in for City
A.M.’s second awards ceremony
where we will be celebrating
the best of London’s financial busi-
ness community and its most suc-
cessful individuals and firms.
Anybody present at last year’s
inaugural ceremony will bear testi-
mony to the fact that the City A.M.
awards have quickly established
themselves as a highlight in the
London financial community’s cal-
endar.
We are proud to recognise that
the City is more than merely the
sum of its parts. The awards ceremo-
ny will once again be an extraordi-
nary evening for an extraordinary
community.
Allister Heath, City A.M.’s editor
said: “Our awards ceremony promis-
es to be an exceptional and exciting
evening. While others are still bash-
ing capitalism, we will be identify-
ing and celebrating those
individuals and companies who are
reinventing the City and in doing so
are helping to take the economy for-
wards.”
The awards are being headline
sponsored by Saxo Bank. Albert
Maasland, Saxo’s UK and US CEO,
said: “Saxo Bank supports both indi-
2010: GLAMOUR AND A SENSE OF ACHIEVEMENT WERE THE HALLMARKS OF LAST YEAR’S AWARDS
headline sponsor champagne reception sponsor
Allister Heath
Editor, City A.M.
Simon Borrows
Greenhill co-chief exec
Truett Tate
Lloyds Bank director
viduals and institutions living and
working in the City to achieve their
trading and investment objectives in
today’s market. We are delighted to
partner with City A.M. in their
awards, and recognise those individ-
AWARDS
David Hellier Sir Roger Carr
Deputy editor, City A.M.
Alison Carnwath
Land Securities chair
Nigel Boardman Simon Mackenzie-Smith
Slaughter & May Bank of America Merrill Lynch
uals and institutions that offer inno-
vation, ingenuity, success and pru-
dent business practices.”
The awards will judge a broad
range of sectors, including banking,
law, professional services, fund man-
(L to R) Seb Coe
introduced the
awards and
Burberry’s chief
financial officer
Stacey Cartwright,
the Mayor of
London Boris
Johnson and Sir
Roger Carr were
among those that
collected them.
official venue partner
News 15
2011
closes on 4 May. (See the website
www.cityamawards.com for further
details on this).
Then our distinguished panel of
judges, comprised of some of the
best known names in London’s
financial community, will make the
final decision ahead of a glittering
ceremony on 21 September at one of
the City’s best and most luxurious
hotels, the Grange in St Paul’s.
Panel members include many
who helped get the City A.M. awards
John Griffith-Jones off to such a successful start last year
CBI President KPMG UK chairman
but they have been joined this time
around by two stalwarts of the busi-
ness community, Sir Martin Sorrell
and Sir Roger Carr.
Sir Martin, as head of the leading
advertising group WPP, has played a
distinctive role in British business
for three decades.
Sir Roger’s appointment to the
Panel is also a real coup. He was a
winner of the Dealmaker of the Year
category last year and he has since
Phil Raper Sir Martin Sorrell become president of the CBI.
Goldman Sachs WPP chief executive The Panel this year is also joined
by Goldman Sachs’ Phil Raper, an
MD in corporate broking at
Goldman Sachs, and by Simon
Mackenzie-Smith, UK investment
bank chair of Bank of America
Merrill Lynch.
Other panel members include
Alison Carnwath, the chair of Land
Securities and Slaughter & May’s
Nigel Boardman.
Finsbury founder Roland Rudd
Roland Rudd has to be one of the City’s best con-
Finsbury senior partner
nected individuals.
Truettt Tate is an executive direc-
agement and entrepreneurialism, tor of Lloyds Banking and John
and will aim to single out the high- Griffith-Jones is chairman of KPMG
est achievers as well as the most UK. Simon Borrows, Greenhill’s co
promising new kids on the block. chief executive completes the group,
Readers can pitch in with their along with City A.M.’s editor Allister
votes – at least they can until voting Heath and his deputy David Hellier.
sponsored by
 16 Economics
Non-European
exports cut
UK trade gap
▲
UK ECONOMY
BY JULIAN HARRIS
EXPORTS beyond the European
Union helped narrow the UK’s trade
gap to £2.4bn in February, in from
£3.9bn in January.
The deficit in visible goods traded
fell by £1bn in the month, to drop to
£6.8bn – its lowest rate for a year, sur-
prising economists.
Within the EU, exports from the
UK actually fell by £0.6bn (4.4 per
cent) from January to February. Yet
exported goods to non-EU countries
soared by £0.9bn, while imports from
outside the EU dropped by £0.5bn.
Overall the trade deficit with coun-
tries outside the EU dropped from
£4.2bn in January to £2.8bn in
February.
“A further narrowing of the goods
trade deficit, on top of January’s
robust data, is confirmation of the
recent strong export trends,” said
Nida Ali of the Ernst and Young Item
Club.
“And what is even more encourag-
ing is an increase in the surplus on
services – this is traditionally an area
of strength for the UK, but services
exports have consistently disappoint-
ed over the past year,” Ali said.
Services grew to a £4.3bn surplus in
February, up from £3.9bn in January.
Excluding volatile components
such as oil, the volume of exports
rose 2.9 per cent in the month, while
imports were 3.2 per cent lower.
“Moreover volume trends show
exports expanding by 5.1 per cent
over the past three months, against
1.6 per cent for imports, supporting
the ‘economic rebalancing’ story,”
commented Investec’s Philip Shaw.
“This does not quite represent an
economist’s nirvana, but today cer-
tainly does represent one of the UK’s
better days,” Shaw concluded.
“Trade is on course to boost first-
quarter GDP growth by 1.25-1.5 per-
centage points in the first quarter,”
added Henderson’s Simon Ward, “fur-
ther evidence that the economy has
bounced back solidly in early 2011
despite high-street weakness.”
High income earners will increasingly move to the east, a report claims
Finance jobs boom in east
EMPLOYMENT
▲
BY JULIAN HARRIS
HIGHLY skilled westerners will
increasingly migrate to emerging
economies in the east, new research
revealed yesterday.
Booming economies such as
China and India will require more
intermediary services such as those
provided by the financial and busi-
ness sectors, a report by Oxford
Economics claimed.
“I foresee a lot of people in the
Picture: REX
west moving to places like China,
where they’ll be very welcome,” said
economist Jens Tholstrup.
“Whereas in wealthy countries, we
put the shutters down on migra-
tion.”
“Populist blocks on immigration
are quite damaging to economic
growth,” Tholstrup added.
Migration policies need to prevent
skills shortages from developing,
concurred Alistair Cox, chief execu-
tive of Hays, the recruitment firm
that sponsored the research.
CITYA.M. 13 APRIL 2011
NEWS | IN BRIEF
Canada sticks to lending rate
The Bank of Canada kept its key lend-
ing rate at one per cent yesterday
while raising the country’s growth out-
look in 2011 by 0.5 per cent to 2.9 per
cent. The central bank said the global
economic recovery would continue at a
steady pace. The bank has not raised
rates since September 2010.
Swedish inflation remains static
March CPI data for Sweden remained
unchanged as predicted at 2.9 per cent
on a year-on-year basis, while inflation
worsened in Germany as the CPI was
unexpectedly revised up to 2.3 per cent
year-on-year, the fastest pace of price
increases in 29 months.
Germany hit by surging oil price
Germany's ZEW index, an indicator of
economic sentiment based on the opin-
ions of almost 300 analysts and fund
managers, fell surprisingly from 14.1
down to 7.6 in April, as oil prices surged
and the European Central Bank raised
interest rates last week. Economists
had expected the index to decline to
ten per cent.
Sweden and Singapore top in ICT
Sweden and Singapore are the most
competitive countries in the digital
economy, according to a study by the
World Economic Forum (WEF). Nordic
and Asian economies are best at using
information and communications tech-
nologies (ICT) to boost their growth,
the WEF said. Finland is in third place,
Switzerland fourth and the United
States fifth. The WEF report focuses
on the power of ICT to transform soci-
ety in the next decade through mod-
ernisation and innovation.
CITYA.M. 13 APRIL 2011
Nokia fights back with new OS Saab production still on
TELECOMS
▲
BY STEVE DINNEEN
EMBATTLED handset manufacturer
Nokia began its fightback yesterday,
launching two new handsets and an
update of its soon-to-be-ditched oper-
ating system.
The new version of Symbian, code-
named Anna, appears to borrow heavi-
ly from popular rival Android, which
is the industry’s fastest growing
mobile platform.
However, analysts are already ques-
tioning whether new handsets run-
Allied Irish
Bank’s losses
soar in 2010
BANKING
▲
BY ROBERT LEEDHAM
ALLIED Irish Bank is to slash more than
2,000 jobs following annual results yes-
terday showing that it lost a staggering
€12bn (£10.6bn) pre-tax last year due to
ongoing toxic property loans. The loss
is a more than four-fold increase on
2009.
The bank reported an impairment
rate of 28 per cent in its property and
construction loans. That amounts to a
cost of €7bn – up substantially on the
€2.7bn cost seen in 2009.
The figures add to the woes of a
lender that has already received €7.2bn
in aid from the Irish government and
was judged to need a further €13.3bn
capital injection in recent stress tests. It
is 93 per cent state-owned.
The bank saw its mortgage arrears
worsen as mortgage-holders struggled
to make progress on their payments:
arrears jumped 214 per cent to €3bn,
€188m of which is based in the UK.
As part of the Irish government’s
reforms to the banking industry, Allied
ning Anna will quickly become
“orphans”, with Nokia planning to
shelve Symbian later this year after
striking a landmark deal to run
Microsoft’s Windows Phone 7.
It also unveiled the four-inch touch-
screen X7 handset, aimed at entertain-
ment consumers, and the qwerty
keyboard E6, aimed at business users.
Constructed from metal and glass,
both handsets are aimed squarely at
the high-end of the smartphone mar-
ket – an area that Nokia has struggled
to break into. Nokia also announced
its Ovi Store now has 40,000 apps for
Irish will also undergo a dramatic oper-
ational restructuring to split its core
and non-core operations. The non-core
bank will manage €25bn of net loans
versus €61bn in the core bank, with the
former to be run down over time.
The ailing bank also saw its core tier
one capital ratio plummet below the
seven per cent Basel III minimum.
Allied Irish recorded a ratio of only four
per cent for 2010 compared to 7.9 per
cent the year before.
Allied employs about 1,250 people in
Britain and the majority of its redun-
dancies are expected to be voluntary.
ANALYSIS l Allied Irish Banks
0.34
€ profit slumped 20 per cent in the
0.30 0.22
12 Apr
0.26
0.22
0.18
1 Feb 21 Feb 10 Mar 30 Mar
download, an eight-fold increase year-
on-year, and facilitates up to 5m down-
loads a day.
The announcements come just days
after HTC overtook Nokia in terms of
market cap to become the world’s
third largest phone manufacturer.
The Taiwanese firm was boosted by
the growing public appetite for hand-
sets running Android
HTC, which also unveiled its new
Sensation handset yesterday, posted
$3.6bn (£2.2bn) in revenues in its first-
quarter, with net income nearly
tripling from last year to $513m.
Banesto chief executive José Garcia Cantera says the outlook for new lending remains weak
Banesto sees profits slump
▲
BANKING
BY HARRY BANKS
SPANISH retail bank Banesto’s net
first-quarter, dragged lower by rising
bad loans in a stunted economy and
as higher funding costs bit into mar-
gins on a yearly basis.
Quarterly profit margins improved
and the number of loans falling into
arrears dropped, providing a bright
spot against a background of rising
bad loans and disappointing loan
hold as Spyker seeks deal
▲
AUTOMOTIVE
LOSS-MAKING Dutch car maker Spyker
said production at its Saab unit will
remain on hold until it obtains fund-
ing to pay suppliers, underlining the
tough battle it faces to rescue the ail-
ing Swedish brand.
Spyker, which bought loss-making
Saab from General Motors last year,
has been forced to halt production as
it is unable to pay its suppliers, but has
growth in a country with the highest
unemployment rate in the Eurozone.
Banesto, majority owned by
Santander, is the first Spanish bank
to report earnings this quarter, giving
a flavour of the challenges facing a
sector reeling from a property boom
and bust that left banks owed billions
by bankrupt developers.
Banesto said: “The first quarter of
2011 has developed against a difficult
backdrop, with market tension, more
intense competition and persistent
economic weakness.”
News 17
said it is facing a short-term liquidity
crunch rather than collapse.
The company said: “Spyker and Saab
Automobile are in discussion with sev-
eral parties to secure additional short
and medium-term funding.”
Spyker Cars is also in talks to sell
and lease back the property portfolio
of its Saab subsidiary. The Swedish gov-
ernment, which guaranteed Spyker’s
loan to buy Saab last year, has a veto
over the property deal.
NEWS | IN BRIEF
African Minerals confident
Iron ore developer African Minerals is
confident of starting commercial produc-
tion in the fourth-quarter from its
Tonkolili project in Sierra Leone. Phase I
of Tonkolili is fully funded and at full
capacity is expected to produce 12m
tonnes of iron ore a year, once it ramps up
from initial production in the fourth-quar-
ter. Shares in African Minerals, the largest
company on London's junior AIM were
flat, closing 0.3 per cent down at 513.4p.
EnCore Oil makes North Sea find
British oil and gas explorer EnCore Oil
said yesterday it found a large oil column
and hydrocarbon-bearing sands at a well
in the Cladhan field in the UK North Sea,
six months after it had hinted that the
discovery could be commercial. EnCore
said it found oil-bearing sandstones at
the upper Jurassic layers of the reservoir,
after drilling the well to a depth of
12,252 feet.
BG Group is positive on Brazil
BG Group yesterday announced its tests
in Brazilian off-shore oil site Guará Norte
were highly productive, with a productiv-
ity of some 6,000 barrels of oil per day
of light oil. It also said the site, located
approximately 305km off the coast of
Sao Paulo, has a potential of up to
50,000 barrels a day.
Walker Greenback triples profit
Luxury interior furnishings group Walker
Greenbank’s full-year pre-tax profit near-
ly tripled, helped by an uptick in demand
for luxury goods. It said it was upbeat
about its new financial year. The wallpa-
per and fabrics maker said that brand
sales in the first 10 weeks of the new
year were up eight per cent to £4.5m.

