Cityam 2012-05-22

BUSINESS WITH PERSONALITY
Brewin Dolphin brings you a closer look at Londons rich heritage

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AN investigation into the Bank of
Englands performance in the
financial crisis will be too limited
in scope and has come too late to
influence a massive shake-up of
financial regulation, prominent
MPs said yesterday.
The Bank announced three new
reviews covering its emergency
support to RBS and Lloyds, the
liquidity it provided to the banking
system as a whole, and the MPCs
forecasting capabilities.
Treasury Select Committee
chairman Andrew Tyrie said this
represents an important step in the
Banks recognition that it needs to
become more accountable, but said
the reviews do not go far enough.
What is needed is a
comprehensive review by the Bank
of its performance through the
course of the crisis, he said.
That review should have been
done much earlier, before the euro
crisis deepened.
Had that happened, Tyrie
believes, the results could have
been used to inform the legislation
currently going through
parliament to reform financial
regulation an opportunity that
has been missed.
His colleague on the select
committee, David Ruffley, said he
was worried about the
appointment of former senior Bank
staff members Ian Plenderleith and
David Stockton to lead two of the
reviews.
Whilst not impugning their
integrity, there is the suspicion
that they subscribe to the group
think among Bank of England
executives that contributed to the
financial crash in the first place,
Ruffley told City A.M.
Mark Zuckerbergs Facebook stake lost $2.2bn in value yesterday
FACEBOOK shares plunged on their
second day of trading yesterday as
traders rejected the social network-
ing giants much-hyped flotation.
Facebook shares sank by five per
cent in pre-market trading, opening
at $36.53 before dipping by as much
as 14 per cent to a low of $33.
The shares eventually settled at
$34.03, a drop of 11 per cent, when
markets closed.
The share movements on Friday,
when the stock managed to keep
its head above the $38 IPO price,
led to suggestions that Morgan
Stanley, Facebooks chief adviser on
the deal, had stepped in to keep
the stock afloat.
Facebooks IPO prospectus out-
lines that the banks advising on
the deal can purchase up to an
extra 63,185,042 shares above their
allotment to attempt to stabilise
the price.
But as the market continued to
spurn the float yesterday, Morgan
Stanley seemed to accept defeat.
One investment banker told City
A.M., You have to make a judgement
call at some point as to whether
youre just going to get buried. I
think [Morgan Stanley] would have
pulled away from the position [to
keep buying yesterday]. But the ques-
tion is why did they keep re-pricing
upwards last week?
Facebook originally outlined a $28
to $35 per share price span for its
www.cityam.com FREE
long-anticipated public offering, but
last week just days before hitting
the stock exchange hiked the range
to $34 to $38, citing strong demand.
The tremendous hype and drive in
the few days before the IPO skyrock-
eted expectations. But the funda-
mentals of Facebook as a business
are relatively immature, Robert
Marcus, chief executive of
QuantumWave Capital boutique
investment bank, told City A.M.
Trading [yesterday] was 100 per
cent predictable, he added.
The social networks Friday debut
as a public company was also marred
by technical problems with its cho-
sen stock exchange, Nasdaq.
The tech-favourite bourse yesterday
said it will set aside a $13m pot to
reimburse disgruntled traders who
were affected by Fridays glitches.
But some estimate the total dam-
age from Nasdaqs malfunction to be
nearer the $100m mark, meaning
the stock exchanges offering will
not placate many brokers.
Mark Zuckerbergs Facebook stake,
which was worth $19.25bn after
Fridays float, lost more than $2bn
in value yesterday.
FTSE 100 5,304.48 +36.86 DOW 12,504.48 +135.10 NASDAQ2,847.21 +68.42 /$ 1.58 unc / 1.24 unc /$ 1.28 +0.01
BY LAUREN DAVIDSON
THUMBS DOWN
FOR FACEBOOK
ISSUE 1,637 TUESDAY 22 MAY 2012
CITY AT ROYAL
FLOWER SHOW
See Pages 11 and 21
See Page 9
Certified Distribution
02/04/2012 till 29/04/2012 is 100,668
SEE PAGE 27
$11bn
Critics say
Bank probe
too limited
BY TIM WALLACE
E-BOOK REVOLUTION
HOW PUBLISHING IS BEING TURNED UPSIDE DOWN
wiped off Facebook's
market cap yesterday
Facebook Inc
18May 21 May
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36
38
40
42
44 $
34.03
21May
WEALTH MANAGEMENT: Page 24

allister.heath@cityam.com
Follow me on Twitter: @allisterheath
G
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Coalition split over report
into slashing regulations
BUSINESS minister Mark Prisk was
forced to defend the hard-hitting
Beecroft report yesterday, after its
proposals to slash red tape were
attacked by both Labour and the
coalitions own business secretary
Vince Cable.
A leak of the government-commis-
sioned report prompted the
Department for Business, Innovation
and Skills (BIS) to publish it earlier
than planned, revealing a range of
suggestions to liberalise the UKs
employment regulations.
Prisk was brought to the House of
Commons after an urgent question
was secured by Labours shadow
business secretary Chuka Umunna,
who then accused the coalition of
being divided on the issue.
The business secretary [Vince
Cable] has said there is a reasonably
good balance between workers
rights and employers flexibility. The
Prime Minister and chancellor how-
ever suggest the balance has gone too
far in favour of employees, Umunna
told the House.
Would the minister tell us who is
determining government policy in
this area his boss or his ultimate
masters in Downing Street?
Prisk hit back, saying the coalition
needs fresh ideas to revive the econ-
omy and arguing: its a shame we
SFO lawyer warned against pursuing
Tchenguiz case
The lead lawyer in the Serious Fraud
Offices investigation of the Tchenguiz
brothers warned the agency two months
before the property tycoons arrest that it
should not pursue the case. In January
2011, Wayil Eisa, the lawyer tasked with
drafting the case for the prosecution,
submitted a 25-page report arguing that
it was inappropriate for a UK agency to
spearhead a prosecution rooted in the
failure of an Icelandic bank.The SFO will
explain in court how crucial documents
were misinterpreted.
HSBC postpones plans to leave UK
indefinitely
Stuart Gulliver, HSBCs chief executive,
has said the bank had decided to drop
indefinitely plans to look at moving its
headquarters from London to Hong Kong.
HSBC, which paid $1.5bn (950m) tax in
the UK last year, threatened to leave the
UK in the face of punitive financial
regulation. News that is has squashed the
review into changing its domicile will be a
major boost to HMRC and the UK. Gulliver
became one of the most vocal critics of
the Governments banking levy and
changes proposed by the Independent
Commission on Banking .
Dovers privatisation sails through
final legal barrier
Full-steam ahead to privatisation was
called by the Port of Dover last night after
the final obstacle to its sell-off by the
Government was passed. The Dover
Harbour Board has said it will make its
submission to the Department for
Transport to find a new owner for the port
and raise capital within the week.
Kodak Patent Tossed by Judge
Eastman Kodak suffered a setback in a
patent suit against Apple and Research In
Motion, dealing a blow to the film giants
efforts to raise billions of dollars by selling
off its intellectual property. Kodak had sued
the iPhone and BlackBerry makers at the US
International Trade Commission, saying their
devices infringed on its patent for
previewing images with a digital camera. In
a ruling Monday, a judge with the
JEREMY Hunt came under
renewed pressure yesterday as the
parliamentary watchdog launched
an investigation into claims that
the culture secretary failed to
declare donations from media
companies.
Hunt has been in the firing line
since emails released to the
Leveson inquiry earlier this month
suggested he supported News
Corps takeover bid for BSkyB
while supposed to be acting in an
impartial judiciary role.
Labour MP Stephen McCabe then
complained to the Parliamentary
Commissioner for Standards about
a series of networking events
with media firms that Hunt had
not entered in the register of
interests.
Culture minister Ed Vaizey had
recorded the events as donations
in kind worth around 27,000 in
total.
A spokesperson for Hunt said
the ommission had occurred
because of an administrative error
and the register entry has now
been amended. She said Hunt
would co-operate with the
watchdog probe.
Hunt has faced several calls to
resign over the last few weeks, but
has resisted. He is set to appear
before the Leveson inquiry within
the next fortnight.
Parliamentary
probe turns eye
to Jeremy Hunt
Lib Dem business secretary Vince Cable opposes plans to make it easier to dismiss staff
2
NEWS
BY LAUREN DAVIDSON
BY JULIAN HARRIS
To contact the newsdesk email news@cityam.com
I
T is often wrongly asserted that
there is no evidence that high
levels of tax and public spending
have a negative effect on economic
growth. Whether the state spends
and taxes 30 per cent of GDP or 50 per
cent is irrelevant, it is argued, and
should merely be seen as a question
of taste. I disagree. There have been
dozens of complex, statistically
rigorous papers written by top
academics from around the world
that have investigated these
relationships and found that big
government is bad for prosperity.
These economists have also looked
at other, related questions: the opti-
mal size of government and the effect
of marginal and average tax rates on
economic performance, job creation
and productivity. It is a tragedy that
such research is overlooked in the UK
political debate, especially at a time
EDITORS
LETTER
ALLISTER HEATH
Research that shows why lower taxes are good for growth
TUESDAY 22 MAY 2012
such as this when we desperately
need to relearn what the sources of
economic growth are.
These studies are rigorous. They
often look at well over 100 countries
and adjust for many variables, such as
country size or level of development
or the business cycle. Such scientific
approaches differ dramatically from
the usual arguments, which rely on
picking one or two countries, or a par-
ticular historical episode, emphasis-
ing certain features and then
(wrongly) trying to derive general con-
clusions from them. For example, it is
often said that Swedens high levels of
public spending and its relative
wealth mean that large states arent
bad for GDP but this omits all other
possible factors and fails to hold all
other variable constant. Crucially, it
also conveniently doesnt mention
that Swedish growth rates only accel-
erated when public spending was
slashed by around 20 per cent of GDP.
The advantage of scientific approach-
es to trying to test economic theories
is that they allow us to try to cut
through the fog economies are
affected by thousands of different
variables and to try and isolate the
key forces that really matter.
Here are a few of the studies. A 2011
paper by Davide Furceri and Ricardo
Sousa studying 145 countries over 47-
years found every one per cent of GDP
papers are reviewed in the 2020 Tax
Commissions final report, a major
investigation into the tax system I
chaired and which launched yester-
day (see www.2020tax.org). For those
with eyes to see, there is oodles of evi-
dence that a smaller state and lower
taxes are good for growth.
AND ANOTHER THING
Now for a public service announce-
ment from City A.M.. We still have a
small number of places left for our
flagship trading and investment con-
ference on Thursday there will be 30
top-notch speakers and a brilliant pro-
gramme. If you are interested, check
out the details at the bottom of this
page and buy a ticket at www.citya-
mactivetrader.com
rise in government spending reduces
private consumption and private
investment by 1.9 per cent. A 2011
study by Antnio Afonso and Joo
Tovar Jalles of 108 countries over 38-
years found that there is a significant
negative effect of size of government
on growth. A 2008 study by Asa
Johansson and colleagues of 21 OECD
countries over a 35-year period found
that every one per cent rise in tax as a
share of GDP is associated with a 0.14-
0.27 per cent fall in GDP. A 2009 study
of 15 EU member states by Mihai
Mutascu and Marius Milos found that
the optimal public spending share of
GDP was 30 per cent. Others have
found that the level of spending that
maximises performance on the
Human Development Index is 30-35
per cent of GDP. Public spending in
the UK is close to half of GDP today.
These and many other excellent
dont get them from the party oppo-
site. Yet his coalition partner Cable
opposes moves to allow firms to fire
badly-performing staff. In my daily
conversations with businesses, this has
very rarely been raised with me as a
barrier to growth, Cable said, having
earlier slammed the idea as complete
nonsense.
Yet Cable also said the vast majority
of proposals reflect his departments
plans. The report recommends:
Compensated no-fault dismissal to
replace current unfair dismissal rules.
Extend qualifying period for unfair
dismissal to two years, from one.
Allow firms with fewer than 10
employees to opt out of much red tape.
Charge a fee to employees applying
for a tribunal to deter frivolous cases.
Exclude firms with under five
workers from being subject to the auto-
enrolment pension scheme.
The Home Office should take more
responsibility for work permit checks.
Make it simpler to bring workers
from abroad, and drop the demand to
register each role at a Job Centre Plus.
A consultation period of 30 days for
redundancies of more than 100 people.
cityamactivetrader.com 0203 201 8900
In association with Champagne reception sponsor
WHAT THE OTHER PAPERS
SAY THIS MORNING
G
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Y
BARCLAYS has decided to sell its
$6.1bn (3.8bn) stake in investment
manager BlackRock because new reg-
ulatory requirements mean the asset
cannot generate a decent return.
BlackRock itself has agreed to buy
back $1bn of the stock, which
Barclays acquired in 2009 in part-pay-
ment for its sale of Barclays Global
Investors to BlackRock.
The bank has now done a cost-bene-
fit analysis of holding on to the 19.6
per cent stake and concluded that the
returns it will generate are well below
the groups 13 per cent target.
That is largely because under new
Basel III capital rules, the equity in
BlackRock is classified as highly risky
and incurs a 250 per cent risk-weight-
ing. In other words, the bank has to
hold reserves against possible losses
on the shares as if it held about 10bn
worth of stock.
The bank is likely to make a small
loss of around 10 cents per share on
Barclays to sell
3.8bn stake
in BlackRock
BY JULIET SAMUEL
AND PETER EDWARDS
the disposal: it bought in at about
$182 per share and is now selling at
around $172, although exact pricing
will be decided in the next week after
a roadshow today and tomorrow. The
deal is being run by Barclays invest-
ment bank alongside lead bookrun-
ners Morgan Stanley and Bank of
America/Merrill Lynch.
Barclays chief executive Bob
Diamond will step down from the
board of BlackRock three months
after the sale is completed, though
BlackRock will still own about 11 per
cent of the bank, in large part
through its array of tracker funds.
JP Morgan calls halt to $15bn
share buyback to focus on Basel
JP MORGAN has called a halt to its
$15bn (9.5bn) share buyback
programme following $2bn in
trading losses. The bank said it
wants to instead prioritise getting
its capital up to the levels required
by the Basel III rules.
Chief executive Jamie Dimon told
an investor conference yesterday
that the bank wants to box this
thing first by focusing on building
capital. It will continue with plans
to pay a dividend but has put the
BY JULIET SAMUEL buyback on hold after completing
just $1.3bn of the programme.
Its capital plans received a
knock recently due to a hedging
strategy that has lost the bank at
least $2bn, which could rise by a
billion or so.
It is not clear if the banks
halt to the buyback came
after a prod from the Federal
Reserve or if it is pre-empting
any regulatory move. Dimon
also told analysts that the
loss is not in danger of
spiralling out of control and
becoming an existential threat.
Theres no outcome that will be a
disaster for this company, he said.
It has also emerged that Irvin
Goldman, the banks head of risk
at its chief investment office,
which lost the money, had
previously been fined by US
regulators and fired for
presiding over trading
losses at Cantor Fitzgerald
in 2007.
Barclays, led by Bob Diamond, is selling its stake in BlackRock
THE EUs antitrust chief has given
Google a matter of weeks to come up
with solutions after a probe found
four areas where its practices may
be considered as abuse of its
dominant position.
EU Competition commissioner
Joaquin Almunia wrote to Google
chairman Eric Schmidt following an
18-month probe after competitors
accused Google of manipulating
search results. The search engine says
the criticisms are unjustified.
BY PETER EDWARDS
TUESDAY 22 MAY 2012
3
NEWS
cityam.com
THOMAS COOK confirmed last night
it has agreed to sell its Indian arm to
Toronto-based Fairbridge Capital for
8.2bn rupees (94m).