 

 
    

  


 
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 18 News CITYA.M. 13 APRIL 2011

CITY MOVES | WHO’S SWITCHING JOBS Edited by Harriet Dennys in association with

Fujitsu
Duncan Tait has been promoted to the role of
chief executive for the UK & Ireland at the IT
services company, rising from managing director
of Fujitsu’s private sector business. Tait succeeds
Roger Gilbert, who steps down to executive
chairman of the UK and Ireland, and his focus
will be developing the company’s expertise in
Cloud storage and delivery. His appointment fol-
lows client wins and contract extensions with
Whitbread, Shell and Stagecoach.
Compact Media Group new finance director. Newbert joins
The Lyceum Capital portfolio company CMG from BBC Studios and Post
has confirmed Warren Newbert as its Production, a commercial subsidiary of
the BBC responsible for studio facilities
at BBC Television Centre and Elstree.
RBS
Tim Skeet has been appointed as man-
aging director for debt capital markets
at the bank’s financial institutions
group. Skeet, who will report to Gordon
Taylor, head of northern Europe finan-
cial institutions origination, moves from
the position of senior adviser to the
International Capital Markets
Association.
HSBC
Fiona Sheerin has been confirmed as
associate director to HSBC’s African
team within its private banking division.
Sheerin joins from Barclays Wealth
where she was assistant vice president,
private banker.
Fitbug
The AIM traded provider of online per-
sonal health services has appointed
Fergus Kee as executive chairman, with
immediate effect. Kee will invest
£200,000 in Fitbug, bringing his stake
in the company to 28.5 per cent.
Old Mutual
Old Mutual Asset Managers has con-
firmed the appointment of Jenny Segal
as head of institutional business, where
she will lead the savings group’s institu-
tional sales and client services team.
Segal joins from Alliance Bernstein,
where she was senior vice president,
institutional business.
Salamanca Risk Management
The risk management consultancy has
appointed Ed Butler as executive chair-
man. Butler was formerly chief execu-
tive of a boutique risk consultancy.
Spire Healthcare
The private hospital group has appoint-
ed Gary Watts as executive chairman
and Rob Roger as chief executive of the
company, effective from 1 May.

To appear in CITYMOVES please email your career

updates and pictures to citymoves@cityam.com SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT +44 (0)20 7092 0053
morganmckinley.com

BEST OF THE BROKERS To appear in Best of the Brokers email your research to notes@cityam.com

ANALYSIS l British American Tobacco 2,494.00 ANALYSIS l Schroders ANALYSIS l Signet Jewelers
2,550
p 12 Apr 1,950
p 2,900 p 2,760.00
1,814.00 12 Apr
12 Apr 2,800
2,450 1,850

2,700
2,350 1,750
2,600
2,250 1,650
17 Jan 4 Feb 24 Feb 16 Mar 5 Apr 17 Jan 4 Feb 24 Feb 16 Mar 5 Apr 17 Jan 4 Feb 24 Feb 16 Mar 5 Apr

BRITISH AMERICAN TOBACCO SCHRODERS SIGNET JEWELERS

Jefferies has started covering the tobacco group with a “buy” rating and a
target price of £31.87. The broker sees strong cash generating capacity,
given the firm has one of the highest exposures to emerging markets in the
sector with 66 per cent of sales coming from new regions, plus the possibil-
ity of a tie-in with in China. BAT’s dividend and share buyback policy also
offers generous cash returns to investors, the broker adds.
Credit Suisse rates the wealth manager “neutral” with a target price of
£18.50. The broker thinks Schroders’ earnings and valuation are becoming
increasingly attractive compared to the firm’s peers, particularly given its
strong earnings momentum. Credit Suisse expects £4.4bn of retail net
inflows during 2011, and has raised its earnings per share forecast by 17
per cent to 135p for the year on the back of a lower than expected tax rate.
Investec rates the jewellery retailer “buy” with a £31 target price. The firm
remains a class act within the mainstream US market, the broker thinks,
supported by a track record of market share gains over the last decade.
Despite uncertainty about the likelihood of a shareholder return in the
short term amid hints about increased capital expenditure, long-term
momentum has led Investec to raise its target price by 200p.