Fairbridge, part of India-born
billionaire Prem Watsas Fairfax
Financial, will pay 50 rupees per
share for its 77.1 per cent stake in
Thomas Cook India.
The travel firm, which is seeking
to pay down debt, said it will grant
Fairbridge a licence over the Thomas
Cook brand for 12 and a half years.
BY KASMIRA JEFFORD
EU gives Google
time to comply
Thomas Cook
sells India arm
Jamie Dimons JP Morgan is
stopping its buyback scheme
Barclays PLC
21 May 15May 16May 17May 18May
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180.00
21May
EUROPEAN Union countries agreed
yesterday to press for new controls
on credit ratings agencies, with a
law to challenge the power of the
debt raters whose downgrades of
countries angered politicians as they
struggle with an economic crisis.
The draft rules, which will turn
into EU law after the completion of
negotiations with the European
Parliament, could make it easier to
sue ratings agencies if they were
seen to make errors when ranking
the creditworthiness of debt.
Diplomats from EU countries
gave their broad backing to a draft
law that will clamp down on the
agencies, who had come under fire
for giving top-notch triple-A credit
scores to debt that unraveled in the
financial crisis.
The deal injects fresh
momentum into a regulatory drive
to change the way the big three
credit rating agencies Fitch,
Moodys, and Standard and Poors
work.
It means country ratings may
have to be reviewed every six
months, rather than once a year, as
is often now the case.
One of the strongest proposed
reforms imposes legal liability on
rating agencies for their decisions
although it is not clear how this
would be enforced.
EU details plan
to clamp down
on rating firms
BY CITY A.M. REPORTER
CENTRAL bankers from across Europe
banded together yesterday to urge
Eurozone governments to seize the
opportunity given by the ECB to
reform their economies, while they
still have the chance.
European Central Bank (ECB) board
member Joerg Asmussen said that
growth is vital to ending the sover-
eign debt crisis, but that economic
reforms, rather than more spending,
are the solution.
The answer to the crisis is not less
but more Europe, he said, suggesting
that increased language education
and a European network for job place-
ment would help increase labour
mobility.
Asmussen also claimed that a larger
central EU budget could help, though
he did not endorse more spending by
national governments.
The fiscal compact can be comple-
mented by growth-enhancing meas-
ures. This makes sense as a
supplement, but the fiscal compact
Central bankers
fear lost chance
to rescue euro
BY TIM WALLACE
cannot be renegotiated or softened,
he said.
Asmussen reminded leaders that
while the ECB is doing what it can to
help by keeping interest rates low and
keep liquidity in the financial system,
the support can only be temporary
and so leaders could act fast.
ECB vice president Vitor Constancio
backed him up, explaining we would
need to reduce liquidity to go back to
normal times.
.The exit [from unconventional poli-
cies] will come some day, he said,
reminding leaders that the ECB only
loaned 1 trillion to banks to avoid a
credit crunch, not to restore growth
themselves.
The Bank of Englands Adam Posen
also weighed into the debate, telling
governments they must recapitalise
banks to bring an end to the crisis.
The source of current problems is
not Greece, he said. It is that various
financial exposures we all have in the
interbank market are not yet resolved
because certain financial institutions
are insufficiently capitalised, insuffi-
ciently disciplined.
IIF says Spain will need 60bn
to prop up the banking system
SPANISH bank losses on bad loans
could be as high as 260bn
(210.5bn), the International
Institute of Finance (IIF) said yester-
day, with up to 60bn needed to
shore up the troubled countrys
banking system.
The IIF used figures based on the
hit that Irish banks took in the
financial crisis to make its predic-
tions, with the estimated losses on
bad assets ranging from 216-260bn,
but expected to fall towards the
upper end of the forecasts.
As a result the IIF a global associ-
ation of more than 450 member
BY ELIZABETH FOURNIER
banks that helped to negotiate the
writedown of Greek debt in March
expects the Spanish banking sector
to need an injection of 60bn to help
it remain viable.
It said that Spains cajas, the coun-
trys saving banks, would be particu-
larly badly hit.
Substantial divergences between
individual banks suggest that gov-
ernment assistance will be needed
for a significant number of banks,
mainly the cajas, the report said.
Most of the Spanish losses are
expected to centre on commercial
real estate loans, which are concen-
trated in the cajas.
The Spanish government nation-
alised troubled lender Bankia two
weeks ago because it was unable to
handle losses from a 2008 property
crash.
However, even in the IIFs worst
case scenario, the estimated capital
injection required would add up to
just five per cent of Spanish GDP,
well below the 33 per cent of
Irelands GDP that was needed to
recapitalise the countrys failing
banks.
But the organisation also said that
Spains macroeconomic outlook was
worse than that faced by Ireland in
2008, and that further fall in house
prices across the country could push
the size of the losses up even further.
CONSTRUCTION output in the Eurozone fell sharply in the year to March, official
figures showed yesterday, delivering a blow to ECB president Mario Draghi, and
underlining the weakness of the economy. Production in the sector dropped 3.8 per
cent compared with the same month of 2011, according to Eurostat, while output for
the EU as a whole fell 3.9 per cent.
CONSTRUCTION SLUMP HITS GROWTH OUTLOOK
SPAIN saw government borrowing
costs edge up and its stocks slip
further again yesterday, as
uncertainty over the future of the
Eurozone and the stability of the
countrys banking sector
continued to unnerve investors.
Yields on 10-year Spanish bonds
rose sharply from 6.266 per cent to
6.322 before dropping back to
6.276 per cent at the end of the
day, while stocks on the IBEZ
slipped 0.65 per cent.
Italian stocks also slid 0.28 per
cent, while markets in stronger
countries rose the FTSE 100
gained 0.7 per cent, the French
CAC rose 0.64 per cent and the
German DAX 0.94 per cent.
Investors keep pressure on
weak governments borrowing
BY TIM WALLACE
Safe havens Germany and
Belgium benefited from the flight
away from at-risk countries in
debt auctions yesterday.
Germany sold 2.91bn (2.35bn)
in one-year debt at yields of just
0.0264 per cent a record low
while Belgium sold 2.55bn in five,
10 and 15-year debt, paying 3.453
per cent on its 10-year bonds,
down from 3.737 per cent in
February.
Overall these yields are causing
a great deal of concern in the
markets and are providing a good
indication that contagion from the
ongoing Greek crisis remains a
very real possibility, said
Investecs Lee McDarby,
particularly highlighting the
soaring Italian and Spanish costs.
TUESDAY 22 MAY 2012
4
NEWS
cityam.com
Back on the agenda: eurobonds
Q
A
and
Q
What are eurobonds?
A
It depends on whom you ask. At
their most basic level, euro
bonds are a way of using Germanys
fiscal credibility to underwrite the
huge debt piles of more profligate
countries. In other words, they are
effectively a way of transferring
German wealth to other countries.
Q
How do they work?
A
Its not yet clear. Broadly, there are
two kinds of proposals for
eurobonds, and they are radically
different from one another. One
focuses on building the Eurozones
firewall and would effectively
mean fiscal union, whereby the
regions bailout fund or a southern
European country could issue debt
guaranteed by all euro countries
without seeking permission. That
would basically mean that Germany
would agree to underwrite the whole
euro project to the tune of trillions.
The other proposal has been dubbed
baby eurobonds by Berenberg
Banks Holger Schmeiding. Its aim is
to fund the EUs growth plan,
whatever it turns out to be. It would
involve institutions like the
European Investment Bank or
European Commission issuing bonds
underwritten by all euro or EU
countries and using the proceeds to
fund initiatives to stimulate to
growth, like infrastructure projects.
Q
Are either of these going to happen?
A
The growth-focused eurobonds are
more likely than the firewall
bonds, mainly because Germany will
not agree to simply underwrite other
countries with trillions in
guarantees. French president
Franois Hollande has caused a stir
by attaching his name to a grand
plan for eurobonds, but his proposal
is actually for baby eurobonds
issued by the EIB rather than for a
massive beefing up of the Eurozones
firewall. In other words, it is a way of
getting Germany to fund a Keynesian
stimulus, probably to the tune of 10-
20bn. Whether it will work is
unclear. Juliet Samuel
GERMANY remains opposed to
the introduction of jointly-backed
eurobonds to tackle the
Eurozones sovereign debt crisis,
a government spokesman
announced yesterday.
New French President Francois
Hollande and some other
Eurozone leaders are expected to
revive proposals for mutualised
European debt or eurobonds at
an informal EU summit in
Brussels tomorrow evening.
By gaining German backing for
their debts, weaker governments
hope to reduce their borrowing
costs and so bring an end to the
sovereign debt crisis without
Germans harden opposition to
eurobonds before key summit
making the painful choices to cut
their own spending and reform
their economies to seek more
sustainable fiscal positions and
economic growth.
German Chancellor Angela
Merkel has long opposed the idea
of bailing out uncompetitive and
unreformed states at the expense
of her countrys taxpayers a
position which a spokesman
insists has not changed despite
the increased pressure from other
European leaders, including
George Osborne.
Eurobonds are not the tool to
overcome the present crisis and
our position has not changed,"
the spokesman told a news
conference.
Eurozone construction plummets
2003 2006 2009 2012
80
85
90
75
95
100
105
110
115
Euroarea,
seasonallyadjustedseries
BRITISH telecoms firm Cable &
Wireless Worldwide said yesterday a
drop in earnings and no prospect of
a quick upturn showed it was right
to back a 1bn takeover by Vodafone
despite the reluctance of its largest
shareholder.
The troubled corporate telecoms
service provider reported core
earnings fell 14 per cent to 378m in
the year to 31 March, just short of
market expectations, and it also took
exceptional charges totalling 606m.
Vodafones offer represented a
more certain outcome than trying to
deliver a turnaround plan in a tough
market that it did not expect to get
any easier, CWW said.
The board believes the Vodafone
offer represents an excellent
opportunity for shareholders to
realise an attractive valuation in
cash today, chief Gavin Darby said.
But Orbis, CWWs biggest
stakeholder, has refused to be
seduced by Vodafones 1bn offer.
An Orbis spokesperson said before
CWW results were published that
even if the company continued along
its disappointing trend, its current
performance is not a good indicator
of the inherent value of the
company. Orbis said it had nothing
to add after seeing the results.
CWW shares rose slightly to 35p.
CWW points to
poor results to
back Voda bid
BRITAINS income taxes jumped
sharply at a time when much of the
rest of Europe was reducing the bur-
den on high earners, official statis-
tics showed yesterday.
Even in corporation tax, where
George Osborne aims to make the UK
more competitive, other countries
have cut taxes further and faster
than Britain, leaving the UKs
rate above the average.
From 2000 to 2012 the
average top rate of income
tax in the EU fell from 44.8
per cent to 38.1 per cent,
while the UKs rose from 40
to 50 per cent.
Part of the rea-
son for the drop
is the number
of low-tax cen-
tral and east-
e r n
Eur opean
countri es
that have
UK raised taxes
while other EU
states cut back
BY TIM WALLACE joined the EU since 2000 for exam-
ple the Czech Republic joined in 2004
and has a top rate of 20 per cent.
However, that is not the only reason
older members have also cut rates.
Frances top rate has dropped from
59 per cent to 46.8 per cent, and
Germanys has been cut from 53.8 per
cent to 47.5 per cent.
Despite cutting its corporation tax
rate from 30 per cent to 24 per cent,
and Osborne pledging to keep cutting
to make the UK a more attractive
place to do business, other countries
have pulled ahead.
The EU average has fallen from 31.9
per cent to 23.5 per cent, with
Germany cutting the most rapidly
from 51.6 per cent to 29.8 per cent.
The UK joined the EU-wide
trend for raising VAT the
average rate has risen from
19.2 to 21 per cent, with the
UKs up from 17.5 to 20 per
cent.
cityam.com
TUESDAY 22 MAY 2012
6
NEWS
W
ITH financial markets in a
state of nervousness, the
$104bn Facebook flotation
appeared to be a godsend
for the few investment banks
involved. So far this year,
investment banks equity advisory
teams have had a pretty rotten time.
The year all started promisingly
enough, with the Italian bank
Unicredit managing to get a 6bn
rights issue successfully away
against all the odds and much of the
received wisdom; then there was the
Glencore/Xstrata 56bn merger and
a number of US healthcare deals.
But overall worldwide mergers and
acquisitions business is down by 30
per cent.
In terms of new issues, the London
market has been near dormant,
although there has been some
action in the oil and gas and natural
resources sector. In 2011 more than
half the issuance in the London mar-
ket was in the oil and gas sector,
according to Dealogic.
In the US, including Facebook, the
picture is quite different. According
to Dealogic again, US IPOs total
$29.1bn, up 19 per cent from the
same period last year. And of these,
more than half the value, $18bn, is
from technology floats. It is likely
that a similar pattern is emerging in
the far eastern markets where luxu-
ry flotations such as Graff Diamonds
still seem to cut the mustard despite
uncertain global conditions.
On Facebook Morgan Stanley got
into pole position, where its highly
respected team is headed by
Michael Grimes. The other banks
inevitably include JP Morgan,
despite its recent trading problems,
and, perhaps surprisingly, Barclays.
Yesterday those same banks were
wondering whether their joy at
being selected to work on the deal
might be unwound by subsequent
share price falls, as Facebook shares
slipped. But most bankers would
rather be on deals than miss out on
them, even though their investors
might have a different view.
As the dust settles on the Facebook
flotation and bankers question who
did well and why, they will also
want to seek the answer to this ques-
tion; will the UK, which does have
pretensions to having its own
Silicon roundabout, if not a Silicon
Valley, ever be in the position of
being the favoured destination for
money-raising? If not, as one invest-
ment banker recently said to me,
the UK technology base will
inevitably drain away to where the
money is.
david.hellier@cityam.com
INSIDE
TRACK
DAVID HELLIER
London not yet in the race for Facebook type flotations
The UK raised its top rate of income tax as others cut back
Czech
Republic
EU Germany France UK Sweden
70
2000 2012
60
50
40
30
20
10
0
%
UK corporation tax remains above the EU average
Czech
Republic
2000 2012
60
50
40
30
20
10
0
%
VAT has risen across Europe
Czech
Republic
2000 2012
30
25
20
15
10
5
0
%
George Osborne wants to
cut taxes to help firms
7
NEWS
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A solid set of results. The NAV of 595p was broadly in line with our 592p
forecast. The underlying portfolio grew 2.6 per cent (Land Secs two per cent) with a
slowdown in growth in the second half. The key driver was the achievement
of a number of important milestones in its ofce development programme.
ANALYST VIEWS
Management remain cautious in their outlook...but expect London to out-

perform the rest of the UK...Shares trade at an 18 per cent discount to todays NAV, in
line with Land Securities, which remains better placed to benet from the
impending supply/demand imbalance in the central London ofce market.
Todays result, like that from Land Securities on 16 May is muted. Almost
all of the NAV and property uplift is from the rst half, and little new news is
announced. However, the ofce development sites were up 18 per cent in
the year. British Land expects a further 192m of gains to ow through.
HOW IS BRITISH LAND

PLACED FOR GROWTH
COMPARED TO RIVALS? Interviews by Kasmira Jefford
ALISON WATSON LIBERUM CAPITAL
JONATHAN JACKSON KILLIK & CO
KEITH CRAWFORD PEEL HUNT

BRITISH LAND said yesterday there
was little rise in its net asset value in
the fourth quarter of the year after
weak consumer sentiment caused the
value of its retail portfolio to drop.
The UKs second largest property
company posted a net asset value of
595p, up from 593p in the three
months to 31 December after gains in
office developments offset a slight fall
in retail values.
The group said retailers in adminis-
tration, which reflected 0.6 per cent
of rent at year-end, were set to rise to
one per cent as a result of Clinton
Cards collapse earlier this month.