FTSE falls sharply as Japan US stocks drop on

crisis hits commodity shares oil price worries
looking for an excuse to take profits months suggests that the double-bot- quarter, is up 11.1 per cent in 2011 --

THELONDON after the FTSE put on 8 per cent since

March’s lows.
tom has formed in the region of 1,128
pence, while the magnitude of this THENEW YORK well above the S&P 500’s gains of 4.5
per cent since the start of the year.

REPORT
He said a support level at 5,908, the
current April low, would be worth
keeping an eye on, “a breach of which
would strongly suggest that the rally
REPORT
pattern is indicating that there is still Signalling the start of the US first-
room for further upside in the near quarter earnings period, Alcoa late
term,” the broker said. Monday reported revenue that
Meanwhile European stocks suf- missed forecasts. Its profit, however,

B
RITAIN’S top share index fell has topped out”. fered their biggest one-day fall in a topped consensus expectations.

sharply yesterday, led by com-
modity stocks which suffered
partly from concerns over the
nuclear crisis in Japan and the impact
of the earthquake on its economy and
also global growth.
This dented mining stocks and
technology firms such as ARM
Holdings.
Miners dropped sharply, weighed
down too by Alcoa’s fall in the United
States after the aluminium maker
missed revenue estimates overnight.
Rio Tinto shed 2.8 per cent ahead of
first-quarter results due out tomor-
row.
“For us as portfolio managers this
is just the opening salvo. We’re wait-
ing for the trend to emerge,” Oliver
Wallin, investment director at
Octopus Investments, which has £1.2
bn of funds under management.
“At the moment our portfolios are
weighted towards equities over other
asset classes because other asset class-
es aren't looking particularly attrac-
tive.”
The FTSE 100 closed down 88.97
points or 1.5 per cent at 5,964.47,
albeit in thin volumes.
A technical analyst at Charles
Stanley said many traders would be
The FTSE 100 volatility index rose
14.2 per cent, hitting a one-week high.
Goldman Sachs’s call to lock in
commodity trading profits weighed
on crude oil prices, which put pres-
sure on integrated oils .
Cruise operator Carnival and
International Consolidated Airlines
Group rose 4.7 and 4.5 per cent
respectively, as Brent crude retreated
from a 32-month high of $127.02 a
barrel hit on Monday.
High oil costs drove US import
prices higher in March to post their
largest increase in more than 1-1/2
years.
With investors’ confidence under-
mined, traders noted a flow into
defensive stocks such as tobaccos,
pharmaceuticals, and utilities.
Drugmakers AstraZeneca and
GlaxoSmithKline were near the top of
the FTSE 100 leader board, up 0.5 and
0.7 per cent respectively.
A note from Charles Stanley
described the broader technical pic-
ture for GlaxoSmithKline -- which hit
its highest closing level on Monday
since January after rallying strongly
from a March low of 1,127.50 pence --
as “encouraging”.
“The price action of the last few
month yesterday, with main indexes
breaking below their 50-day moving
averages, as Japan’s worsening
nuclear crisis sparked a bout of profit
taking.
The FTSEurofirst 300 index of top
European shares unofficially closed
1.65 per cent lower at 1,127.42 points,
the index’s lowest close in nearly two
weeks.
“Strictly speaking, valuation levels
remain very low, but there are
mounting doubts over the impact of
rising energy and commodity costs,
as well as interest rates, on compa-
nies’ results. This hasn’t been com-
pletely priced in yet in earnings
forecasts,” said Pierre-Yves Gauthier,
of AlphaValue in Paris.
ANALYSIS l FTSE
6,100 5,964.47
12 Apr
6,000
5,900
5,800
5,700
5,600
5,500
17 Jan 4 Feb 24 Feb 16 Mar
U
S stocks dropped yesterday on
worries falling oil prices could
set off a reversal in the high-fly-
ing energy sector, while Alcoa’s
leaner-than-expected revenue disap-
pointed.
Energy stocks led the S&P 500’s
losses, with the S&P Energy Index
down 3 per cent. Strategists were
already worried the rally in energy
stocks may have gone too far ahead of
earnings, and a drop in oil prices
could spark an extended sell-off.
“The leadership has been for the
longest time in those sectors that are
highly related to global growth and
commodity prices. So once the com-
modity space starts rolling over, then
equities are poised to follow,” said
Robert Van Batenburg, head of equity
research at Louis Capital in New York.
Oil prices tumbled for a second day
following a Goldman Sachs forecast
calling for a fall of almost $20 in the
price of Brent. The International
Energy Agency also said high prices
could curb oil demand.
Unrest in oil-heavy regions of the
Middle East and North Africa has
fuelled a sharp rise in oil prices. The
S&P energy index, by far the market’s
5 Apr top-performing sector in the first
Alcoa’s stock slid 6 per cent to $16.70
and was the Dow’s biggest percentage
loser of the day.
Materials stocks in general fell in
sync with declines in metals prices.
Investors are worried that Japan’s
massive earthquake and a nuclear cri-
sis could weaken recovery prospects
in the world’s third-largest economy.
The Dow Jones industrial average
was down 117.53 points, or 0.95 per
cent, at 12,263.58. The Standard &
Poor’s 500 Index was down 10.30
points, or 0.78 per cent, at 1,314.16.
The Nasdaq Composite Index was
down 26.72 points, or 0.96 per cent, at
2,744.79.
Japan raised the severity of the
Fukushima nuclear power plant acci-
dent to the highest level on the
International Nuclear and
Radiological Event Scale, putting it on
par with the Chernobyl 1986 disaster.
Dollar-denominated Nikkei future fell
1.3 per cent.
“Japan is looming large in the back-
ground,” Van Batenburg said, noting
warnings about supply issues by
Japanese companies. “Coming into
earnings season with that kind of out-
lier, people are going to take a step
back.”
 Wealth Management Foreign Exchange
CITYA.M. 13 APRIL 2011
FOR THE KIWI,
INTERVENTION
MAY BE CLOSE
BORIS SCHLOSSBERG
DIRECTOR OF CURRENCY RESEARCH, GFT
S
OMETIMES, currency strength can be a curse.
Witness the New Zealand dollar, which set fresh
yearly highs this week, creating more angst in
Wellington as the country’s policymakers worry
about the kiwi’s impact on New Zealand’s vital export
sector. The kiwi has gained strength largely as result of
the rally in commodities and in sympathy with the
Australian dollar, which has been setting post float
record highs on a near daily basis this month.
Having risen to above $0.7800, the New Zealand
dollar now stands within striking distance of the psy-
chologically important $0.8000 level and some mar-
ket players are beginning to wonder if the Reserve
Bank of New Zealand (RBNZ) will be forced to inter-
vene to temper its rally.
In March 2005, the RBNZ published a list of four
criteria for considering foreign exchange market
intervention: the exchange rate must be exceptionally
high, or exceptionally low; the exchange rate must be
unjustified by economic fundamentals; intervention
must be consistent with the policy targets agree-
ment; and conditions in markets must be opportune
and allow intervention a fair chance of success.
Therefore, if the kiwi continues to climb, the RBNZ
may have good reasons to consider intervention. The
unit has been pumped up by nothing more than gen-
eral investor enthusiasm for commodity dollars. In
reality, New Zealand’s economy is quite shaky.
Unemployment has actually increased, GDP growth
has been anaemic, while both business and consumer
sentiment surveys have deteriorated markedly.
Furthermore, in order to ease monetary conditions in
the aftermath of the devastating earthquake in
Christchurch, the country’s second largest city, the
RBNZ recently lowered interest rates by 25 basis
points to 2.5 per cent – hardly a bullish sign for the
currency. In short, there has been no economic justifi-
cation for the rally in kiwi-dollar. Up to now, New
Zealand monetary authorities have been reluctant to
engage the market. However, if today’s New Zealand
Business PMI data slips below the 50 boom/bust
level for the first time in four months, while the unit
continues to inch towards the $0.8000 figure, expect
the RBNZ to sound the alarm relatively soon.
HOW DID YOUR BROKER
REACT TO THE USD/JPY
DROP LAST MONTH?
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19
UK rate rise delay now
expected by markets
Sterling plunges in
response to falling
CPI inflation and
weak economic data,
writes Philip Salter
Y
ESTERDAY’S drop in the consumer
price index (CPI) inflation figure for
March, from 4.4 to 4 per cent, sur-
prised the markets. This sent ster-
ling tumbling as expectations of a May rate
rise evaporated. Weak retail figures com-
pounded the gloomy outlook for the
pound.
Many traders seem to have been tipped
off prior to the announcement, as
rumours of the 0.4 per cent drop did the
rounds. “This helped sterling-dollar slide
some 50 pips to $1.6290 by the time the
rumours were in fact confirmed at 9.30am.
The weak figures then sent sterling-dollar
crashing another 63 pips to a low of
$1.6227, before stabilising around $1.6260,”
says Ian O’Sullivan of Spread Co. As a
result, the UK’s currency took a dive,