Chief executive Chris Grigg said the
Eurozone crisis and a faltering UK
economy had hit both the rental and
the investment markets in the UK,
particularly in retail.
Grigg, however, said the group had
British Lands
asset value up
as retail drags
BY KASMIRA JEFFORD
continued to perform well, with
underlying pre-tax profits up a solid
5.1 per cent to 269m in the year to 31
March, helped by a 5.4 per cent rise in
rental income to 28m. Its portfolio
also rose 2.6 per cent to 10.3bn.
The firm said 50 per cent of office
developments under construction
were now pre-let. It upped its quarter-
ly dividend by 1.5 per cent, bringing
the full year dividend to 26.1p.
British Land Co PLC
485
490
495
500
505 p
495.60
21May
BOTTOM
LINE
DAVID CROW
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08450 006 007
WATERSTONES yesterday unveiled a
partnership with Amazon that will
see the iconic British bookshop sell
the Kindle e-reader and e-books.
The high street retailer, which cele-
brates its 30th birthday this year, said
the deal is part of its major refurbish-
ment programme, which will see its
stores decked out with new coffee
shops, free wifi access and dedicated
digital areas.
The move surprised some, as
Waterstones managing director
James Daunt has previously spoken
out against Amazon, calling it a
ruthless money-making devil.
The bookshop was also known to be
working on its own e-reader device,
which was set to launch this spring.
But Daunt insisted Waterstones was
not compromising itself. He said, We
needed to solve the digital question...
Are we forsaking the physical book for
the digital? Not at all.
In a statement, Daunt said the deal
will complement and strengthen the
traditional attributes of the book-
shops to which the company remains
BY LAUREN DAVIDSON
fundamentally committed.
The companies declined to disclose
commercial terms of the partnership,
and said further details will be
announced in the autumn.
This date could also point towards
the arrival in the UK of the Kindle Fire,
Amazons Android-based colour
touchscreen tablet which launched in
the US before Christmas.
Waterstones deal with Amazon
echoes Microsofts partnership with
Barnes & Noble and its Nook e-reader,
announced in late April.
Amazon shares rose 4.26 per cent to
218.11.
Publishers need to learn lessons of the record industry
I
N my less cynical moments I feel
sorry for the record labels. While
I think they are almost entirely
to blame for destroying huge
swathes of their own industry, they
did so unwittingly. Their abject
failure to respond to the digital
music revolution that occurred in
the early part of this century means
the recorded music business will be
permanently smaller. But the record
labels were in unchartered territory.
Publishers have no such excuse. The
music industry offers a textbook
case of how not handle a
technological reformation yet
publishers are making exactly the
same mistakes.
Take, for instance, the much-hated
digital rights management software
that punished legitimate buyers of
MP3 files. If you bought your tracks
on a legal site such as iTunes, it was
virtually impossible to transfer them
between different devices. If you
bought them off a pirate file-sharing
website, then it was incredibly easy.
The record companies actually
pushed people on to illegal platforms
by offering such a terrible service.
The publishing industry is doing the
same by insisting on DRM for e-
books. Similarly, the price of e-books,
although falling, is still too high,
especially when you consider that
the cost of distributing and retailing
a digital book is fractional compared
to a physical one.
There are already early signs that e-
books are threatening publishers
business models. At the end of
March, JK Rowling started selling e-
book versions of her hugely success-
ful Harry Potter series through her
own website, Pottermore. In doing so
she bypassed publishers and vendors
completely, keeping the vast majority
of revenues for herself. Pottermore
sold 3m worth of e-books in its first
month. If Rowling had distributed
the titles through a publisher she
would have been lucky to have seen
450,000 of that. Rowling has
learned the lessons of the music
industry the e-books cost far less
than the printed versions and are
free of restrictive DRM protection.
Of course this only works for the
big hitters like Rowling. Fledgling
authors would struggle to find expo-
sure or readers without publishers
standing behind them. The book
industry works on the assumption
that if an author makes it big, the
proceeds of their success are used to
offset the cost of backing new
authors, many of whom will be com-
mercial failures.
As Morrissey puts it so scathingly of
record labels, they want to help you
to grow, and then siphon all your
dough. But why shouldnt they? It
would be terribly sad if books were to
become a winner takes all market.
IN BRIEF
Campbell keeps targets
I Campbell Soup
disappointed investors by
leaving its full-year profit
forecast unchanged despite
reporting better-than-
expected quarterly earnings
yesterday, as it continues
trying to turn around its
North American soup
business. Campbell, whose
shares were down two per
cent, said it was on track
with a plan this year to
spend $100m on new
advertising, new products,
and research and
development meant to
reignite soup sales that have
gone cold amid increased
competition from store
brands and other options
such as frozen foods.
Amazon.com, Inc
15May 16May 17May 21 May 18May
220
222
224
214
216
218
226
228
230 $
218.11
21May
US trial of ex-Goldman
board member begins
TUESDAY 22 MAY 2012
9
NEWS
cityam.com
Explore new horizons
from London
Dubai
from
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Johannesburg
from
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Buenos Aires
from
663
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Waterstones to
stack Kindles
on its shelves
david.crow@cityam.com
Twitter: @davidcrow83
A FORMER Goldman Sachs
Group board member
threw away his duties in
divulging secrets about the
investment bank to now-
imprisoned hedge fund
manager Raj Rajaratnam, a
US prosecutor said at the
start of a major insider-
trading trial yesterday.
Rajat Gupta, once a
boldface name in business
and charity circles, is the
most prominent corporate
executive charged in the US
governments crackdown
on insider trading.
He has denied the
charges, and his lawyer says
that prosecutors have no
direct evidence to win a
conviction. The case is USA
v. Gupta, US District Court
for the Southern District of
New York, No. 11-907.
Rajat Gupta denies insider trading allegations
G
E
T
T
Y
HSBC has completed its sale of 195
branches in upstate New York to First
Niagara Bank in a deal first
announced in July last year.
The move, which bagged the
banking group $900m (570m), is
the latest completion in a string of
transactions aiming to rid the bank
of retail operations it sees as
subscale.
HSBC has decided that its US retail
bank fits into that category: the
business boasts $14bn in customer
deposits but only $2.2bn in loans
and $4bn in brokerage and
insurance assets under management.
That makes it too small to fit into
the banks new plan, which is to
focus mostly on its corporate
customers and to only operate high
street banks where it can become big
enough to be worth the time and
money.
HSBC said last week that it has
brought in $5.9bn by selling
businesses in the last year, including
its US credit cards business.
It has also sold assets in Europe,
including Poland, Georgia and
Slovakia.
HSBC seals the
deal to sell 195
US branches
BY JULIET SAMUEL
G
E
T
T
Y
MUSIC chain HMV is said to be con-
sidering a break up of its live enter-
tainment business as it struggles to
drum up interest from bidders for its
festivals arm.
Earlier this year, HMV hired
bankers at Citigroup to find a buyer
for its profitable HMV Live division,
which runs 13 music venues and
stages five festivals, to help cuts its
180m debt pile.
But it is now considering a deal
that would see it retain the festivals
such as Lovebox but sell the enter-
tainment venues including
Londons Hammersmith Apollo,
according to Sky News.
American entertainment giant
AEG, the owner of the O2, was
reported this weekend to have been
granted preferred bidder status for
HMVs venues, which also include
the Jazz Cafe in London and the Ritz
in Manchester.
AEG is understood to have beaten
HMV mulls potential
break-up of its live
entertainment arm
BY KASMIRA JEFFORD off competition from several other
interested bidders including Sony
Music and private equity group
Oakley Capital, the owner of Time
Out.
HMV, which has issued a string of
profit warnings over the past two
years, secured a crucial lifeline with
its banks in January, which eased its
covenants in return for the company
granting its key suppliers warrants
over 2.5 per cent of its equity.
HMV declined to comment.
SHARES in struggling hedge fund
manager Man Group leapt 4.6 per
cent yesterday on hopes its acquisi-
tion of FRM could lead to a divi-
dend boost.
The stock, which has halved
since early March, closed up at
78.8p as analysts backed a low-risk
deal for the global hedge fund
research and investment firm
with $8bn under management.
Man will not pay anything ini-
tially but over three years will pay
a maximum of $82.8m in cash
depending on how much of FRMs
assets it can retain, plus additional
payments depending on perform-
ance fees earned.
Man and FRMs combined busi-
ness, which will trade under the
FRM name, will manage around
$19bn in total. The division will be
run by head of Man multi-manag-
er Luke Ellis, who was previously
managing director of FRM.
Jonathan Jackson, head of equi-
ties at Killik & Co, said the deal
leaves Man in a stronger posi-
tion.
The acquisition is expected to be
double-digit accretive to Mans
adjusted net management fee earn-
ings per share in 2013. Importantly,
this is the figure the group pays its
dividends from.
David McCann at Numis said it
was a fairly small, sensible deal
but said Mans management could
do little to change the poor per-
formance of AHL, the flagship com-
puter-driven fund that lost 6.4 per
cent last year.
Yesterday Man chief executive
Peter Clarke said: This financially
compelling transaction provides us
with the opportunity to signifi-
cantly improve the profitability of
our multi-manager business.
By combining the complementa-
ry investor bases of the two busi-
nesses and pairing FRMs well
regarded investment process with
Mans managed accounts infrastruc-
ture, we can increase revenues with no
material change to Mans current cost
base.
Man, the worlds largest listed hedge
fund, expects cost savings of $45m a
year. In January the group said it
would cut an extra $75m from costs,
on top of previously announced sav-
ings of $40m.
The deal, which is expected to be
completed before the end of
September, is unlikely to herald a buy-
ing spree for Man.
Kylie Minogue is among the singers who have performed at HMV Lives venues
HMV Group PLC
3.2
3.3
3.4
3.5
3.6 p
3.10
21May
THE FSA has had its decision to
fine a UBS trader 1.25m
upheld by the upper tribunal,
an independent judiciary body.
Sachin Karpe, head of a
trading desk in the banks
institutional wealth
management business, was
fined in 2009 for engaging in
unauthorised trading,
including an attempt to
subvert Indian law by helping
Tribunal upholds 1.25m FSA fine on former
UBS trader for rogue trades with client cash
BY JULIET SAMUEL
an Indian client make a $250m
(158.2m) investment in a vehicle
open only to non-Indians.
The tribunal also confirmed
the FSAs findings that Karpe
had transferred money from
other clients accounts in order
to cover losses from his trades.
Karpe also directed trader
Laila Karan to assist in creating
records that aimed to make it
look as if the client transfers
had been instructed. She was
fined 75,000, which was also
TUESDAY 22 MAY 2012
10
NEWS
cityam.com
Man Group PLC
77.5
80.0
82.5
85.0 p
78.80
21May
upheld by the tribunal.
Both Karpe and Karan were also
banned from taking on new roles
in financial services for failing to
act with integrity.
It is understood that the police
had looked at the file but did not
pursue the case, in part because
Karpe did not make much in
personal profits from his trades.
UBS was fined 8m in 2009 for
compliance failings but did not
appeal the penalty. It compensated
clients to the tune of $42m.
City backs Mans 50m
multi-manager vision
BY PETER EDWARDS
Got A Story? Email
thecapitalist@cityam.com
11
cityam.com
cityam.com/the-capitalist
TUESDAY 22 MAY 2012
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knowledgetoaction.co.uk/cityam

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Citys finest in
full bloom at
Chelsea Flower
Show preview
THECAPITALIST
Cairns Sir Bill Gammell arrives at last nights Chelsea
Flower Show Charity Gala Preview in aid of the RHS
MITIEs Ruby McGregor-Smith was
fresh from the firms upbeat results
Ex-Lloyds boss Eric Daniels proved hes
still on the Citys best guestlists
RBCs co-head of European
investment banking, Josh Critchley
Centrica chair Sir Roger Carr
attended the event with his wife
L
A
U
R
A

L
E
A
N
/
C
I
T
Y
A
M
Simon Borrows was named as the
new chief exec of 3i last week
GOOGLE CHROME has surpassed
Internet Explorer as the most used
web browser, according to data
firm StatCounter.
For the week of 14-20 May,
Chrome was the worlds number
one web browser, leaving usual top
spot hogger Internet Explorer
lagging behind.
The Google site first pipped
Windows browser two months ago,
when Chrome topped the league
for one day, on Sunday 18 March.
But the win was shortlived. At
the time, Statcounter said it
noticed a trend of Chrome peaking
on weekends when consumers were
free to choose their own browser,
unlike on weekdays due to the
majority of offices employing
Internet Explorer.
This was the first time weve
seen Chrome top the tables for a
12
OUTSOURCER Mitie yesterday said it
was eyeing international growth as it
reported record revenues.
The FTSE-250 company, which has
dozens of UK government contracts,
has a brimming order book with
services including security and main-
tenance growing.
Its pre-tax profits jumped 5.9 per
cent to 94.5m for the year to the
end of March.
Mities order book grew 26 per cent
to 8.6bn while revenues jumped 5.9
per cent to just over 2bn.
The company, whose biggest clients
include Vodafone, Tesco, and the
British government, said that the
Eurozone crisis was providing it with
new opportunities.
Chief executive Ruby McGregor-
Smith said: Some UK companies
with operations in Europe are using
us as they cut back on the number of
suppliers they have.
We will also be looking to expand
into markets beyond Europe and
there could be acquisitions, particu-
larly with our energy services busi-
ness growing.
We are very strong in the UK but
will be looking beyond.
Mitie, which acquired energy and
carbon consultancy Utilyx early this
year, said energy services generated
34 per cent of revenues in 2012.
The firm, which is bidding to run
Mitie seeks out
overseas deals
as sales jump
BY JOHN DUNNE
nine prisons in a joint venture with
Britains prison service a new mar-
ket for the group said its outlook
was robust and it expected growth to
continue as cost saving pressures
bring more public sector opportuni-
ties to the table.
The group said its order book stood
at 8.6bn, up 26 per cent from 2011
and a record for the firm, while its
pipeline of bid opportunities slipped
to 11.2bn from 11.4bn a year ago.
McGregor-Smith added: Part of the
reason we have a strong business is
that we employ our own staff and our
training is good. Mitie employs
around 63,000 people in the UK and
over the year the company won a con-
tract to provide security for BT. It was
also awarded a deal to clean Odeon
cinemas and has a 775m contract to
provide a range of services to Lloyds
Banking Group. It has a further 1bn
in contracts with the Ministry of
Justice in the pipeline.
Alibaba buys back
$7bn stake in Yahoo
CHINESE internet entrepreneur
Jack Mas Alibaba Group is buying
back up to half of Yahoos 40 per
cent stake for $7.1bn (4.5bn) in a
deal that moves the Chinese e-
commerce leader closer to a
public listing.
Under the agreement, Yahoo
will sell one-half of its stake in
Alibaba for at least $6.3bn in cash
and up to $800m in new Alibaba
preferred stock. The deal,
announced yesterday, caps years
of often acrimonious talks
between Alibaba and Yahoo over
how the Chinese company could
reclaim some or all of the stake
that Yahoo bought for about $1bn
in 2005.
While Ma had a strong rapport
with Jerry Yang, the Yahoo co-
founder who led the initial
investment in Alibaba, ties
between the two companies
soured when Yang was ousted and
replaced as CEO by Carol Bartz.
Relations were also complicated
by a spat over the Chinese groups
payment unit Alipay, and Yahoos
attempt to appoint more directors
at Alibaba.
Talks over a deal for Ma, who
owns nearly 7.5 per cent of
Alibaba, to buy back most of the
Yahoo stake for up to $9bn
faltered earlier this year over
valuation.
The deal came after a
management and board revamp at
Yahoo, which appointed a new
interim CEO in the last week and
gave three of 11 board seats to
Third Point, the hedge fund run by
activist investor Dan Loeb.