rebounded and fell again – with bears sell- Sterling fell yesterday and may fall further Picture: GETTY
ing sterling off across the board.
Even though inflation is running at dou- sumption could be the greater catalyst for tary policy behind the curve of every other
ble the Bank of England’s (BoE) mandate, a medium term sell off in the Queen’s cur- central bank, excepting the deflated Japan
this drop is expected to strengthen the rency.” Rishi Patel of Fair FX adds: “We still and the inflation-exporting US. The mar-
doves on the monetary policy committee need to consider the bigger picture. Later kets think these new figures could lead
(MPC). Michael Hewson of CMC Markets this year we will see the high energy prices King and other doves on the MPC to feel
believes these inflation figures “certainly filter through to household bills”. vindicated in their loose monetary stance.
make a rate rise at next month’s May meet- Most commentators are still cautious If this turns out to be the case, expect ster-
ing much less likely.” Richard Wiltshire of about inflation. Alistair Cotton of ling to suffer further.
ETX Capital believes market expectations Currencies Direct argues: “When the BoE ANALYSIS l Sterling's fall yesterday
of a May hike have dropped from 55 to 20 talked about temporary factors pushing 1.636
per cent, while Richard Driver of Caxton the inflation rate up, they were talking $
1.634
FX thinks market consensus is now point- about commodity and import prices, not
ing towards an August rate rise. food retailers slashing margins. This brief 1.632
Sterling’s dip is also down to weak eco- dip could be temporary as well.” Angus 1.630
nomic data. “With UK economic figures Campbell of London Capital Group con-
1.628
still very inconsistent, evidenced yesterday cludes that with “the prospect of high
morning by poor retail sales, we can expect inflation, low interest rates and sluggish 1.626
sterling to underperform this month,” says growth, sterling is not a particularly attrac- 1.624
Driver. Wiltshire thinks despite the CPI tive currency at the moment.” 1.622
data, “the obvious weakness in UK con- The BoE is running a procyclical mone- 00:00 06:00 12:00
SPREAD BETS | CFDs | FOREX
free phone 0800 358 0864
gftuk.com
GFT Global Markets UK Ltd. is authorised
and regulated by the Financial Services
Authority.
 20 Wealth Management | Foreign Exchange
MECHANICAL
TRADES KEEP
EMOTION OUT
TOM HOUGAARD
CONSULTING ANALYST, INTERTRADER
S
TEVE Ward once told me that there is no
point in having a mechanical trading system
if you are not going to follow it. He certainly
has a valid point.
I fondly remember the trading exercise that I
put myself through in order to build trading disci-
pline: pick a strategy and execute it religiously for
30 trades. You should find that by trade 15 or so
you will have taken an enormous step towards
trading discipline and consistency.
PRACTISING MECHANICAL TRADING
I have a good suggestion for a mechanical entry. I
like to trade it in euro-yen, which is quite a volatile
currency pair. The ingredients for this straightfor-
ward technique contain the following well-known
principles: Fibonacci, overnight high and overnight
low.
In the morning, around 8am, I look at what the
high over the overnight range is. I then look at
what the low of the overnight range is. I then
wait for the market to take out either the high or
the low of the range. If, and only if, the market
then trades back into the range, after having tak-
ing out the high or the low of the range, I prepare
an order to enter the market at the 62 per cent
retracement over the range. This order comes
complete with a stop and a target too. It doesn’t
trigger every day though.
EXAMPLE:
The overnight high was ¥117.40 and the low was
¥116.80. Around 8.30am, the market traded
below ¥116.80, down to ¥116.60. It then began
to rally. The entry price is ¥116.60 + 62 per cent
of ¥117.40 minus ¥116.60 = ¥117.10.
The stop is below the old low and the target is
double of what the stop is, in this case 100 points.
If the target has not been reached by 4pm, I will
close the position, unless I am in profit, in which
case I will move the stop loss to breakeven, and
potentially close some of the position, depending
on how much I am up. I use a bit of discretion
when it comes to the end of the day.
Happy trading.
The views and comments in this article are not
the views of InterTrader.com. The provision of this
information should not be construed in any cir-
cumstances as a recommendation or solicitation
to buy or sell any security or financial instrument.
Quantitative
easing: the hot
money problem
The Fed’s monetary manipulation will have
effects beyond US borders, writes Craig Drake
D
ESPITE murmurings to the contrary
by various members of the Federal
Open Market Committee (FOMC), it
seems that the US Federal Reserve’s
$600bn (£368bn) scheme to purchase
Treasury bonds will run its full course, up
to June as initially planned. But an interven-
tion the size of QE2 cannot just come to a
sudden halt and the Fed go Treasury cold
turkey. As a result, the after-effects should
still keep the dollar low for a while longer
Buts the interventionist measure tails
off, there are worries about the fortunes of
US bond yields. These fears will have been
exacerbated by Pacific Investment
Management (Pimco), the world’s largest
bond investor, shorting US debt to the tune
of $7bn.
Beyond the danger posed by a lack of con-
fidence in the ability of the US to address its
enormous budget deficit, the end of QE2
will affect not just US domestic affairs, but
the global currency markets. Anybody
investing in the forex market should be
keeping a close eye on these developments.
Should the artificially low US interest
rates continue – the overnight rate current-
ly is held around zero – it will continue to
result in detrimental knock on effects
around the developing world. The policy
makers of emerging markets are worried
that hot money will keep flowing from the
low interest rate yielding dollar into higher
interest rate currencies of emerging mar-
kets as investors attempt to ensure they get
the highest short-term interest rates possi-
ble. If the volume of these transfers is high
enough, it has an impact on exchange rates
and so on the trade balance.
Last year, China’s vice finance minister
Zhu Guangyao voiced his objection to QE2,
and its hot money effects, saying “the
major problem is the different situation
compared with the period of the financial
crisis. Now the capital market has money,
but it doesn’t have confidence in support-
ing the economy. International capital
CITYA.M. 13 APRIL 2011
wants profit. So a big portion of that
$600bn will flow into emerging markets,
and place pressure on the capital market. It
aims at gaining short-term profit, so it will
leave very fast.”
However, Steen Jakobsen, chief econo-
mist of Saxo Bank, thinks that sights
should be shifted away from the announce-
ments of the FOMC and ECB and says that
we should instead be focusing on those
countries that are actually capable of
exporting capital: “Chinese lending rates
have led inflation, and as a second deriva-
tive the inflation expectations – those very
same inflation expectations that are now
getting every single central bank to talk
hawkish. China is ratcheting bank reserve
requirements higher and hiking rates to
curtail the inflation impact on their econo-
my, well ahead of the curve along which
the ECB is now also moving and the Fed is
lagging far behind. At the same time, how-
ever, we have the world’s other key net
exporter of capital, Japan, in an entirely dif-
ferent situation than China. In response to
the terrible aftermath of the 11 March
earthquake/tsunami, Japan is providing a
massive new global stimulus and effective-
ly a new QE3.”
Kully Samra, UK branch director of
Charles Schwab is buoyant about the post-
QE2 outlook for the American economy,
taking the view that the economy has
enough slack to take the money flows once
the money-printing ends. “It is heartening international protests against their mone-
that we are not having serious discussions tary policy is somewhat of an echo of that
about QE3, QE4 et cetera in the US. taken by John Connally, Jr, Richard Nixon’s
Although the Fed has flooded the system Treasury secretary. Defending the 1971 $40
with cheap currency, the velocity of money bn budget deficit as an essential “fiscal
remains depressed and the core inflation stimulus” he remarked to a European dele-
rate has been benign (see graphs above). gation worried about exchange rate fluctu-
With PPI up and the money multiplier still ations that the American dollar “is our
low, we should avoid another round of currency, but your problem.” Nixon’s gov-
quantitative easing in the US for the near ernment stepped in to try and control infla-
future.” tion following this raising of the debt
Whether we see further rounds of quan- ceiling. The measures backfired. Hopefully
titative easing, America’s attitude to the this time it will be different.
CITYA.M. 13 APRIL 2011 Wealth Management 21
Ladder Trading
The Federal Reserve
has burnt its way
ANALYSIS l Monetary base through $600bn
worth of freshly print-
2,200