L
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A
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Ruby McGregor-Smith said Mitie was eyeing acquisitions.
MITIE Group PLC
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21May
TUESDAY 22 MAY 2012
cityam.com
NEWS
Google Chrome becomes
worlds top web browser
BY LAUREN DAVIDSON
whole week, Statcounter chief
executive Aodhan Cullen told City
A.M.
Chromes market share rose to
32.8 per cent last week, compared to
Explorers 31.9 per cent.
And it seems as if Chrome is set
to stay on top. The Google browser
has been steadily climbing over the
last two years, while Explorer has
been stumbling along a downwards
trajectory.
Ranked third is Firefox, which
took a 25.5 per cent share of the
market last week. Chrome soared
past the Mozilla browser in October.
Google first launched Chrome as
a beta version for Microsoft
Windows in September 2008, before
releasing the stable browser to the
public in December of that year.
StatCounter bases its research on
a sample exceeding 15bn page views
per month collected from a
network of more than 3m websites.
AVAIL-TVN, a US-based media
services provider, announced
yesterday it has raised $100m (63m)
in a round led by private equity giant
Carlyle Group, to help fund its
acquisition of rival company On
Demand Group in the UK.
Avail-TVN, which works with
companies like NBC and Univision,
said its $27m acquisition of On
Demand Group also announced
yesterday will make it the largest
provider of digital video services in
the world.
Carlyle is leading the round that
also includes existing investors
Columbia Capital, Valhalla Partners,
Novak Biddle and Pioneer Ventures
and will become Avail-TVNs largest
investor.
Avail TVN said the deal will
expand its reach to more than 25
countries, serving more than 70m
households across the world.
Carlyle bets on
USs Avail-TVN
BY KASMIRA JEFFORD
DIVERSIFIED industrial
manufacturer Eaton yesterday
agreed to buy electrical
equipment maker Cooper
Industries $11.8bn (7.5bn) in cash
and stock, its biggest-ever
acquisition, a move that will lower
Eatons taxes by shifting its
incorporation to Ireland.
American Eaton will pay $72
per share for Cooper: $39.15 in
cash and the rest in stock. Eaton
shareholders will control almost
three-quarters of the new Eaton
Global.
The deal will allow Eaton to
better participate in an electrical
market that is expected to benefit
from investment to modernise
aging power grids in both mature
and developing economies. It will
G
E
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Y
DO YOU THINK LONDONS AIRPORTS
ARE READY FOR THE OLYMPICS?
Interviews by Anaam Raza
I dont think so. The airports could
be end up being a let down and
embarrassment this summer. But I have hope
in the aviation authorities that they could still
do something about it in the 50 or so days to
go before the Olympics. What is really bother-
ing me is transport within London!
These views are those of the individuals above andnot necessarily those of their company
ATSUSHI
MATSUMOTO
SMBC NIKKO
Yes, I dont see why not. They must

have been planning for years, and I
think the airports are ready to deal with the
extra workload, it shouldnt be a problem. If
the other Olympic hosting countries have been
able to deal with it, then we can deal with it
too.
PAUL NUTTALL
HARDWICKE
No, probably not. It will be a seri-
ous challenge to deal with 12m
passengers coming from outside the UK for
the Olympics this summer. The airports really
are not geared up to the capacity, and its
probably far too late to do anything about it
now.
ARUN BHALLA
EXPERIS
CITYVIEWS
TUESDAY 22 MAY 2012
13
NEWS
cityam.com
Ryanairs chief executive Michael OLeary celebrated record profits at his firm
Ryanair says fuel prices
will drive down profits
BUDGET airline Ryanair yesterday
announced record profits of 503m
(406m) for the year to March 2012, an
increase of a quarter on a like-for-like
basis.
But the Dublin-based firm said that
this would be the last year of expecta-
tion-beating profit rises and warned
that returns could drop by as much as
20 per cent during the next fiscal year.
Recession, austerity, currency con-
cerns and lower fares at new and
growing bases will make it difficult to
repeat this years record results, said
chief executive Michael OLeary.
If we were guiding a blue sky sce-
nario with rising fares into next win-
ter, we would be nuts, he said.
Ryanair has focussed on increasing
fares up 16 per cent this year in
order to offset substantial hikes in
taxes and oil prices.
The tactic has paid off, with revenue
up 19 per cent at 4,325m, helping to
negate a 360m increase in fuel costs.
Chief financial officer Howard
Millar said that traffic will grow by
five per cent to reach 79m in the year
to March 2013 but explained that sub-
stantial fare increases are no longer
possible.
Asked about the effects of the Greek
economic crisis, he commented:
Greece is very small for us. We would
be more concerned about places like
Spain, its high unemployment and
plans to raise taxes.
The airline also confirmed it would
hand 483m to shareholders in just its
second dividend payout since floating
in 1997.
Despite aiming to slow its previously
rapid expansion Ryanair has recently
expanded into Hungary, Spain and
Scandanavia to take over from
defunct local operators.
The additional bases led them to
purchase 25 new aircraft and open
330 new routes, taking the total num-
ber of Ryanair routes to over 1,500.
Peter Hyde, an analyst at Liberum
Capital, reaffirmed his buy rating:
We expect Ryanair to focus on deliv-
ering growth in net income per pas-
senger and to benefit from capacity
discipline, slowing its own growth,
closing the fare gap and weak com-
petitors exiting the market.
Shares in the firm were down 2.5
per cent.
BY JAMES WATERSON
Ryanair Holdings PLC
4.40
4.30
4.20
4.10
4.00
3.90
3.80
4.04
21May
Eaton snaps up rival
Cooper in 7.5bn deal
CITY A.M. REPORTER
also allow Eaton to expand into
lighting and lighting controls, a
market poised to benefit from a
rebound in commercial
construction.
Eaton also cited expected
growth from the oil and gas
industry, which both Cooper and
Eaton serve.
Incorporating in Ireland will
shave about $160m a year from
Eatons tax bill, said Eaton chief
executive Sandy Cutler, who will
lead the combined company.
Its our confidence in the
synergies in this particular deal
that gave both our boards the
conviction (to do this).
When Cooper incorporated in
Ireland last decade, it was one of
several US industrial companies,
including Ingersoll Rand and Tyco
International to do so.
THE head of German carmaker Opel,
under pressure from parent General
Motors to end losses, yesterday
refused to promise workers at its
plant in Bochum that their jobs
would be safeguarded after 2014.
The plant, located in the rust-belt
Ruhr region devastated by coal
mine closures, is expected to shut
after the company chose to build
the next generation of its popular
Astra compact here in Britain and
Poland where wages are cheaper.
Unions say around 45,000 jobs are
linked to the factory but a weak
economy has hit car sales in Europe,
forcing manufacturers to confront
high fixed costs and a capacity
overhang that GM says equates to 10
plants.
Germany has had few major plant
closures in the last four years and
shutting Bochum could become an
issue in next years election.
German Opel
jobs are at risk
CITY A.M. REPORTER
14
IN BRIEF
ITE sales leap 30pc in first half
IExhibition and conference organiser
ITE Group reported a higher first-half
profit as volume sales jumped 30 per
cent. The UK firm, which organises
around 200 trade exhibitions and
conferences each year in 14 countries,
said its booked revenue for the year,
including sales from newly acquired
businesses, rose six per cent on a like-
for-like basis and stood at 156.2m as
at May 18. For the six months ended
March 31, adjusted pre-tax profit
increased to 13.1m pounds from
9.1m a year ago. Revenue jumped 29
per cent to 68.6m.
Informa forecast unchanged
IInforma yesterday said its
expectations for 2012 remained
unchanged, despite difficult economic
conditions worldwide. In an interim
management statement, the provider
of specialist information and services
to academic, businesses and
individuals, said it is meeting its goals.
Despite the upbeat forecast, based on
the four months from 31 December to
30 April 2012, shares dropped 4.71 per
cent to 365.80p.
Music Festivals revenue down
IVince Powers Music Festivals group
yesterday warned that sales are down
for its venues in Kent and Spain. The
AIM-listed firms shares fell 7.6 per
cent to a 52-week low of 42.50p.
Pursuit shares in freefall after
P&G fails to award it contract
PURSUIT Dynamics saw its shares
nosedive yesterday after it
announced that it had missed out
on a key contract with consumer
giant Procter & Gamble.
The loss-making technology
company had pinned its hopes on
P&G buying its technology aimed
at reducing costs for businesses.
Pursuit won extra funds from its
shareholders in March. It said at
the time that it was spending
about 1m per month and that
cash balances stood at 9.8m.
It was hoping to turn cash flow
BY CITY A.M. REPORTER positive by September and deliver
sales of at least 22m. Pursuit
Dynamics said it now expected
revenue for the year ending 30
September to be materially below
its estimates.
The company has not reported a
profit for at least the past five years,
and posted a loss of 15.3m in the
year to September 2011.
The loss of Procter & Gamble
today is a significant blow for
them, said Paul Kavanagh,
chairman at Killick Capital.
Theyve got a tough job in the
next few weeks in establishing with
their lead investors as to what the
right route for the business going
forward is and whether there is
sufficient in the technology to push
shareholder patience further.
Sir Martin Sorrells (top) WPP has invested in Burma just days after Western sanctions
were lifted. Aung San Suu Kyi took her seat in Myanmars parliament earlier this month.
Pursuit Dynamics PLC
120
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60
40
20
p
14.75
21May
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TUESDAY 22 MAY 2012
cityam.com
NEWS
WPP yesterday announced it has
bought a stake in a Burmese advertis-
ing agency just days after US sanc-
tions on the Asian country were
lifted.
New York-based Ogilvy & Mather, a
fully-owned subsidiary of global ad
giant WPP, yesterday unveiled the
purchase of a stake in Today
Advertising, an agency in Myanmar.
The firms did not specify the size of
the stake nor how much money
changed hands.
The deal comes just days after the
US suspended sanctions barring US
investment in Myanmar following
political reforms in the southeast
Asian state.
US secretary of state Hillary Clinton
said last Thursday, Today we say to
American business: invest in Burma
and do it responsibly.
Europe ended sanctions a few weeks
WPP invests
in Burma after
sanctions end
BY LAUREN DAVIDSON
earlier. After decades of house arrest,
opposition leader Aung San Suu Kyi
took her seat in parliament on 2 May,
marking the start of a new era in
Burma.
Today Advertising, an agency with 60
employees, will join WPPs growing
business in the Asia Pacific region,
which generates annual revenues of
over $4bn (2.5bn) for the company.
WPP shares rose one per cent to 776p.
WPP PLC
820
810
800
790
780
770
p
775.50
21May
BRIDGEPOINT, the private equity
house behind a series of high street
names, has bought a dictation
technology firm from Lloyds
Development Capital in a 49m
deal.
Its Bridgepoint Development
Capital arm has taken a majority
stake in BigHand, which works with
more than 150,000 professionals
such as lawyers, doctors and
accountants.
As part of the deal BigHands
management will control a minority
share and Lloyds Development
Capital will hold onto a small stake.
Yesterday both buyout houses
refused to reveal the value of their
Bridgepoint spells out a 49m
deal for dictation firm BigHand
BY PETER EDWARDS
existing stakes.
Bridgepoint Development Capital
partner Alan Payne said: Voice
productivity software can yield very
significant efficiency gains and cost
savings to its users. BigHand is
highly rated for its product
capability and quality of service and
is now recognised as a market
leader.
Bridgepoint, whose advisers
include former Marks & Spencer
boss Sir Stuart Rose, also controls
Pret A Manger and clothes chain Fat
Face. Earlier this year it signed a
deal to buy Quilter, the wealth
management business owned by
Morgan Stanley Smith Barney, for an
undisclosed sum thought to be
more than 170m.
G
E
T
T
Y
G
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T
T
Y
MULTI-MILLIONAIRE businessman
Aburizal Bakrie is limbering up for
presidential elections in mid-2014
in the worlds most populous
Muslim-majority nation.
Secular Indonesia, a hot
favourite of international
investors, is a sprawling
archipelago of largely untapped
mineral riches, an increasingly
wealthy middle class and an
Indonesian tycoon Bakrie gears
up for bid to become president
economic growth rate last year of
6.5 per cent.
But in a country in which it is
deemed unseemly to openly
declare ambition, Bakrie,
chairman of the nationalist Golkar
Party, stressed he is merely testing
the waters.
It is not yet a campaign, said
the 65-year-old, claiming that a
speech to students was only to see
what their problems are so that I
can tell my legislators.
TUESDAY 22 MAY 2012
15
NEWS
cityam.com
Aburizal Bakrie of the Bakrie Group denied that his campaign has begun
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ONLINE gambling firms suffered yes-
terday after the Spanish authorities
decided to enforce two historic laws
and demand substantial back taxes
from offshore bookmakers with cus-
tomers in the country.
Bwin.party said it has completed a
self-assessment process and will pay
26.56m to the Spanish taxman,
expenditure that it hopes will help
its bid for a new gambling licence.
Meanwhile shares in rival
Sportingbet fell 6.5 per cent after it
said it is in discussions with the
Spanish Ministry of Finance regard-
ing back taxes but did not indicate
the size of a potential payment.
Spains decision to collect the duty
comes at the same time it is issuing
eGaming licences for online gam-
bling sites, events that are thought to
be connected.
In April the Spanish tax authori-
Gambling firms
hit by Spanish
back tax raid
ties sought, creatively, to apply laws
dating from 1966 and 1977 to online
gambling operators, said Ivor Jones,
an analyst at Numis.
While it is not explicit that the
award of licences is contingent on
paying the back-duty, there is an
implicit threat that this is the case.
Shares in bwin.party edged up after
it said it had now met all require-
ments to gain a Spanish licence.
Sportingbet PLC
32
31
30
29
28
27
26
25
p
26.25
21May
BTG back into the black thanks
to supply rights for new drugs
BRITAINS BTG swung to a pre-tax
profit for the year to end-March,
helped by its move to direct sales of
its specialist anti-poison drugs, and
said it had acquired the European
named-patients supply rights for
another antidote, uridine
triacetate.
The speciality pharmaceutical
company, which already has the US
supply rights for the medicine to
treat toxicity of cancer drug 5-FU,
said it retained the option to
acquire the European commercial
rights from Wellstat upon approval.
The group also benefitted from
the first royalties from Johnson &
Johnsons Zytiga, a drug to treat
advanced prostate cancer that was
approved last year in the United
States and Europe.
BTG made a pre-tax profit of
23m against a loss of 10.8m the
same period a year ago, on revenue
77 per cent higher at 197m. It said
it anticipated that revenue for the
current financial year would be
between 180m and 190m.
Chief executive Louise Makin
said: We have delivered a strong
performance and demonstrated
significant financial and operating
progress. We expanded our US
commercial operations.
We are well placed to continue
implementing our growth strategy.
BTG PLC
380
375
370
365
360
p
358.09
21May
FRENCH oil major Total said
yesterday that several inspections
had revealed that the leak of the
G4 well on the Elgin complex
north of Aberdeen in Scotland had
stopped.
Total said it started pumping
mud into the disabled well on 15
May and the leak stopped 12 hours
later.
The next step will be to re-man
the Elgin complex and restart the
Viking drilling rig to set cement
plugs on the G4 well, which will
take several weeks.
The platform is 150 miles across
the coast of Aberdeen.
The gas began leaking on 25
Total tests reveal that the North
Sea leak at Elgin has stopped
March, triggering an emergency
response with fly-overs by spotter
planes to assess the extent and
source of the leak.
The Elgin platform and
neighbouring operations were
evacuated.
President of exploration and pro-
duction at Total,Yves-Louis
Darricarrre said: While we will
obviously take on board any lessons
to be learned, I want to congratu-
late all the teams, including our
partners that have been mobilised
with the only focus to stop the leak.
It is important that we continue
to work together with the authori-
ties to conclude the ongoing inves-
tigations, take into account lessons
learnt.
BRITISH pork products supplier
Cranswick yesterday reported a
three per cent rise in full-year
profit.
The British company also
announced that chief executive
Bernard Hoggarth would step
down at the companys annual
general meeting on 1 August.
Hoggarth will take up a part-time
role as commercial director while
the company added that his
stepping down had been pre-
planned. He will be replaced as
chief executive by chief operating
officer Adam Couch.
Pre-tax profit for the year to the
end of March rose to 48.4m from
47.1m a year ago.
Revenue was up eight per cent to
821m with underlying sales surg-
ing by 10 per cent.
The company, whose brands
include Jamie Oliver and Weight
Watchers, hiked its final dividend
to 19.5p a share.
Cranswick, which processes and
supplies pork products, said that
record Christmas sales and
production had lifted it.
Meanwhile booming sales in the
Far East had also contributed to
the profits rise.
Cranswick gets
a new boss as
profit goes up
BY JAMES WATERSON
Landlord Segro banks 200m
from sale of industrial estates
LANDLORD Segro yesterday
announced the sale of four
industrial sites in the Midlands and
Greater Manchester for a total of
204.5m, as part of a strategy to
focus on core assets in London and
the south east.
A fund managed by US firm
Harbert Management Corporation
has agreed to buy two multi-let
industrial estates in Birmingham,
as well as sites in Rochdale and
Manchester.
BY JAMES WATERSON In the year to date, assuming the
completion of this transaction, we
have announced non-core asset
disposals of 377m, with further
disposals expected during the
remainder of the year, said Phil
Redding, Segros chief investment
officer.
This latest announcement is
another important step forward in
the process of re-shaping our
portfolio to focus on core markets.
The sale proceeds represent a
small discount of 2.9 per cent on
the sites book value at the end of
2011, while completion of the deal
remains contingent on
confirmation of the purchasers
lending agreement.
Following the disposal of the
440,000 sq metre sites Segro will
close its two regional offices in
Manchester and Birmingham.
Jones Lang LaSalles industrial
and logistics team, led by Philip
Marsden, advised on the deal as
part of its involvement in Segros
1.6bn disposal programme.
Shares in Segro edged up by just
0.14 per cent to 217.10p on the news.
IN BRIEF
Olswang profits rise 30 per cent
I Revenues at technology, media and
telecoms law firm Olswang grew by 17
per cent in the 2011/12 financial year, the
firm said yesterday. Total revenue was
108.1m, up from 96.2m for the
previous financial year. The increase
meant the firms profits were up by more
than 30 per cent, and it expects profit
per partner to be around 530,000.
HICL invests in PFI hospitals project
I Infrastructure investment firm HICL
has taken a 30 per cent equity and loan
note interest in a PFI hospitals project for
34.6m. The project is a 40 year scheme
to design, build, finance and maintain an
acute hospital and six mental health
facilities for NHS trusts covering the
Birmingham and Solihull areas.
Construction has nearly been completed.
David Sleath has been chief executive of Segro for just over a year
TUESDAY 22 MAY 2012
16
NEWS
cityam.com
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EVALUATING RISK AND MAKING THE BEST OF IT
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MORTGAGE lending plunged in
April after the stamp duty holiday
expired, industry data showed yes-
terday, while economists warned the
underlying state of the housing mar-
ket is weakening.
Gross mortgage lending slumped
from 12.6bn in March to 10.2bn in
April a 19 per cent fall to an 11-
month low, according to data from
the Council of Mortgage Lenders.
The particularly sharp drop hit the
market because the stamp duty holi-
day for first time buyers came to an
end in March, bringing forward
some purchases.
Lending stood at 140.78bn for the
whole of 2011 and 135.34bn in
2010, well down on the 362.76bn
peak in 2008, illustrating the mar-
kets sustained weakness.
Housing market activity is very
low compared to long-term norms,
and the economic fundamentals
currently look worrying for the mar-
ket with unemployment high, earn-
ings growth muted, and the outlook
highly uncertain, said Howard
Archer from IHS Global Insight.
In addition, relatively tight credit
conditions may well make it hard
for many people to get a mortgage.
Mortgage loans
plummet as tax
break expires
BY TIM WALLACE
Furthermore, some mortgage rates
have risen recently due to lenders
higher borrowing costs in wholesale
markets and this could well weigh
down on housing market activity.
Indeed increasing numbers of buy-
to-let investors are turning to bridg-
ing loans to finance their debts, in
part because they are struggling to
access mortgages from banks data
from West One Loans shows gross
lending in the sector hit 1.1bn in
the 12 months to March.
The mortgage market has gone
into reverse, added Richard Sexton
of e.surv chartered surveyors.
Borrowers are already bearing the
brunt of the political dithering in
Europe, and are being hit hard by
rate rises and tightening lending cri-
teria.
Economic headwinds are further stifling the UKs housing market
Mortage lending fell sharply in April
Apr 11 Jul 11 Oct 11 Apr 12 Jan12
14,000
13,000
12,000
11,000
10,000
9,000
8,000
m
ROLLING out superfast broadband
to rural businesses will close the
digital divide with cities and
revitalise the rural economy, the
Federation of Small Businesses
(FSB) claimed yesterday.
Its survey showed 63 per cent of
small firms in rural areas are
dissatisfied with the speed of
their internet connection,
compared with 48 per cent of
Firms call for superfast internet
BY TIM WALLACE
businesses in urban areas.
Another 43 per cent of small
rural firms are dissatisfied with
the reliability of their
connections, and 24 per cent with
value for money.
It shouldnt matter where a
business is located with the
technology we have today all firms
should be able to trade overseas,
throughout the UK, and from
town to village, said FSB boss
John Walker.
TUESDAY 22 MAY 2012
17
NEWS
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in association with
Active shareholders
tie top pay to results
EXECUTIVES pay is increasingly
linked to the performance of the
companies they manage,
according to a wide-ranging
economic study published
yesterday that dismissed public
worries over rewards for failure.
Todays correlation between
pay and performance is driven by
bonuses and other incentive
packages, which have become
more important in recent years,
the Centre for Economic
Performance (CEP) found.
BY JULIAN HARRIS
Firms with active institutional
investors are more successful at
linking executive pay to results
that senior management achieve,
the study discovered.
Active and large shareholders
can provide an important
disciplining influence on the
structure of CEO pay, it suggests.
Badly performing companies are
far more likely to sack their top
execs or lower their pay, the
survey of 400 UK firms discovered.
However, pay cuts for failure are
not as speedy as pay increases on
the upside, the report added.
PEOPLE in the G8 countries have
become more pessimistic over
economic prospects, according to a
study seen today by City A.M.
A mere 14 per cent of people
across the G8 expect their countries
economies to be stronger in six
months time, an international poll
by Ipsos MORI has showed.
Two years ago, this figure
measuring short term optimism was
slightly higher at 20 per cent.
The US is bucking the trend,
however, with a quarter of people (25
per cent) anticipating a stronger
economy in six months time up
from 16 per cent in October.
G8 downbeat
over recovery
BY JULIAN HARRIS
TUESDAY 22 MAY 2012
18
DFJ Esprit
The cross-stage venture capital
firm has appointed Peter Keen as
its a new venture partner,
specialising in medtech and life
science investments. Keen joins
with 28 years experience in the
sector. He was co-founder of
Chriscience Group, chief financial
officer of Arakis, and is currently
non-executive director of Horizon
Discovery and Q-Chip.
Jefferies
Lyndon Norley has been hired as a managing director at the
investment bank. He will become its head of European
restructuring and recapitalisation investment banking.
Norley joins from Greenberg Traurig Maher, where he was
head of its European restructuring practice. He previously
held the same role at Kirkland & Ellis, and was a partner in
Cadwaladers financial restructuring practice.
Grovepoint Capital
The private investment firm has announced the launch of
Grovepoint Investment Management, an advisory firm
focused on specialised opportunities, headed by new hire
Brent Gearer. Gearer joins from Investec, where he was
head of specialised opportunities. He has over 16 years
experience in financial services, including senior positions
at CIBC, Svenska Handelsbanken and at Deloitte.
Barclays Corporate and Employer Solutions
The division of Barclays Bank has appointed Katharine
Photiou as head of workplace savings. She was most
recently at Mercer, the consulting and outsourcing service
provider, and has held senior roles at Friends Provident.
Photiou will report to Richard Phelps, head of corporate
and employer solutions.
RBC Capital
James Edwardes Jones has been appointed as managing
director, and research analyst covering pan-European
consumer stocks, at the corporate and investment banking
arm of Royal Bank of Canada. Edwardes Jones has held
senior roles at RBS, Espirito Santo Investment Bank, Credit
Suisse First Boston and Hoare Govett. He has additionally
worked as a financial analyst for J Sainsbury.
Mercer
The consulting and outsourcing service provider has made
two new appointments to its international consulting
group. Stephen James joins as principal from Towers
Watson. He has over 10 years experience in the sector. Tia
Brett joins as a senior associate. She spent 12 years at
Unilever, where she was a member of the global pensions
team.
Hermes Real Estate Investment Managers
Gavin Murray and Matthew Chillingworth are joining the
fund manager as asset managers. They will both report
directly to head of asset management David Price. Murray
was previously a portfolio manager in the join ventures
team at Land Securities. Chillingworth was previously a
property manager at King Sturge, the property consultancy.
WHOS SWITCHING JOBS Edited by Tom Welsh
+44 (0)20 7092 0053
morganmckinley.com
SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT
U
S stocks rose more than 1 per
cent yesterday, with the S&P
500 snapping a six-day losing
streak in a rebound from
equities biggest weekly drop in
almost six months, but Facebook
slumped in its second session after a
disappointing debut.
Sentiment improved after G8 leaders
gave verbal backing for Greece to stay
in the euro and stressed over the week-
end that their imperative is to pro-
mote growth and jobs.
Shares of Apple climbed 5.8 per cent,
leading the Nasdaq to its biggest one-
day percentage gain since December.
The Dow Jones industrial average
jumped 135.10 points, or 1.09 per cent,
to 12,504.48. The Standard & Poors
500 Index climbed 20.77 points, or 1.60
per cent, to 1,315.99. The Nasdaq
Composite Index rose 68.42 points, or
2.46 per cent, to close at 2,847.21.
ITV
Peel Hunt rates the broadcaster as a hold with a target price of 82p, saying
that despite a bumper summer of sport it thinks positive sentiment around
Euro 2012 is already priced in. The broker says the outlook for autumn and
beyond is muted, but expects broadcasting revenue growth of 2.2 per cent.
DASHBOARD CITY
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RITAINS top share index halted
a week-long slide yesterday, as
investors stumped up the
courage to buy in on the dips of
badly beaten equities, although the
murky outlook for global growth
kept gains to a minimum.
Londons blue chip index closed
36.86 points higher, or up 0.7 per cent
at 5,304.48, having fallen 5.5 per cent
last week on persistent concerns over
the implications of a possible Greek
exit from the euro and worries over
debt-laden Spanish banks
The index has stabilised around the
5,250 level in the past two trading
days and just above the 200-week mov-
ing average, a level last broken in 2
December, the day major central
banks lifted global markets via coordi-
nated liquidity injections, although
an analyst said any upside this week is
seen limited at 5,430.
Comments from Chinese policymak-
ers that suggested they could well
take measures to help boost growth
and domestic consumption helped
the rally, as did the US Chicago Fed
National activity index, which sug-
gested the US economy is on a slow
recovery path at the start of Q2.
There is some value out there ...
There is some growth (outside Europe)
and people need to remember that
the earnings of FTSE 100 companies
are skewed outside the UK, said
Rupert Armitage, director at Shore
Capital.
Riskier banks and miners, which
have fallen more than 18 per cent and
22 per cent respectively over the last
three months, inched higher.
Vedanta, up 5.2 per cent, led the
miners higher in tandem with copper
prices, which recovered on a combina-
tion of bargain-hunting, short-cover-
ing and a weaker dollar, having rallied
off four-month lows in the previous
session.
Part-state-owned lender Royal Bank
of Scotlandwas the strongest banking
gainer, up 4.1 per cent, having been
the biggest faller on Friday.
LONDONREPORT
FTSE up after
week-long dip
NEW YORKREPORT
US stocks lift
on Greek talks
EADS
UBS has upgraded the Airbus parent from neutral to buy with a target price
of 35, saying the declining strength of the Euro against the dollar boosts long-
term profitability, with each 1 cent move down upping EADS value by 1.2 per
share. EADS is also a safe haven as two thirds of its sales are non-Eurozone.
KINGFISHER
Seymour Pierce has downgraded its recommendation on the home
improvement retailer from buy to hold with a target price of 290p
after revising pre-tax profits down by seven per cent to take into account
weaker trading in its core markets.
BESTof theBROKERS
Kingsher PLC
p
287.50
282.50
285.00
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272.50
275.00
270.00
15May 16May 17May 18May 21May
273.30
21 May
European Aeronautic Defence and Space Company
30.00
29.50
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21 May
ITV PLC
p
84
83
82
81
80
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79.50
21 May
T
HIS WEEK sees the launch of
The Single Income Tax the
final report of the 2020 Tax
Commission. As one of the
commissioners, Im proud of
the result: a 417-page blockbuster of
thorough analysis and sensible, yet
radical, reforms.
A Single Income Tax would ensure
that taxes were cut to 33 per cent of
national income; no marginal tax
rate would exceed 30 per cent; and
taxes on labour and income would
be abolished and replaced with a tax
on distributed income. In addition,
we suggest abolishing transaction,
wealth and inheritance taxes, cut-
ting transport taxes, and funding
local authorities through local
taxes. It is a massive step forward in
terms of simplifying the tax code,
T
HIS week, diplomats in Bonn
must face up to a crumbling
international consensus on
climate change. United Nations
negotiations stalled in Durban
last December. Japan, Russia and
Canada recently joined the US by
walking away from an extension of
the Kyoto Protocols emission cutting
targets while China, Brazil and India
werent bound in the first place.
Australia and New Zealand remain
perched on the fence, leaving the EU
to go it alone with just seven other
developed countries locked into
binding targets. What went wrong?
The dual vices of Kyoto were develop-
ing countries blanket immunity from
emission cuts, and a corrupting
bureaucracy. The first is based on the
fiction that rich countries are exclu-
sively responsible for global warming.
Today, rich countries share of responsi-
bility has been eclipsed by rising emis-
sions from the rest of the world,
including the rapidly expanding Bric
economies which account for 58 per
cent of the total. No durable deal to cut
emissions can allow those countries a
cityam.com/forum
No durable deal to
cut emissions can
allow Bric economies
a free ride indefinitely
In association with
THEFORUM
Twitter: @cityamforum on the web: cityam.com/forum or by email: theforum@cityam.com
Agree? Disagree? Got a sharp comment?
The Forumwants you to join the debate.
Top responses will be reprinted in The Forum.
20
TUESDAY 22 MAY 2012
DOMINIC RAAB
Blanket immunity for developing
nations has stifled climate hopes
free ride indefinitely.
Kyotos second vice is the Clean
Development Mechanism (CDM), set
up to allow polluting companies in
rich countries to earn Certified
Emission Reduction (CER) credits by
paying for projects that cut emissions
in developing countries. The idea was
to help the poorest nations green their
economies. Yet, as of March 2012, 90
per cent of this massive subsidy had
benefited so-called middle class
countries 60 per cent to China, 16 per
cent to India, 9 per cent to South Korea
and 7 per cent to Brazil. Far from help-
ing the poorest, the CDM is a giant
handout from the West to her econom-
ic rivals.