Monetary base ($, billions)

ed greenbacks this
time around,
Picture: GETTY
1,800

1,400

1,000
Source: Charles Schwab,
Factset, Federal Reserve
2007 2008 2009 2010 2011

Professional Trading
Professional Spread Betting

www.ProSpreads.com
Spread betting can result in losses that exceed your initial deposit.
Authorised and regulated by the Financial Services Commission, Gibraltar.

down to rising prices in lumber, dairy and

THE meat. The technicals show that the pair’s rel-
ative strength index (RSI) has broken above a
TIPSTER bearish trend line and maintains support at
$0.7831. Capital Spreads quotes $0.7854-
$0.7858 for New Zealand dollar-US dollar.
STRONG Since the coordinated intervention in dol-
lar-Japanese yen last month, the yen has
EURO GAINS weakened significantly and taken the pres-
sure off Japanese exporter’s profit margins. It
ON STERLING recently broke above its 200-day moving
average for the first time in 10 months, shift-

T
ANALYSIS l Money multiplier HOSE surprise inflation figures yester-
day have served to put back the
9 prospect of an MPC rate hike further
still and it’s weighing hard on the pound
M2 to Monetary Base Ratio
ing the focus back to further yen losses. While
above ¥83.50 the prognosis looks good for
further yen weakness on a break of ¥85.60
CMC Markets spread is 84.279-84.297

as a result. With the Eurozone now temporari-
ly over its sovereign debt crisis and rates start-
7 ing to tick higher in Frankfurt, it’s perhaps no
surprise that euro-sterling is rallying. Many
are now eyeing a test of the 2010 highs around
£0.9150 with the question increasingly becom-
5 ing when – as opposed to if – we will breach
this level. Current IG Index price on euro-ster-
ling is £0.8898-£0.8900.
The New Zealand dollar hit a five month
Source: Charles Schwab, Factset, Federal Reserve high versus the US dollar, as the value of New
3
2007 2008 2009 2010 2011 Zealand’s commodity exports gained for a
seventh consecutive month. This could be put
The US dollar fell heavily on Friday after
the US budget talks dragged on for much
longer than anticipated. This dollar weakness
along with heavy selling interest in dollar-
Swiss franc has seen the pair tumble 250
pips in a week to come to within a mere 35
pips of its recent record low of SFr0.8965. It
is probably not a matter of if but when this
low will be tested and it will be interesting to
see what the reaction will be when it gets
there. Spread Co offers a spread on dollar-
Swiss franc of SFr0.9007-SFr0.9010.
Craig Drake

FOREX ANALYST PICKS

FOREX STRATEGIST FOREX STRATEGIST FOREX STRATEGIST
JOHN KICKLIGHTER ILYA SPIVAK JOEL KRUGER

My pick: Short euro-dollar and Aussie dollar-dollar; long euro-kiwi dollar My pick: Long dollar-yen (pending) My pick: Short euro-dollar at $1.4405
Expertise: Fundamental and Technical Analysis with Risk Management Expertise: Global Macro Expertise: Technical Analysis
Average time frame of trades: 1 day to 1 week Average time frame of trades: 1 week to 6 months Average time frame of trades: 1 week to 6 weeks

My long euro-yen position served me well, but I decided to book the sec-
ond half of the position before the ECB’s decision, for a good overall
return. Neither my euro-dollar (below $1.42) nor Australian dollar-dollar
($1.020) short setups have triggered yet, but should risk aversion pick
up pace, they will. I like sterling-dollar for similar reasons, but that needs
to be played by momentum. Less risk dependent is a possible euro-New
Zealand dollar long above NZ$1.8550.
Two weeks ago, dollar-yen finally broke out of the congestion that contained
prices in the six months since October, rising to retest familiar resistance
just above the ¥85.00 figure. A pullback is now underway and I will look for
signs of its exhaustion to enter long to capture the long-term advance.
Expect a forthcoming rise in US Treasury yields, as the Federal Reserve gets
closer to ending QE2. As the US Treasury moves to finance the budget
deficit, bond prices lower with new issuance while pressuring yields higher.
The latest topside failure ahead of psychological barriers at $1.4500
and subsequent bearish close on Monday could warn off the onset of a
sizeable short-term corrective pullback. The major rising trend-line off
the 2011 lows comes in by the $1.4250 area and we would expect to
see a test of this level over the coming sessions. From there it will be
interesting to see if the market can actually put in a daily close below
the trend-line which it has been unable to do all year. Stop at $1.4525.
 22 Wealth Management CITYA.M. 13 APRIL 2011

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 City Focus
23

| Accounting

For those without family connections,

professional qualifications are a lifeline
Improving Britain’s
social mobility means
appreciating that
university is not the
only route to success

NEIL STEVENSON
EXECUTIVE DIRECTOR (BRAND), ACCA

L
AST week, Nick Clegg launched the
government’s new social mobility
strategy to great fanfare. With slightly
more fanfare, the press and opposi-
tion skipped over the strategy and focused
on Clegg’s use of unpaid interns and the
parental help he’d had to start his career.
Amusing headlines – not if you’re Nick
Clegg – but there’s an important point
being missed.
Over the coming decades, the UK has a
hard task to maintain its place in the glob-
al economy. Developing economies have
joined the competition at the top-end of
the global economy, while traditional big
beasts – the US, Germany – aren’t giving up
their positions without a fight.
If the UK wants to maintain its position
then it needs to up its game in terms of pro-
ductivity. Without improvements to social
mobility though, this will be an uphill
struggle: a lack of social mobility means
wasted talent. A 2010 report by the Sutton
Trust estimated that weakening the link
between background and achievement
could be worth up to £140bn to the UK
economy per year by 2050.
With so much at stake, criticisms of how
someone got a job a quarter of a century be done as gateways to the professions. His background isn’t Office’s 2009 Access to the Professions than others to achieve final qualifications.
ago seem insignificant compared to what The type of people entering the profes- helping his career any panel. Professional bodies should give indi- There is a roughly 50:50 split in ACCA’s stu-
the strategy for the future actually is. sions is a good indicator of social mobility. more viduals a fresh start when progressing dent body between graduates and non-
And we do need a strategy. Today, British Professions are usually well-respected and towards a qualification. What can be graduates, with exemptions available for
children from disadvantaged backgrounds well-paid. Looking purely at pay – admitted- Picture: PA achieved rather than what has already graduates and extra opportunities for skills
are less likely than their better off peers to ly only one indicator of a good or desirable been achieved should matter more. development for non-graduates.
reach the expected level of attainment in job – a newly qualified ACCA accountant The ACCA Qualification is equivalent to Different stages of progression must be
their school careers. Just one in nine of can expect to earn roughly £40,000 a year, a Masters degree in the UK. Additionally, recognised with awards. Certificates at a
those with parents from low income back- according to trade-paper Accountancy Age. while working towards the qualification, range of points can help motivate students
grounds reach the top income quartile, But artificial barriers still make it hard students have the opportunity to earn a to move onto the next stage. Too often, stu-
whereas almost half of those with parents for people from poorer backgrounds to BSc degree in applied accounting from dents give up study because they feel the
in the top income quartile stay there. enter professions such as accountancy. Oxford Brookes University. It takes years of qualification is too far off.
For many children in today’s Britain, Within the accountancy profession hard work and rigorous training to com- Flexibility matters too. Qualification
their future career is mapped out by the cir- worldwide, there is still an emphasis on plete the ACCA Qualification, but there is design needs to be flexible in terms of the
cumstances of their birth. For the poorest, graduate entry, especially for registered no reason to place it out of reach for those length of time required to qualify, the ways
top careers are closed off, and the opportu- auditors. Many bodies around the world wanting to study it in the first place. For in which the qualification can be studied,
nity to contribute their full potential to maintain university degrees, or equivalent, those students that don’t meet the mini- and the order in which qualifications are
society is wasted. The individual loses out, as minimum entry requirements, and mum entry requirements, foundation level taken and work experience gained.
we all lose out. many require specific accounting and busi- qualifications are on offer to help students Finally, there is the problem of the poor
The new government strategy creates an ness qualifications. work their way towards eligibility. quality of careers advice in state schools.
independent commission on social mobili- This would be fair if university access was Professional qualifications can be the Information and guidance about equally
ty that will report to parliament, while a set linked to natural talent, but as the statistics passports of social mobility, recognising worthwhile, non-university career paths is
of indicators will be included in depart- above show, background still plays too talent, not background. There are several often inadequate and the professions and
mental business plans; there’s also a social much of a role. Talented young people with steps that can be taken by professional bod- other options end up almost invisible to
mobility business compact. poor support in their early years find their ies and government to make this a reality. young people. Government needs to recog-
Alongside other professional bodies, options dry up when they leave school. Professional bodies need to remove barri- nise and promote professional qualifica-
such as the Royal Institute of British Talent and potential remain untapped. ers to entering training. Professions should tions as a valuable alternative to university.
Architects, and employers such as Channel ACCA has always disagreed with this focus on outcomes, not inputs. Nobody The professions are a force for good
4, KPMG, and PricewaterhouseCoopers, approach and was founded in 1904 with should be pre-judged before even attempt- when it comes to social mobility.
ACCA has signed up to the compact. the express intent of breaking open access ing to pass a tough qualification. Government hasn’t always been quick to
The compact commits its signatories to to the professions; indeed, our efforts to Linked to this is the idea of multiple recognise this, but the new strategy could
boosting social mobility as employers, but promote social mobility through our quali- entry points. With varying levels of past mark a turning point. This development
for professional bodies a lot more work can fications were recognised by the Cabinet education, some will need more support should be supported, not sidelined.
 Lifestyle
24 CITYA.M. 13 APRIL 2011