The UK cost of the CDM rose by 31
per cent between 2008 and 2010, peak-
ing at just under 100m per year. UK
consumers pick up the tab, as the com-
bustion, manufacturing and power
sectors companies like E.ON, Corus
and Cemex fund projects in return
for credits. But, the CDM is not just an
expensive subsidy; it creates a market
for polluting gases. Over two-thirds of
CER credits have been issued for proj-
ects to destroy two noxious gases, tri-
fluoromethane and nitrous oxide.
Producing trifluoromethane has
become a nice little earner, with pol-
luters paid 24 times the actual cost of
destroying them. Timorous steps to
scale back these perverse practices
have not stopped them from expand-
ing.
Then there are the local horror sto-
ries. In Durban itself, the CDM funds a
project at the Bisasar rubbish dump,
burning methane. Experts estimate
the project will generate credits worth
tens of millions of pounds. Far from
promoting sustainable environmental
practices, it has a history of toxic leaks.
Six out of ten residents on a local estate
have reported cancer. Norwegian and
Italian firms back another project in
the Niger Delta, which burns unwant-
ed gas associated with oil deposits.
Medical reports suggest the resulting
gas flares have reduced local life
expectancy and increased infant mor-
tality. Who authorises the projects?
Kyoto established a validation process,
monitored by Designated Operational
Entities (DOE) supposedly reliable
companies with requisite expertise.
Yet, in 2010, the ko-Institut, in Berlin,
reviewed five leading DOE and ranked
all of them between D and F (on a scale
from A to F, with A the highest).
Looking forward, experience since
Kyoto holds two lessons. Firstly, all
major emitters must be locked into
any new agreement to cut emissions. If
a global deal wont stick, limit negotia-
tions to the 20 nations responsible for
80 per cent of emissions instead of
haggling among 190 governments.
That would be more likely to fix the
problem, while sparing the poorest
countries from onerous economic sac-
rifices. Either way, it is pointless for
Britain to endure the economic pain of
further cuts without broader interna-
tional buy-in.
The second lesson is to avoid the
warping bureaucracy of the CDM,
which should be scrapped. Plans for a
new international Green Climate Fund
risk spawning another white elephant,
unless its remit is sharply focused and
rigorously monitored. It should be lim-
ited to supporting the transfer of gen-
uinely innovative green technology
and bolstering local environmental
defences in the poorest countries not
paying Brics to pollute more, so
activists can feel good billing rich
countries to clean up the mess.
Dominic Raab is the Conservative MP for
Esher & Walton.
and I hope it can change the public
debate.
Indeed, one of the main argu-
ments against corporation tax in its
present form is that people do not
understand how it works.
In an article published in February
2011, The Guardian reported that in
2009 Barclays Bank paid just
1.13bn in UK corporation tax
despite making profits of 11.6bn.
However, this misses three impor-
tant facts. Since corporation tax is
supposed to be 28 per cent some-
thing seems wrong. And indeed,
something is wrong.
Firstly, their pre-tax profits were
actually just 4.6bn. Most of the dif-
ference relates to proceeds from the
sale of Barclays Global Investors,
which is not subject to corporation
tax.
Secondly, the profit relates to the
entire global business, plenty of
which was earned outside of the UK
and is therefore not subject to UK
corporation tax. Their domestic tax
liabilities were in fact 1.07bn. Once
you account for the losses made in
2008 that get carried over into 2009,
there is no scandal here at all.
The main problem with corpora-
tion tax is that people tend to treat
it as a free lunch. But corporations
are legal fictions; they are not capa-
ble of paying any taxes. Its like
thinking that dogs pay for dog
licenses. Just because companies
have their own bank accounts, does-
nt mean that they bear the burden.
Only people pay tax, and therefore
any levy on companies must come
from one of three sources:
Employees through lower
wages
Owners through lower divi-
dends
Customers through higher
prices
1
2
3
Plenty of studies have attempted to
analyse the incidence of corpora-
tion tax, and in the US a 2006
Congressional Budget Office report
found that 70 per cent was borne by
domestic labour. If gross wages fall
by 0.5 percent for every 1 per cent
increase in corporation tax which
is in line with other studies then a
5 percentage point cut in corpora-
tion tax could boost the UK average
wage by over 500. Of course, these
figures are estimates, but the impor-
tant point is to reveal that corpora-
tion tax harms workers and that
there are better ways to raise rev-
enues.
Anthony J. Evans is associate professor
of economics at Londons ESCP Europe
Business School. www.anthonyjevans.com
anthonyjevans@gmail.com
FRONTLINE
ECONOMICS
ANTHONY J. EVANS
Companies dont pay taxes but employees, owners and customers do
21
Pernicious taxes
[Re: Britain must embrace 30 per cent tax
revolution to boost growth, yesterday]
I agree with the Tax Commissions findings
on inheritance tax. Inheritance tax is a tax
on capital, on money that has already been
fully taxed as income or otherwise. Its
pernicious and destroys the UKs capital
stock to pay for current government
spending. Inheritance is often the seed-corn
for small businesses, putting capital in the
hands of people who would never want to
risk a bank loan. And any inheritance not
used by the recipient is recycled through the
banking system to productive businesses.
Government spending has to be reduced to
allow capitalism to work properly and make
us all better off in the long run.
JohnHill
Winners and losers
30 per cent is still a little higher than I would
have liked, but the ideas of combining taxes
and of ensuring that everyone pays the same
proportion are a good move towards a sim-
pler, fairer system of tax. We need to restore
faith and trust in the system. I still think
spending should be prioritised towards edu-
cation, but thats a separate point.
DJ Thomas
Putting these ideas into action would require
the greatest attack on government spending
ever seen in the UK. And government spend-
ing isnt just about numbers on a spread-
sheet, but the real incomes and livelihoods of
many hundreds of thousands of people. Not
quite a fair system for all, I think.
KerenJones
T
HE idea of Eurozone countries
pooling their sovereign debt
in the form of Eurobonds re-
emerges every time the euro
crisis suffers another turn for
the worse. Curiously, the ideas chief
proponent seems to be the UK
government, which has made
several interventions, stressing the
need for the Eurozone to move to
fiscal burden-sharing. This puts it
in the company of European
federalists such as Romano Prodi
and Jean-Claude Juncker, and
socialists such as Franois Hollande.
However, the UK government, like
most other advocates of Eurobonds,
tends to gloss over the details. There
are at least three economic reasons,
and a huge political reason, as to why
Eurobonds are no easy fix.
Firstly, the moral hazard entailed in
Eurobonds is huge. Remember, for
large parts of the past decade, Greece
was treated by markets the same way
as Germany, and was able to borrow
money at almost the same interest
rates. Everyone can see the results.
Secondly, Eurobonds would
inevitably take away pressure for rad-
ical reform. As painful as it is, at least
the Eurozone crisis is forcing Club
Med countries to pursue long-over-
due reforms of their pension and tax
systems, labour markets, and so
forth. Piggy-backing on Germanys
credit rating could take away this
pressure. And linking back to moral
hazard, the focus could again be on
growth via debt, rather than through
structural reforms.
Thirdly, most of the proposals for
Eurobonds would see only part of the
Eurozone governments debt under-
written jointly, with the rest remain-
ing national. This option would be a
major economic gamble. Not only
would it be extremely difficult to
implement on existing debt stocks, it
could also send borrowing costs on
TOP TWEETS
A simple tax system is difficult. Politicians
need complexity to disguise rises from voters.
@AugusTyme
What do you know? Facebook, built on giv-
ing away core services free isnt working out
to be quite as profitable as hyped.
@montrose77
Best thing about a Grexit is we dont have to
debate the word Grexit anymore. Worst thing
is massive financial panic.
@mattyglesias
I look forward to politicians saying the theo-
ries of Hayek are what we should be follow-
ing. I wont hold my breath.
@liarpoliticians
Does the Chelsea Flower Show represent a
uniquely British forum for doing business?
YES
The Chelsea Flower Show is one of those uniquely English events
that people either admire or are puzzled by. Certainly, compared to
the way business can be conducted in China, there are differences.
China has a long tradition of hospitality, which has been translated
into a more Western concept of corporate hospitality. Personal
contact and trust are paramount. But whether a meal is presented as
a lavish banquet, or served in a cosy neighbourhood restaurant, the
aim is to get a feel for the person behind the corporate title. And if
getting to know the other is the goal, then the event must be
intimate enough to facilitate this process. The notion of guanxi
(mutual trust and meaningful exchange) is more easily achieved in a
focused setting than at a large event. Nevertheless, the Chinese, like
anyone else, will appreciate an event as wonderful as Chelsea.
Nick Byrne is UK director of the Confucius Institute for Business at
the LSE.
Nick Byrne
NO
Omar Merlo
Social events like the Chelsea Flower Show represent a valuable and
universal opportunity for business. They allow people and
organisations to cultivate social capital. Social capital can be just as
important as physical and human capital for economic success.
Value can reside in positive emotions linked to social relationships,
like respect, friendship and trust. Social relations have productive
benefits because the goodwill we earn is a valuable resource.
Therefore, even the simplest and most informal opportunity to
connect, share ideas and build relationships can generate significant
value. And the benefits of nurturing social capital are universal.
Many social events around the world, whether the Melbourne Cup
Day race, the White Turf race in St Moritz, or Chinese New Year in
Shanghai, are valuable opportunities for developing social capital.
Dr Omar Merlo is assistant professor of marketing at Imperial
College Business School.
RAPIDresponses
Eurobonds are an
economic risk and
a political dream
the nationally-denominated debt sky-
rocketing which would ultimately
outweigh the benefits of having
Eurobonds in the first place. In addi-
tion, a half-way house would mean
that a substantial euro rescue fund
would still be required, since the
Eurozone continues to lack a lender
of last resort putting extra pressure
on the credit ratings of Germany and
other core euro countries.
The first and second problems
could be dealt with, in theory, by
imposing strong EU budget rules. But
the record of Eurozone countries of
abiding by such rules and the lack
of credible enforcement mechanisms
does not inspire confidence. The
third problem can only be solved by
going for full Eurobonds, meaning
no national debt at all.
However, this is where politics
and a bit of constitutional law kicks
in. German taxpayers are not ready
to accept higher national borrowing
costs to underwrite Greece, Portugal
and Spain. Nor are they willing to
accept a euro based on watered-down
budget discipline. Going down that
road risks a major backlash which
could lead to the Germans pulling
the plug. In addition, the German
Constitutional Court in Karlsruhe
has already expressly forbidden
Eurobonds without a change to the
German basic law.
In any case, Eurobonds would take
years to implement. The answer to
the current crisis must lie elsewhere.
Vincenzo Scarpetta is a researcher at
Open Europe.
TUESDAY 22 MAY 2012
VINCENZO SCARPETTA
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F
OR those who wish to get a
more robust foundation to
their trading, there is no lack
of offerings out there, no
matter your experience. But where
to start? Do you want the freedom
of being able to study online or
would you rather be face to face
and gain hands-on trading
experience. How much time can
you dedicate, and whats your
budget? The courses do not come
cheap, but if they can improve your
trading profitability, then they can
more than pay for themselves.
Heres a selection of courses and
providers to get you started:
LEX VAN DAM TRADING ACADEMY
www.lexvandam.com
Online course 399
The online trading academy from
hedge fund manager Lex Van Dam
is split into five parts idea
generation, company analysis,
chart analysis, charting
psychology and risk management.
According to Van Dam: The goal
of the five-step trading is to give
you a good grounding so that
when it comes to more aggressive
trading methods that I will
discuss in later courses you will
have a good basis to work from.
When you purchase the online
course you will also have many
other benefits such as priority
booking for seminars, discounts
for new online modules and
access to online material.
If you want to get a preview of
whats on offer from Lex Van
Dam, he will be a keynote speaker
at the City A.M. Active Trader
conference on 24 May. Details at
www.cityamactivetrader.com
SOCIETY OF TECHNICAL ANALYSTS
www.sta-uk.org
Foundation course 650 for six
weeks
For the charting purists, the Society
of Technical Analysts (STA) runs
dimploma courses at all levels
Courses are held in London at
London School of Economics and
the British Bankers Association and
all teaching is by qualifed STA mem-
bers. The courses are considered
suitable for the annual PIA
Continuous Professional
Development Programme.
The Society of Technical Analysts
offers structured courses in the the-
ory and use of technical analysis.
The foundation course offers a basic
introduction to technical analysis
while for those hoping to progress,
the STA Diploma Course and exam
gives students the opportunity to
gain an internationally recognised
qualification required to be a full
member of the STA (MSTA). The STA
courses are run in central London
but a home study course is also
available if the classroom hours do
not suit your schedule.
BPP
www.bpp.com
14-week trading and technical
analysis course 4,000
On the more expensive end of the
scale, but also on the more in-
depth side, BPP offers a 14-week
course in conjunction with
Amplify Trading. The practically-
focused course is geared to
real-life trading in international
stock, commodity and bond
futures. Face-to-face teaching takes
place at BPP Business School each
Tuesday evening from 6-8pm. In
addition to the evening classes,
participants will also be given
supervision on the CQG trading
platform where where you can
trade on the major exchanges
using various asset classes.
Going back to school to
boost trading grades
Heading back to the classroom can help shore up your knowledge
BORIS SCHLOSSBERG
fx360.com
CHINA MAY NOT SAVE THE
WORLD AGAIN AS MACRO
DATA CONTINUES TO FADE
S
UNDAY night, as currency markets
were preparing for yet another
desultory opening of the weeks
trade, marked by yet more stress in
the Eurozone and a seemingly
perfunctory statement from the G8
which was long on platitudes and short
on any concrete policy measures, risk
currencies did something unexpected
they rallied. Despite the gloom and
doom that surrounds the euro these days
forex traders became optimistic, pushing
euro, Aussie and cable higher as trading
started in Asia. What was the cause of
this sudden burst of enthusiasm?
A story in the China Daily stated that
the countrys premier Wen Jiabao
called for greater fiscal stimulus during
a weekend inspection tour to Wuhan,
capital of Central China's Hubei
province. The relationship between
maintaining growth, adjusting
economic structures and managing
inflation must be properly handled,"
Wen said in comments reported by
Xinhua News Agency. We should
continue to implement a proactive
fiscal policy and a prudent monetary
policy while giving more priority to
maintaining growth.
For currency traders who remembered
that China near singlehandedly
dragged the global economy out of
recession after the 2008 credit crunch,
those words were enough to spark a
fresh rally in risk. However, the key
question going forward is whether
China can act as a locomotive of growth
for the G20 world once more given its
massive internal problems.
In 2008, in the wake of the post-
Lehman credit crunch that saw most of
the industrialised world teeter on the
edge of another Great Depression,
China took dramatic policy action,
increasing its fiscal stimulus to nearly 8
per cent of GDP far larger than the
paltry 1 to 2 per cent moves made in
most of the G7 economies. The bet paid
off, as the Chinese economy continued
to grow at a near double digit pace,
helping to fuel profits for American
multinationals, German exporters and
Australian commodity producers and
helping pull the global economy back
into expansionary territory.
However, the stimulus was not without
cost. The easy money created a massive
real estate bubble in China and fueled
food inflation that sparked widespread
social unrest. Most troubling of all,
however, was the huge wave of
corruption that followed this boom and
that remains a very serious problem for
China going forward as it enters a more
mature stage of economic growth.
There is no doubt that corruption was
always present: growth papered over
many sins. Now, however, Chinese
growth has slowed markedly while
corruption continues to siphon off
much needed capital for unproductive
means there is a reason why Macao
has become a bigger gambling Mecca
than Las Vegas. The recent Bo Xilai
scandal has only hinted at the extent of
problems within the Chinese leadership
and laid bare the myth of vaunted
efficient communist capitalism.
For all its progress, China remains an
autocratic state with little protection
for property rights and investors are no
longer enamoured with the country as
they once were. If China is to progress
to a truly modern society it will not
only have to become more market
oriented but more democratic as well.