| Motors WORDS BY
RYAN BORROFF

CAR TALK
BY RYAN BORROFF

GOOD TIMES WITH THE 3 TOWERS RALLY

If Staples to Naples is too much like
roughing it and the Mille Miglia is a little
out of your reach, then the 3 Towers Rally
– which takes place between 9-17 July
2011 – may be right up your alley.
Organised by automotive charity BEN, the
rally takes in Europe’s three iconic towers:
the Tower of London, the Eiffel Tower and
the Tower of Pisa. The cost is £4,000 for
two people sharing a car and the entry
fee includes crossings, accommodation,
breakfast and evening meals plus support
vehicles.

The new, prettier Jeep

The first Compass Fiat bought in to the American brand. The
new Compass has an improved interior,
Jeep is trying to
appeal to British
will start from £16,995.
Driving the 2.2 litre CRD through the TEST DRIVE MONOS
hit some sour notes, reworked chassis and Grand Cherokee-
inspired looks. The Compass 2.2 CRD we’re
buyers who would
previously have
Buckinghamshire backroads, I found its
new diesel engine to be pokey and surpris-
Track driving car club RS Academy has
added two of the first production Mono
but the company driving also has a new engine.
The result is an SUV that is undoubtedly
thought the brand too
expensive.
ingly refined. Even better, the car felt
much more like a compact European SUV
sports cars to its fleet and members will
be able to drive the cars at selected dates
better-looking, if still a bit quirky. From the to drive than expected. It felt much sporti- and venues from May. The lightweight,
has made amends front the car carries much of the cool er than any American SUV I can remem- ultra high performance Mono has a top
sophistication of its top-end sibling, the ber. This is a huge plus for a product that speed above 170 mph and can reach 0-60
Grand Cherokee. But at the rear, it looks will have to deal with European bends, mph in just 2.8 seconds. RS Academy

J
EEP is America’s original, iconic bulky and isn’t svelte enough to look truly rather than just cruising along on vast organises track days around Europe and
extreme off-road brand and the old- sporty. Which is why the rear passenger highways. The 6-speed gearbox felt pretty members have access to more than 100
est SUV brand there is. Originally door handles hidden up high in the C-pil- slick too and I found I liked it, though the race days each year.
used by the US military, its since lars look silly. The resulting unbroken noise of the 120bhp engine was more
become an upmarket choice for the school metal door surface appears as if somebody intrusive than it could have been. On the
run. With its latest Compass SUV, which forgot to put the door handles on and it road it’s not the most refined but it has a
goes on sale this month (the first modern spoils the car’s looks somewhat. cheerful pragmatism, even if it’s a little
Jeep to be offered with a two-wheel “soft But inside things are better. The new rough round the edges. All in all, the
roader” option), Jeep hopes to attract steering wheel, so often quite for- Compass felt like an improved Jeep that
new buyers who would have pre- gettable in SUVs in particular, has remained true to its roots. The ques-
viously thought the brand is marvellous. Its cool tion now is whether UK drivers will buy
was too expensive, while three-spoke design has a into it.
also grabbing sales from quality feel and adds
people that would other- some genuine and THE FACTS:
wise buy a hatchback. unique character to JEEP COMPASS
Jeep’s first-genera- an interior, that
tion entry-level though premium, is
Compass had mixed quite plain. It’s PRICE: £23,595 CENTENNIAL CORVETTE
reviews. The compact clean, comfortable 0-62MPH: 9.8 secs Chevrolet has introduced a 2012
SUV was criticised for and has a no-non- Centennial Edition package, available on
having a poor interior sense pragmatism TOP SPEED: 125 mph all its Corvette models. The cars get a car-
with too much plastic about it. It feels roomy CO2 G/KM: 172g/km bon metallic finish with satin-black graph-
trim and for having too. MPG COMBINED: 42.8mpg ics and satin-black lightweight cast-spun
quirky bug-eyed looks and The 2.2 litre CRD diesel aluminium wheels, plus red brake cal-
questionable ride-quality. I drove has four-wheel drive THE VERDICT: lipers, special badges on the B-pillars, the
Some of the engines offered and a manual gearbox, though DESIGN hhhii centre caps of the wheels, and the centre
weren’t so great either and it didn’t there will also be a 2-litre petrol- PERFORMANCE hhhii of the steering wheel. Inside the interior
sell as well as it should have. engined 2WD manual version, a 134hp 2.2 PRACTICALITY hhhhi is ebony leather-wrapped with red stitch-
This facelifted version represents some- CRD model and a 2.4 litre 4WD petrol ver- VALUE FOR MONEY hhhii ing. Prices to be announced.
thing of a new beginning for Jeep since sion with automatic transmission. Prices

Wide choice, great value, first class service.

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CITYA.M. 13 APRIL 2011 Lifestyle | TV& Games 25

BBC1 BBC2 ITV1 CHANNEL4 CHANNEL5 TV PICK

TERRESTRIAL
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7pm The One Show
7.30pm DIY SOS: The Big
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Would I Lie to You? 11.15pm FILM
Scream 1996; National Lottery
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8pm Springwatch High Seas
with Gordon Buchanan
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the White
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10.30pm Newsnight: Weather
11.20pm Wonders of the Solar
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12.20am Wonders of the Solar
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7.55pm 4thought.tv 8pm Vacation,
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on 4: Being N-Dubz in America and 9pm NCIS
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Show Spotlight 1.15am The Frontier Millions 12.55am SuperCasino mother has a boyfriend and tries to
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and interactive gaming; ITV Story 3.05am FILM Where the How Not to Decorate 4.55am Ted finds a way to outwit a bully.
News Headlines Sidewalk Ends 1950. 4.45am Great Rough Guide to Activity Holidays
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ITV Nightscreen Recall 5.25am-6.10am Countdown House Doctor

SKY SPORTS 1 Sport 11.30pm Cage Fighter 1am Live NBA Basketball E4 Weapons 3am Greatest Tank
SATELLITE & CABLE

7pm Sky Sports News at Seven
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‘n’ All 9pm Boxing 10pm Boots ‘n’
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Highlights 1am Boxing 2am FIFA
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Greatest 3am UEFA Champions
League Highlights 4am Boxing
5am FIFA Futbol Mundial
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SKY SPORTS 2
7pm Live UEFA Champions
League 10.15pm You’re on Sky
Sports! 11.45pm Soccerex
European Forum 12.15am Total
Rugby 12.45am-2.45am Masters
Tennis
SKY SPORTS 3
7pm European Tour Weekly
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Fighter 10.30pm Trans World
12am Poker 1am Inside the PGA
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Wednesday Selection 7.05pm Polo
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Club 9.55pm Wednesday
Selection 10.20pm World
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ESPN
5pm Live Women’s Super League
Football 7.45pm ESPN Kicks:
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Review 10pm Premier League
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7pm CSI: Crime Scene
Investigation 8pm Four Weddings
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11pm Criminal Minds 12am Ghost
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Investigation 2.40am Charmed
4.20am Nothing to Declare
5.10am-6am Maury
BBC THREE
7pm Snog, Marry, Avoid? 8pm
Botox Britain: Your Face in Their
Hands 9pm The Gatwick Baby:
Abandoned at Birth 10pm Russell
Howard’s Good News 10.30pm
Family Guy 11.15pm FILM
Serendipity 2001. 12.40am
Russell Howard’s Good News
1.10am American Dad! 3am The
Gatwick Baby: Abandoned at
Birth 4am Botox Britain: Your
Face in Their Hands 5am-5.25am
Snog, Marry, Avoid?
7pm Hollyoaks 7.30pm Friends
9pm FILM My Super
Ex-Girlfriend 2006. 11pm Glory
Daze 11.55pm My Name Is Earl
12.55am The Event 1.45am Ugly
Betty 2.25am Important Things
with Demetri Martin 2.50am The
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4.15am-6am Switched
HISTORY
7pm America: The Story of the US
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4am The Universe 5am-6am Ice
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8pm How It’s Made 9pm Cook
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Seconds
DISCOVERY HOME & UEFA CHAMPIONS LEAGUE LIVE
ITV1, 7.30PM
HEALTH Tottenham Hotspur v Real Madrid
7pm A Baby Story 8pm 17 Kids
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the quarter-final second-leg encounter
10pm Hospital Sydney 11pm The
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1am Hospital Sydney 2am The
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Martina Cole’s The Runaway:
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My Pet Shame 5.10am-6am Bill designer Jenny Packham give her a
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COFFEE BREAK
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk

QUICK CROSSWORD
   

SUDOKU KAKURO
8 21 23 10 18 30 12 
13 21
20  
29 29
Place the numbers from 1 to 9 in each empty cell so that each 30  
row, each column and each 3x3 block contains all the numbers Fill the grid so that each block 9 19
23 26
from 1 to 9 to solve this tricky Sudoku puzzle. adds up to the total in the box 11 8 17

above or to the left of it. 6 24
You can only use the digits 1-9 38 
  and you must not use the
16 37 7
45  
same digit twice in a block.
    The same digit may occur 39 
10 28 10
   more than once in a row or
column, but it must be in a
10
15
4
6
7

31 3
  separate block.
14 16 
11 27
       14 25
 

  ACROSS DOWN
1 Small amount of food 1 Treeless Russian
  
    WORDWHEEL B S
eaten between meals (5)
4 Quarry (3)
6 Retch (5)
plain (6)
2 Military fabric (5)
3 Former name of the
Using only the letters in the Wordwheel, you have
  ten minutes to find as many words as possible,
E A 7 Minor actor in Democratic Republic
of Congo (5)
crowd scenes (5)
none of which may be plurals, foreign words or
proper nouns. Each word must be of three letters N 9 Former capital of 4 Penetrate
gradually (9)
LAST ISSUE’S or more, all must contain the central letter and
letters can only be used once in every word. There
C L Pakistan (7)
11 Biographical sketch (7) 5 Hackney carriage (4)
SOLUTIONS KAKURO is at least one nine-letter word in the wheel.
T O 13 Knead (7) 8 Not being faithful to a
spouse or lover (3-6)
15 Mixture of decaying
QUICK CROSSWORD 2 3 1 9 6 9 5 vegetation and 10 Pseudonym (5)
S H A C K D R O O P
1 6 3 2 7 4 7 2 SUDOKU          manure (7) 12 Given to sympathy
7 4 1 1 3 4 or gentleness (6)
I R I R A V U          16 Set straight or right (5)
8 9 7 3 5 9 8 4
G L E A N R O A S T
2 8 5 4 1 4 6 1
         17 Region of eastern South 13 Opening through
N A N D E L T
S M A S H E S S L Y 9 8 6 5
        
Africa, KwaZulu-___ (5) which food is
WORDWHEEL
P E S I 1 4 2 4 5 2 1 3
         taken in (5)
P S I A D A M A N T         
18 Concert featuring
I D R L E G O
3 2 6 9 8 6 2 5
bands (3) 14 Cause an engine
6 8 9 9 7 4         
V A L E T A R S O N The nine-letter word was to stop (5)
O E E V A O N 2 1 2 5 7 1 3 4          19 Offspring of a male lion
T I R E D M A P L E 9 3 3 9 8 7 9
METABOLIC          and female tiger (5) 15 Wooden shoe (4)
 Sport
26 CITYA.M. 13 APRIL 2011

UNITED END BLUES’ SEASON

Ferguson: Torres
was always going
to be selected
MANCHESTER UNITED manager Sir
Alex Ferguson believes his opposite
Chelsea number Carlo Ancelotti had
no option but to select Fernando
Torres for last night’s crunch
Carlo Ancelotti’s future in doubt after selection
backfires and Euro dream dies for another year
but I thought a lot of time to take
MANCHESTER UTD 2 this decision. I preferred to start
with Fernando for this kind of
game, with these kind of tactics,
CHELSEA 1 but Didier played very well in the
second-half. He did better than
Torres in his 45 minutes. We have
Man Utd win 3-1 on aggregate to believe in Torres though. We
have to wait until he improves.”
▲

Champions League clash. FOOTBALL On the likelihood of him being

The Spaniard was hauled off at
half-time after being picked ahead of
Didier Drogba despite failing to score
in 10 previous games for the London
club since a £50m January move.
“Having signed Torres for the
money they did, I thought they had to
play him,” said Ferguson. “If you had
the opportunity to sign Torres, you
wouldn’t have turned it down.
“Everyone said at the time it was a
fantastic piece of business. You can’t
criticise him for that. He’s a good
signing. It’s not working at the
moment, but he’s a young man with
other seasons ahead.”
Barcelona cruise
BY JAMES GOLDMAN
CHELSEA manager Carlo Ancelotti
admits he may have made a fatal
error of judgment in selecting
Fernando Torres ahead of Didier
Drogba in last night’s Champions
League quarter-final defeat at Old
Trafford.
Drogba, who was brought on at
the start of the second-half in place
of the ineffectual Spaniard, gave
10-man Chelsea brief hope with a
smartly taken equaliser 13 minutes
from time, but Ji-Sung Park
responded just 21 seconds later to
send United into their fourth
Champions League semi-final in
the last five years.
With a trophyless season now an
Chelsea manager at the start of
next season, Ancelotti added: “I
don’t know. It’s not the kind of
question a manager can answer.
I’m not concerned. I have to work. I
have to try to do my best. It’s not
my decision whether I stay or not.”
Defeat in the first leg at
Stamford Bridge dictated that
Chelsea would need to take the
game to United and they dominat-
ed large swathes of the opening
exchanges with Frank Lampard
missing the best chance of the half.
At the other end Javier
Hernandez had a brilliant diving
header ruled out for offside, but
two minutes before the break he
got the benefit of the doubt from
the linesman when he converted

past Shakhtar inevitability, Ancelotti accepts his

BARCELONA forward Lionel Messi
struck his 48th goal of the season as
Pep Guardiola’s side eased into the
last four of the Champions League
following a 1-0 win against Shakhtar
Donetsk. The 2009 winners won 6-1
on aggregate and in the process
became the first visiting team to win
at the Donbass Arena.
future at Stamford Bridge is out of
his hands, but has urged Chelsea’s
fans to keep patience with Torres,
who has now gone 11 games with-
out a goal for his new club since a
£50m move in January.
Asked if his decision to keep
faith with Torres, seen to be a
favourote of owner Roman
Abramovich, was a mistake,
Ancelotti said: “Maybe. Could be,
Ryan Giggs’ cross for his 18th goal
of an increasingly impressive debut
season at Old Trafford.
Chelsea’s sluggish start to the
second-half was typified by
Ramires’ needless tackle on Nani
which reaped his second caution
and a subsequent red card, before
Drogba breathed unexpected life
into the contest, only for Park, with
a left-footed drive, to instantly dash
hopes of a comeback.

Redknapp believes in miracles as Spurs Mourinho’s mind

aim to put Bernabeu misery behind them
“We are in a situation where every-
TOTTENHAM (0) body feels the tie is over. It will take a
miracle but miracles can happen,”
Redknapp said. “I went to see Fulham
play Juventus in the Europa League
REAL MADRID (4) last season. They were 3-1 down from
the first leg and conceded another
▲
Redknapp has opted against inform-
ing his players they require a come-
back of record breaking proportions
to progress.
“I haven’t told them that,”
Redknapp joked. “They might ring
me up and say ‘what’s the use in com-
on Madrid not
Premier League
REAL MADRID manager Jose
Mourinho admits he will return to
the Premier League at some stage in
his career, but he has not intention of
doing so this summer.
The former Chelsea boss has led