That transition is unlikely to be smooth
or easy, with the state and the
countrys elite continuing to exert an
iron grip on policy and resources.
Thats why the prospect of a second
Chinese stimulus may not prove to be
as effective as the first. Recent
economic data from China has shown
consistent slowdown, especially among
the key middle-market manufacturing
sector, indicating that problems with
the export driven economy may be
turning structural. More importantly,
the latest trade balance figures showed
a marked slowdown in imports,
suggesting that domestic demand is
cooling as malinvestment in real estate
takes its toll.
All of this troubling economic data
indicates that China may not be able to
print its way out of slowdown this time.
That means investor optimism
regarding any potential stimulus will
quickly fade.
The Aussie dollar, which serves as a
proxy for Chinese growth in the
currency market, has already fallen
hard, breaking the parity barrier last
week for the first time this year. Some
of the more bearish analysts believe
that Chinese growth may slow to as
little as 6.5 per cent this year, which
would mean that Aussie could tumble
to $0.9000 as the market begins to
fully appreciate the magnitude of the
slowdown in Asia Pacific.
twitter.com/fx360 facebook.com/fx360
DIRECTOR OF CURRENCY RESEARCH, GFT
THE TIPSTER
ASOS hoping for a change of look
ASOS took something of a beating
when it released its trading statement
last month, dropping 17 per cent. The
hitherto-relentless growth in sales
was revealed to have slowed
somewhat, even though international
sales continued to show excellent
growth. ASOS has become a slave to
its own excellent performance, and it
will need a strong showing from the
final results on Thursday if the shares
are to recover their trendy status. IGs
price on ASOS is 1,538p-1,548p.
The LCG UK 30index struggled to
bounce when the FTSE 100 did
recover a little on Monday. This would
suggest that investors are sceptical
that the UK economy is going to
recover meaningfully anytime soon
especially as this week sees the
second reading of UK GDP for the first
quarter which is set to confirm the
double dip recession. Capital Spreads
quotes 9,583-9,600 for the LCG UK
30 index.
With the rise of the middle class in
China helping the luxury goods sector
escape the worst of the sell off in
recent weeks, and given that China's
retail sales expanded by 14.1 per cent
year-on-year, one could expect that
Burberry will reveal a stellar set of
figures this Wednesday. A 25 per cent
leap in profits is on the cards to
376m on the back of demand in
Europe but in particular the emerging
economies. CMC Markets quotes
1,391.31p-1,394.70p for Burberry.
SABMiller is well placed to weather
the Eurozone storm. Earnings due this
week are expected to show a 7 per
cent rise in sales and the much
publicised takeover of Fosters
demonstrates the companys
aggressive expansion plan, increasing
market share in developing countries.
As a result, the company is less
exposed to a slowdown of exports to
EU countries. The company also
enjoys a watertight balance sheet
with return-on-assets higher than its
competitors and recent acquisitions
should lead to improved efficiency,
something which will be reflected in
future earnings. Spread Co quotes
2,436.69p-2,441.35p for SABMiller.
CRAIG DRAKE
TUESDAY 22 MAY 2012
22
cityam.com
TRADING MANAGEMENT WEALTH
The contents of this column are provided for general information purposes only. One should consider the appropriateness
of the information in light of their own objectives, financial situation or needs before trading. CD11UK.074.010612
G
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G
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CRAIG DRAKE
Zynga, Inc
10:00 12:00 14:00
6.40
6.60
6.80
7.00
7.20 $
7.00
21May
offering their explanations for the lack-
lustre opening day followed by yester-
days rout. Fittingly, your Facebook
news feed is probably full of them. They
range from difficulties in valuing a free
website with uncertain ad revenues to
the effects of a now highly developed
secondary market for shares in private
companies when Google floated in
2004, the likes of SecondMarket and
SharesPost were non-existent.
It is easy to get caught up in the hype
of the Facebook float youve had an
account for years, all your school
friends are on it and youve been to see
the movie. But you need to ask: why are
you trading it? Is it because you think
you can trade profitably or just because
you feel a particular affinity with the
FB:US ticker above all others? If youre
going in for the latter, you might as
well save your money and spend it on
Farmville credits. But if youre going
CURRENCY STRATEGIST
JOEL KRUGER
My pick: Looking to buy dollar-yen
Expertise: Technical analysis
Average time frame of trades: 1 day to 1 week
This is a market in the process of carving a significant longer-
term bottom, after posting record lows in 2011 by 75.50. As
such, the latest pullback from yearly highs by 84.20 is
classified as corrective, and the market is in the process of
looking to carve a fresh higher low. Look to buy either on a
dip to the 200-day simple moving average by 78.50, or on a
break back above 80.60. Once triggered, look to hold the
position for an eventual break back above 84.20.
ANALYST PICKS
Markets defriend Facebook again
A
T the depths of its slump,
Facebook yesterday fell by as
much as 20 per cent from the
highest print since Fridays
IPO. And it was not just Facebook
that took a hit. Having first set
their sights on the social network,
markets then turned their ire on
the rest of the publicly-listed
Internet 2.0 universe, with
LinkedIn, Yelp and Zynga all taking
a hit. Zynga, the makers of
Farmville and other online games
and one of Facebooks major
revenue streams, saw its price
plummet on the disappointing
first days trading, but managed to
claw back losses yesterday. In what
seemed to be an all round stigma
trade, GSVC, the venture capital
company that part owns Facebook,
also saw drops approaching 10 per
cent.
Facebook executed its long-antici-
pated IPO on Thursday last week,
pricing the shares at $38 for a total
of $16bn, valuing Facebook at
$104bn. But despite the IPO fervour,
the shares traded flat on their first
day of trading, opening at $42
before falling below its opening
print for the rest of the session.
There are plenty of commentators
CURRENCY STRATEGIST
ILYA SPIVAK
My pick: Stay short euro-dollar
Expertise: Global macro
Average time frame of trades: 1 week to 6 months
I sold euro-dollar two weeks ago at $1.3004, as prices broke
support at $1.3025 initially targeting $1.2865 and $1.2674.
The pair met the first objective and nudged the second, but
oversold positioning suggests a bounce. I will look at an
upward correction to add to the short exposure in the coming
days, expecting Eurozone crisis jitters to return and push the
pair lower. Significant resistance levels that may prove to cap
gains from here stand at $1.2887 and $1.2962.
CHIEF STRATEGIST
JOHN KICKLIGHTER
My pick: Short euro-dollar, long euro-Swissie and euro-Aussie
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 day to 1 week
The risk aversion drive continued last week, and it looks to be
getting serious. The euro-dollar short from $1.2935 moved to
its target quickly. I will look for another leg to the bear run
should it break $1.2625. In the meantime, Ill stick with the
euro versus risk theme in the euro-Australian dollar long
from Au$1.2950 (against a Au$1.2800 stop). Finally, Im
waiting on the SNB to make a decision on euro-Swiss franc,
as the Eurozone situation heats up.
TUESDAY 22 MAY 2012
MANAGEMENT WEALTH
cityam.com
into it because you see the lows as a
great buying opportunity, as you
think you can ride the wave when
the shares institutional holders
come to the rescue to prop up its
price, then you should take that posi-
tion. Similarly, if you want to stand
by the conviction that this is a bub-
ble stock, then your spread betting
provider will happily let you take a
short position on that view. But
whichever way youre going to go,
you should plan your trade when
are you going to buy, when are you
going to sell and where are you going
to set your stop losses. If you get
caught up in the hype and get
caught on the wrong side of a trade
and lose the months rent, you will
find that your spouse will defriend
you pretty quickly.
TRADING
24
The airwaves are not short on opinions on Facebooks poor showing
G
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DAVID
JONES
TIM
GUINNESS
ALLISTER
HEATH
RICHARD
FARLEIGH
LEX
VAN DAM
cityamactivetrader.com
0203 201 8900
See the full programme & buy tickets today at
or call
In association with Champagne reception sponsor Produced by
TUESDAY 22 MAY 2012
25
TRADER CONFERENCE ACTIVE
cityamactivetrader.com
On 24 May, the Grange Tower Bridge Hotel hosts Active Trader 2012, where Richard Farleigh is speaking
Richard Farleigh
explains to Tom
Welsh what hell
say this Thursday
What is your trading
background?
I studied economics and maths
at university, and then worked
in the research department of
Australias Central Bank. I moved
into investment banking, initially
running a derivatives desk. I learned
about macro-trading and headed a
proprietary trading operation. In the
mid-1990s, I ran a hedge fund in
Bermuda and was likely the worlds
highest-paid hedge fund manager.
What are you covering in your
session at City A.M.s trading
conference on 24 May?
The topics Ive written about in
my book, Taming the Lion. It
educates people in techniques which
can operate in different trading
environments. Ill talk about trading
ideas, and managing the entry,
holding, and exit of a position.
Why is this important for
traders?
Most amateur traders make
very basic mistakes. They dont
always know where to get their ideas
from. They dont analyse their wins
and losses correctly. And they don't
understand the effect of psychology
on the market. On top of that,
theyre often not very disciplined.
What is the most important
lesson to learn as a trader?
You learn your lessons from
your mistakes. Ive learned to
fear the market, to treat it with
respect. Im influenced by the power
of big ideas and the concept that
markets go further than expected.
What are the most important
tools a trader needs to have?
A professional approach to
trading, a way of assessing the
value of his or her ideas and
assessing performance over a time
period. Its important to look for
some comparative advantage and be
aware of strengths and weaknesses.
What is the worst mistake a
trader can make?
To think its too easy, that the
market has missed something
that is actually well-known or
irrelevant. Markets operate as a
supercomputer and process a huge
amount of information, in a manner
far better than humans are capable.
Why are you excited to be
taking part in City A.M.s
trading conference?
I enjoy talking about risk-taking
and discussing a scientific
process to a difficult subject. People
with an interest in trading are often
an interesting bunch of people.
To meet dozens of trading gurus like these,
buy a ticket for Active Trader on 24 May:
www.cityamactivetrader.com
Or call: 020 3201 8900
Two days to go: Buy your tickets
to City A.M.s trading conference
RICHARD FARLEIGH
9.00AM-10.00AM, 24 MAY
Richard Farleigh was born into
poverty in the Australian outback as one
of 11 children. He was fostered at an
early age. Farleigh studied economics
and maths before managing a
derivatives desk, a proprietary trading
desk, and a hedge fund in the 1980s and
early 90s. His focus was on predicting
big picture trends and these trends
effects on currency and interest rate
markets. Since the mid-1990s, Farleigh
has operated as a business angel and
he has backed more early-stage
companies than anyone else in the
United Kingdom, and his appearances
on the BBCs Dragons Den have earned
him the moniker Mr Nice. Farleigh is
also a Chess Master and he has
competed at two Chess Olympics.
Follow him on Twitter: @FarleighRichard
Q
A
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WILL SMITH
TRADING
COMMENT
I
NVESTING in natural resources
offers the potential for high
returns for investors, but risks
are ever present. Both the
demand and supply sides need to
be assessed. What are the main
challenges for resource companies
at this moment and how best
should the accompanying risks be
negotiated?
Economic principles dictate that
prices are set at a point that supply
satisfies demand. The demand case
for commodities is well known
with the emerging nations of the
world consuming more materials
as their economies gather pace. We
are very aware, especially after the
global financial crisis of 2008, that
this will not be in a straight line,
but over a reasonable timescale
this upward trend should continue
as urbanisation proliferates.
The supply side of the equation is
extremely challenging, and we see
this across such diverse commodi-
ties from copper, coal and uranium
to palm oil.
Increased political risks and
growing resource nationalism, a
lack of skilled workers and declin-
ing grades, rising capital costs and
increasing requirements in permit-
ting, are just some of the factors
conspiring to make meaningful
supply growth elusive and more
expensive.
Political instability within emerg-
ing nations and new democracies
is not new, but Africa alone in the
last two years has witnessed the
Arab Spring, disputed elections in
Cote dIvoire, and coups in Mali
and Guinea Bissau. Because a new
mining project is often a large cap-
ital commitment requiring a long
payback time, companies crave sta-
bility and investment decisions are
often deferred or postponed until
an acceptable degree of stability
returns.
Resource nationalism is also on
the rise, and not just in the devel-
oping nations. Australia recently
imposed a resources rent tax.
Royalties are under upward pres-
sure across the globe as govern-
ments seek greater participation in
projects.
The recent expropriation of 51
per cent of YPF by the Argentinean
government is an extreme example
of resource nationalism and will
probably not have the desired
effect of increasing domestic oil
and gas production. Such a dramat-
ic move can only deter the foreign
capital and skills required to
unlock the undoubted potential of
the shales of the Neuquen basin.
The global boom
in commodities is
a long term story
TUESDAY 22 MAY 2012
26
MANAGEMENT WEALTH TRADING
cityam.com
But there will be plenty of risks and challenges along the way
T
HE impending arrival of Facebook
into global markets did little to
shore up optimism last week, as
markets tracked relentlessly lower
for the entire week.
As with the preceding week, Greece
remained the centre of attention, drag-
ging Spain and Italy into its mire. Better
German GDP figures provided only the
briefest relief from the unending gloom,
and news that talks on a new Greek gov-
ernment had broken down once again
prompted a flurry of selling in mid-week.
US data also failed to live up to expecta-
tions, while Fed minutes didnt suggest
that the worlds largest central bank was
any closer to pushing the QE3 button.
In sum, we remain in thrall to the
Eurozone crisis, as the apparent exit of
the Greeks from the currency plays out in
slow motion.
Sentiment on the FTSE 100
has remained bullish
throughout the week,
but the bears have
gained some ground,
with the indicator
shifting from 71 per
cent long to 63
per cent long.
This is likely a
two-way thing, as
some longs close
out, while
others
initiate new
INSIGHT
DAVID JONES
BEARS GAINING GROUND AS
GREECE PUSHES FTSE SLIDE
CHIEF MARKET STRATEGIST
IG IS DIFFERENT SEARCH IG MARKETS
offer the best value and perform-
ance. Another way to help mitigate
some risks is by backing manage-
ment teams which have had previ-
ous success.
Our belief in the long term story
of commodity strength is driven as
much on the problems of the sup-
ply side as it is on the headline
grabbing demand side.
Diversifying investments through a
portfolio approach is, we think, the
most efficient way to mitigate the
ever present risks while taking
advantage of this global boom in
commodities.
Will Smith is senior fund manager for
City Natural Resources High Yield Trust
One certainty in this uncertain
world is that the average grade of
copper mined is declining, possibly
to as little as 0.6 grams of copper
per tonne of ore extracted. This is
true of gold, silver and most other
metals, and this only raises the cost
and difficulty of increasing supply.
Resource investors cannot avoid
such risks and challenges entirely,
but I believe the best way to miti-
gate them is by using a portfolio
approach, diversifying investments
across a number of countries and
minimising exposure to single
asset companies. At City Natural
Resources, we focus on growth
companies across the resources sec-
tor as we feel that these companies
A lack of skilled workers has affected commodity mining
GERMANY 30 WALL STREET EUR/USD US SPX 500 USD/JPY
52%
LONG
74%
LONG
51%
SHORT
64%
SHORT
53%
SHORT
0.44%
0.02% 0.04% 0.62%
0.44% 0.78% 0.36% -0.09%
GBP/USD SILVER
US LIGHT
CRUDE
GOLD AUD/USD
62%
SHORT
85%
LONG
61%
LONG
87%
LONG
-1.12% -0.12%
63 %
LONG
Clients trading this market also have positions on
Client sentiment on the FTSE 100
63% of IG clients with open positions in this
market expect the price to rise
37% of IG clients with open positions in this
market expect the price to fall
76%
LONG
short positions.