Spurs manager Redknapp retains hope of
an upset. Picture: ACTION IMAGES
FOOTBALL
BY JAMES GOLDMAN
TOTTENHAM manager Harry
Rekdnapp insists his side are capable
of producing what would represent
the greatest European comeback of
all time against Real Madrid tonight.
The nine-times winners cantered to
an emphatic 4-0 victory over 10-man
Spurs at the Bernabeu last week, and
never before has such a first leg
deficit been overturned in the history
of the Champions League.
But Redknapp, who cited Fulham’s
comeback from 4-1 down on aggre-
gate against Juventus in last season’s
Europa League as cause for optimism,
believes all is not lost for Spurs.
goal in the second leg but still came
back to win.
“It was one of the great games I’ve
seen and showed anything is possible.
If we play well you never know what
can happen.
“It’s a fantastic game to look for-
ward to. Obviously we would like to
be in a position where the score is a
lot closer but the first leg didn’t go
our way for reasons we all know. As
long as we give it our best shot I can’t
ask any more. We have to turn in a
good performance and see how it
develops. Hopefully we can make a
real game of it.” He quipped: “I will be
happy if it goes to penalties, we’ve
been practising.”
Despite his positive outlook,
ing, can I go shopping?”.
If Spurs are to give Madrid a fright
they will need a stellar performance
from Luka Modric, who was over-
whelmed and overrun in a the first
leg following the early dismissal of
Peter Crouch.
Modric lists Gladiator among his
favourite films and the Croatia mid-
fielder wants Spurs to play with the
fearlessness shown by the warriors in
the Russell Crowe movie.
“I watched that movie a lot of
times. I won’t watch it before the
game but it is true we need to show
big fighting spirit like in the movie,”
Modric said. “Against Real that is the
only way we can expect something
from the game.”
the Spaniards to second place in La
Liga, the final of the Copa del Rey
and the quarter-finals of the
Champions League, but speculation
continues to link him with a return to
England.
But Mourinho says he wants to
see out the remainder of his contract
in Spain.
“My future is Real Madrid because
I have a contract and it looks like the
club is happy with my work,” he said.
“My future will be in England, for
sure, but my future is after Real
Madrid.
“I have a contract for three more
seasons and I hope I will do well
enough to deserve to continue here.”
CITYA.M. 13 APRIL 2011
KEY MOMENTS
How Chelsea’s hopes of silverware were
snuffed out at Old Trafford, as Man Utd
kept alive their dreams of the Treble.
27mins: Hernandez taps in the opener
after a cross from the outstanding Giggs
70mins: Chelsea’s prospects nosedive as
Ramires is sent off for a second booking
77mins: Sub Drogba offers hope with a
smart volley to equalise on the night
78mins: Seconds later United are back in
front, Giggs feeding Park to fire past Cech
‘It would be an injustice if Paula Radcliffe never won Olympic gold’
Track great Colin Jackson tells Frank Dalleres
why he longs to see the marathon star triumph,
about rows over London 2012 and his latest role
H
IS ANSWERS come as quickly as
the hurdles he repeatedly con-
quered over 110m when Colin
Jackson is asked which British
Olympians he believes will capture
gold next summer.
Triple jumper Phillips Idowu, hep-
tathlete Jessica Ennis, long jumper
Greg Rutherford, Dai Greene, the
Welsh 400m hurdler – all get a
namecheck. And then the one he has
clearly relishes leaving until last.
“Finally someone who we all know
but who has been off our radar for
some time: Paula Radcliffe,” says
Jackson (right), warming to his topic.
“She’s been off doing her mothery
thing, which is great to see, and she’s
happy where she’s at now. But when
she’s back running and at her best
again, London will be one of these
times where she will be inspired.”
London 2012 could represent a
Big bucks, basketball and
buffalo: Kroenke’s world
What Arsenal fans will
want to know about
the man about to take
charge of their football
club. By Frank Dalleres
H
E’S NO Ken Bates,’ is how one
colleague describes Arsenal’s
publicity-shy prospective owner
Stan Kroenke. That is putting it
mildly for a man known as Silent
Stan. His profile is famously low so
City A.M. spoke to sources on both
sides of the Atlantic in an attempt to
learn more about the Missouri native.
PROUD SELF-MADE MAN
Billionaire Kroenke married into the
WalMart dynasty but industry insid-
ers in Denver, where he owns several
sports franchises, say he is fiercely
proud of having amassed his own for-
tune through real estate.
TIGHT-LIPPED
Arsenal fans hoping he’ll let his
guard down should not hold their
breath. Journalists in Colorado say he
has tightened media access to man-
agement of his franchises. While not
unpopular with supporters, some
question his reluctance to talk.
LIKE FATHER, LIKE SON
Is Kroenke’s son Josh a future Arsenal
director? The ex-Lehman Brothers
analyst has the reins at the basketball
and ice hockey franchises, where he is
known as similarly business-minded
but more media friendly.
NOT PROFIT-DRIVEN
He is said to like business but like
final shot at Olympic glory for
Radcliffe, 37, the world record holder
for some eight years who has
endured such heartbreak at previous
Games.
“It would be great to see Paula lift
an Olympic title as I believe she is cer-
tainly the best female marathon
runner there has ever been,” he
adds. “In a way I think it would be
an injustice if she didn’t. She’s
given everything to the
sport; she’s so dedicat-
ed.”
Jackson, 44, who
took silver at Seoul
in 1988 but also
suffered Olympic
frustration despite
largely dominat-
ing his event
throughout
the 1990s, is
ARSENAL
First invested in 2007, now has
control of 63 per cent of
shares and has offered to buy the
rest in a £731m deal.
DENVER NUGGETS
Bought NBA side in 2000 and
improved results towards end of last
decade. Now run by son Josh.
Kroenke (main pic), his son Josh (inset) and their growing sports empire. Pictures: GETTY
sport even more, and is not in the
game just for the money, according to
those who know him, easing fears he
could siphon off Arsenal’s profits.
SPORT IN THE BLOOD
His full name is Enos Stanley
Kroenke, after basketball players Enos
Slaughter and Stan Musial, of the St
Louis Cardinals, and he excelled on
the court as well as in the classroom.
FITNESS FANATIC
He is trim for a man of 63 and reports
depict him as health conscious, work-
ing out daily and shunning bread and
pasta in favour of lean buffalo meat,
helping the class of 2012 by acting as
an ambassador and mentor.
So when Idowu, Ennis and
Rutherford are approaching the
blocks next summer he will
be on hand to advise,
while also showing
dignitaries around
the park and
bestowing Olympic
insight. He’s a
touch jealous.
“Can you imag-
ine being the very
first British
Olympic
COLORADO AVALANCHE
Took over in 2000 and won
2001 Stanley Cup, then divisional
titles. Handed overl to Josh in 2010.
ST LOUIS RAMS
Bought 40 per cent of NFL
side in 1995 and persuaded
then Los Angeles Rams to move to
Missouri. Won Super Bowl in 2000.
COLORADO RAPIDS
Snapped up in 2004, formed
partnership with Arsenal in
2007 and won first Major
League Soccer title in 2010.
fish and egg white omlettes.
WON’T PANDER
He has shown he is not afraid to upset
fans, moving the Rams from Los
Angeles to St Louis, and lately has
shunned big signings at the Denver
Nuggets in favour of a youth policy.
LAST WORD
While he stays out of the locker room
Kroenke is known for having the last
say on business decisions. Sources say
he is methodical, chooses his pre-
ferred plan, and then sticks to it.
Additional research by Alex Sharp.
champion here on home soil? It
would just be incredible,” he enthus-
es. “You’d get elevated overnight to
hero status, so for them it will be fan-
tastic. I’m really envious.”
Building excitement about the
Games has been soured lately by pub-
lic rows over the future of the
Olympic Stadium and how profits
will be shared by organisers Locog
and the British Olympic Association.
Jackson has seen it all before.
“This time of year these stories
always leak out because there is no
real sporting story to talk about,” he
says. “The Olympic Games is the
biggest thing; there must be some
kind of scandal or gossip in it, so we
expect that. It happens, we accept it,
but we can bag it up and move on.”
For now he is also aiming to help
inspire future generations of British
Olympians by promoting Tesco’s
Great School Run, for which the
supermarket giant has recruited
more than 1m children this year.
“When the Games is over this is
one of the legacy projects that’s hap-
pening,” he says. “The Olympics will
engage youngsters; this campaign
will continue and engage more.”
27
SPORT | IN BRIEF
Broad targets May comeback
CRICKET: England fast bowler Stuart
Broad hopes to make a return to com-
petitive action early next month for
Nottinghamshire against Yorkshire.
Broad, 24, had to fly home before his
country’s last two World Cup group fix-
tures. “I’m hoping to play on 4 May at
home to Yorkshire,” he said. England
begin their summer programme against
Sri Lanka at Cardiff on 26 May.
Khan laments lack of support
BOXING: Amir Khan has accused the
leading British broadcasters of a lack of
support ahead of Saturday's WBA light-
welterweight title defence against
Northern Ireland's Paul McCloskey. The
fight at the MEN Arena will only be
shown only by minor pay-per-view chan-
nel Primetime. "I really thought this
would have been a massive fight, but it’s
one of those things,” said Khan.
Wilshere quashes City link
FOOTBALL: Arsenal’s Jack Wilshere has
dismissed transfer speculation linking
with a summer move to Manchester
City. “People asking if I’m going City? I
don’t kiss the Arsenal badge then leave.
This club is in my heart,” he tweeted.
Results
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email sport@cityam.com
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