Sentiment on indices as a whole remains
positive, suggesting hope that other parts
of the global economy will at least offset
the Eurozone crisis to a degree. However,
if further losses result for Londons
leading index, this trend of increasing
bearishness could continue into June, as
more clients opt to short the index.
The flight for safe havens is also seeing
a drop in the
number of
clients who
expect
further
increases
in the
value of
the US dollar
versus the yen. The crisis
on the continent means
that the yen is becoming
a destination for worried
investors once again, to
the despair of the
Japanese Finance
Ministry, who are now
hinting at more easing
to help reduce the
attractiveness of their
currency.
There is no
ignoring the Trojan
horse in the room
FOLLOWING THE PROFESSIONALS
BY CRAIG DRAKE
Though the large commodities funds
can be taking position sizes in the
hundreds of millions, spread betting
and contracts for difference can
allow the retail investor to take
positions on commodities and still
see returns. Taking a position on
gold bullion would usually take a
huge amount of capital to take
advantage of a $10 intraday move
the brokerage costs would wipe out
any gains made unless you were
taking significant position sizes. But
with spread betting you can take a
position from as little at 1 a point
giving you the levels of leverage
usually only available to institutional
traders. By spread betting a mining
stock, you can also mitigate the
currency risk since you are buying
a derivative and not the underlying
stocks, you do not run the risk of
having profits wiped out by a
strengthening dollar.
On the other side of the coin, you
should also follow in the footsteps of
the professionals when it comes to
risk analysis at the most basic level
by setting stops and limits when you
place a trade. The leverage that
allows you to take a meaningful
position on the gold price, or indeed
on any other commodity for that
measure, means that you can see
your margins ripped through if you
do not ensure that you put the right
controls in place. By placing a stop
loss, should the price of the
instrument that you are trading rise
or fall beyond a specified point, your
order will trigger and the sale or
purchase will be made.
Y
ou wouldnt think London
needed yet another high-end
Italian restaurant. Well,
apparently, it does or at
least, it wont say no to one. For a
late sitting one recent Thursday, the
(fairly) new Cotidie was surprisingly
busy, full of boisterous, Armani-clad
European bankers. At a table near
us was a table of young Russian men
in suits, who kept a bottle of vodka
on ice alongside the fine wine.
But its not strictly that sort of
place: its expensive, yes (a starter of
asparagus with prawns for 14), and
elegant (lots of lacquered minimal-
ism and interesting light fixtures),
but its friendly. I was there with my
mother and we sat together at one
of the elegant yet cosy oval tables,
wedged together on the same side.
The food was clearly composed of
the highest quality ingredients. The
idea is that they come from many
regions of Italy but as someone not
equipped with an encyclopaedic
culinary or agricultural knowledge
of Europes most various food coun-
try, I can only say that what we
ordered was generally very tasty, but
also a bit skimpy where portions are
concerned. (Occasionally the reverse
was true and the plates came
heaped.)
To start with, my mother was
seduced by the sounds of the tradi-
tional Culatello di Zibello with cres-
centine fried bread and preserved
fruit mostarda this came as a curi-
ously simple, repetitive plate of
cured meat with dough-ball style
bread; puffed up and lightly fried.
The bread was a naughty fairground
treat; the meat very good but all
together, it felt a bit samey. For 16
you might want something with
more dimensions.
I went with the aforementioned
asparagus: seasonal, yes, and sweetly
sauted, with lovely sizzled maz-
zancole (triple-grooved) prawns still
with a bit of shell, and a herb may-
onnaise. Nice, but small four or so
spears of asparagus and three or so
small prawns huddled together. I
wanted more.
We next indulged in that mysteri-
ous extra Italian course of carbs (do
you have it instead of a starter? Is it
greedy to have it as well as one?). The
fresh handmade guinea-fowl ravioli
with butter and black pepper, diced
char-grilled ham and green pea
velout called to my mother, who
wanted something unusual it
came al dente, with some sort of
cheese having snuck into the ravioli
filling, and thus very rich when you
added in the ham.
My mother felt the pea veloute did-
nt work harmoniously with the
pasta I begged to differ, finding in
it a welcome, earthy counterpoint to
the animal flavours of the rest of the
dish.
But unexpectedly, my country
soup of beans warm Frantoio
soup with pist pasta and chervil
was the winner. It was rustic a bowl
so densely packed with fibre that it
would have satisfied a hiker fresh
from a freezing day in the
Dolomites. The broth had the the
consistency of baked beans gravy,
and there were flecks of cheese
accompanying the beans and pasta.
Onwards to fish: fillet of gilthead
sea bream steamed with seaweed,
pesto and garlic broccoli was a
cleansing, low-fat dish but small.
Very small at 26. If your priority is
your waistline, though, this is a
great choice. Meanwhile, I was try-
ing to make sense of white fish
salad which I had imagined as
something containing vegetables. It
was more of a French fish stew with-
out the stew prawns, a few large
pieces of white fish, clams, mussels,
and a wasabi mayonnaise I didnt
like much. I dont see the point of
ordering such a dish unless youre
avoiding carbs and meat, but at the
time I had thought of vegetables,
and the meat on the menu hadnt
appealed for some reason.
Now, looking closely, I see theres a
rooster stuffed with duck foie gras
and lardoons and served with
spinach flan. I imagine thatd be a
stonking dish.
Finally, we inferred that the pud-
dings at Cotidie based on the petit
fours we nibbled must be excel-
lent. They all looked tempting but
we were feeling virtuous after all
that fish.
All in all, this is a very Marylebone
sort of place: European, expensive,
elegant. But its more than that, too:
the service is excellent, executed by
a team of light-footed, earnest
Italians, and there are no short cuts
with quality. But given the sort of
food now available in London for
less money, Cotidie is just a bit too
far off the mark when it comes to
offering bang for buck. If that does-
nt bother you for example if you
need a classy place to bring clients,
go forth and enjoy.
Costly new Italian is a
safebet for goodclients
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Cotidie offers top food, service...and prices, says Zoe Strimpel
LIFE&STYLE
TUESDAY 22 MAY 2012
27
cityam.com
FOOD & DRINK
U
nabashedly British, Paxton and
Whitfield has always
specialised in farmhouse cheese
from these isles, becoming
Queen Victorias official
cheesemonger in 1850. But it wasnt
always plain-sailing for the shop,
which started life as a stall in Aldwych
market in 1742 before moving to
Jermyn Street. In the 1860s, a vogue
for Continental food emerged among
high society and good old cheddar
and Caerphilly ceased to be piquant
enough.
But it kept going and despite a
stint as a general grocery store when
dairy supplies dried up in World War
II is now the favourite cheese shop
for the dinner party-throwing elite,
wedding planners and City corpo-
rates. Exxonmobil, Smith &
Williamson, Clifford Chance, Berry
Bros & Rudd and Sopexa are among
the companies who have used the
expertise at Paxton and Whitfield to
hold events as educational as they are
tasty.
Paxton has evolved with an environ-
mental policy that makes use of small
producers who treat their animals
well and supply cheese without chem-
icals. At the end of the day, nothing is
half-baked (or matured) at Paxton: the
wonderful selection in the shop has
all been matured on-site in under-
ground cellars.
The selection in store makes it abun-
dantly clear why those in the know
still find the cheese they want here.
Hard cheese is the largest category-
with a couple of particularly tempting
cheddars. The house cheddar is a clas-
sic and rewarding choice: matured in
natural caves in Somerset so that in
acquires a wonderfully distinctinve
nutty bite, it comes cloth bound and
ready to go. Also delicious and unique
is the Cheddar Smoked Ceodre, wax
coated farmhouse cheddar naturally
smoked over oak chips.
Elsewhere there are plenty of
Lincolnshire poachers, Leicester and
even a raclette, alongside soft and
blue cheeses.
A shop of tradition and history
Paxton may be, but it rolls with the
times, too, providing a full online serv-
ice so if youre too far from Jermyn
Street, you can simply make your
order on the web. Online the shop
also provides dozens of tasty cheese
recipes. St Eadburgha and Mushroom
Bruschetta with Toasted Pinenuts and
Tomato Salsa, anyone? Yes please.
A selection of cheese at Paxton and Whitfield.
For the next month City A.M. and Brewin Dolphin will be shining a spotlight
on a series of City Treasures as we celebrate some of the great places and
institutions around us. Many of them are established with a long
and interesting heritage yet they still exude their core values
based on service and excellence.
Tomorrow is the HAC.
www.brewin.co.uk
WHY CHURCHILLS FAVOURITE CHEESE SHOP IS STILL A SUCCESS
PAXTON AND WHITFIELD
Cotidie is a ritzy but friendly Italian in Marylebone.
RESTAURANT
COTIDIE
50 Marylebone High Street, W1U 5HN
Tel: 020 7258 9878
FOOD hhhii
SERVICE hhhhi
ATMOSPHERE hhhii
How to invest in a beautiful smile
Investing in your pearly whites can pay dividends where confidence and success are concerned.
London City Smiles has a range of exciting
treatments that can transform your look
TUESDAY 22 MAY 2012
28
cityam.com
LIFE&STYLE ADVERTISEMENT FEATURE
S
MILE, and the world smiles
with you. It sounds simple
enough, but missing, wonky
or stained teeth can leave you
wanting to keep your gnashers
firmly to yourself. Fed up with
feeling self-conscious about your
smile? Thought about getting
dental treatment, but wrote it off
as too much hassle? You might be
surprised to learn that upgrading
your set of not-so-pearly-whites has
never been easier or more
affordable.
Dental implants can transform
the smile of those with missing
teeth, whether its a full set or just
the one. Traditionally, the proce-
dure has involved a drawn-out heal-
ing period of several months, but
with the innovative All -on-four-den-
tal implant system, its business as
usual after just a couple of hours.
This revolutionary method involves
the strategic placing of four
implants onto the anterior part of
the jaw, a positioning which maxi-
mizes existing bone structure and
cancels out the need for additional
invasive procedures such as bone
grafting. Replacement teeth can
then be attached to the implants on
the same day, meaning your can
start showing off your brand new
smile straight away. Its no quick fix
solution either, with all implants
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Award winning implantologist Dr
Balwant Vekaria of London City
Smiles (www.londoncitysmiles.com),
which offers All-on-four-implants
alongside a wide range of support-
ing treatments, has witnessed first-
hand the life-changing effects of
so-called smile reconstruction. You
might have the haircut, the expen-
sive jewellery, the lipstick but
what really makes you beautiful is
your smile. The smile and teeth are
the foundations of facial beauty, and
people I have treated have bloomed,
finding new confidence, and even
new jobs and new partners.
But what about when it comes to
crooked or uneven teeth? Sporting
Ugly Betty-style train-tracks is hard-
ly likely to boost your confidence
whether your fighting your corner
in the board room or going on a
first date. However, Dr Vekaria and
his team of highly qualified staff
offer a more sophisticated alterna-
tive: the Invisalign method involves
donning a series of clear, almost
invisible aligners tailor-made for
your mouth. You change them
every two weeks until your teeth
have achieved the desired straight-
ness, and rather helpfully you
can remove them for special occa-
sions too.
If you have a weakness for morn-
ing espressos and large glasses of
merlot that have taken their toll on
your choppers, you might want to
consider London City Smiles Air
and Go treatment. This is a fast,
effective and pain-free tooth clean-
ing system which removes stains
and aids gum disease prevention for
a naturally healthier, brighter
smile. Tooth whitening is also avail-
able, and is a subtle way of trans-
forming your appearance. In
addition, the team specialises in
facial aesthetics, including wrinkle
relaxing injections and dermal
fillers which, in combination with
dental treatment, can strip years
from your face.
Understandably many people feel
apprehensive and anxious about
changing the appearance of their
teeth. Dr Vekaria and his team
make it their priority to offer a pro-
fessional and genuinely supportive
service, and recognise how impor-
tant it is to feel at ease in the den-
tists chair. There is no charge for
your initial consultation, which is
an opportunity to dispel any con-
cerns you might have and for your
consultant to formulate a unique
treatment plan which there is no
obligation to pursue. Dr Vekaria, a
dentist at the forefront of his profes-
sion and the recent beneficiary of
an award from the American
Academy of Implant Dentistry, has
over 30 years experience behind
him. His highly qualified team
includes an anaesthesiologist who
is able to administer conscious seda-
tion to make your experience as pos-
itive and painless as possible and
is matched by first-class facilities
and equipment. An in-house CT
scanner and endodontic micro-
scope allow for a streamlined treat-
ment process, with no need for
referrals and protracted waiting
lists. Gratifyingly, their concern for
patient well-being continues long
after you have left the clinic with a
24 hour aftercare support line in
place.
Investing in your smile is surpris-
ingly cost-effective at London City
Smiles, with zero per cent finance
on all treatments so you can spread
the cost over a series of months. A
complete dental implant with
crown can be fitted for as little as
75 over 18 months. Whats more,
there will be a number of
special offers to coincide with the
launch of the clinics new website
(www.londoncitysmiles.com) so
keep your eyes peeled over the next
couple of weeks to get a great deal.
Why not book a free no-pressure
consultation to find out how
London City Smiles could improve
your smile and your confidence?
Conveniently located opposite
Angel tube station, and with a num-
ber of special offers already avail-
able, this is a dental practice that
can really give you something to
smile about. With Summer
approaching, forget fad beach-body
diets, an expensive new wardrobe
and hours in the gym, and invest is
an effective, permanent change to
your appearance so you can laugh
and smile with confidence, and live
life to the fullest.
For more information or to book an initial
consultation visit
www.londoncitysmiles.com or call 020
7837 2300. London City Smiles is located
at 19-21 Islington High Street, N1 9LQ.
Opening hours are 9am-5.30pm Monday,
Wednesday, Thursday, Friday; 9am - 8pm
Tuesday and 9am -1pm on Saturday.
You might have the
haircut, the expensive
jewellery, the lipstick
but what really makes
you beautiful is your
smile. Its the founda-
tion of beauty
29
TV & GAMES
cityam.com
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BBC1
SKY SPORTS 1
7pmCarl Froch Behind The Ropes
7.30pmLive Premier League
Speedway 9.30pmSporting Greats
10pmCarl Froch Behind The
Ropes 10.30pmSpecial Report
11pmA League of Their Own 12am
Champions League Weekly
12.30amPremier League
Speedway 2.30amFootball Asia
3amFootballs Greatest Managers
3.30amCarl Froch Behind The
Ropes 4am-6amPremier League
Speedway
SKY SPORTS 2
7pmSports Unlimited 8pmLPGA
Tour Golf 9.30pmFootball Asia
10pmChampions League Weekly
10.30pmGolfing World 11pm
LPGA Tour Golf 12.30amSports
Unlimited 1.30am-3amLPGA Tour
Golf
SKY SPORTS 3
7pmBass Fishing 8pmFootballs
Greatest 9.30pmThrillseekers
10pmSports Unlimited 11pmPolo
12amBass Fishing 1amBritish
Miler 1.30am-2.30amPolo
BRITISH EUROSPORT
6pmLive Football 8pmGet Ready
for Roland Garros 8.15pmBoxing
11pmGT Academy 11.15pmInside
WTCC 11.45pmCycling: Giro
dItalia 12.45am-1amGet Ready
for Roland Garros
ESPN
7pmFA WSL Review Show
7.30pmPress Pass 2012 8pm
Serie A 9.30pmBundesliga 11pm
FA WSL Review Show11.30pm
Press Pass 2012 12amPlanet
Speed 12.30amAmerican Le Mans
Series 1.30amMazda
Championship Racing 2.30am
Australian Football International
2012 3.30amFA WSL Review
Show4am-6amPolo
SKY LIVING
7pmCriminal Minds 8pm
The Biggest Loser USA
9pmUnforgettable 10pmCriminal
Minds 11pmLadyboys 12amBones
1amMaury 2.40amMedium
3.30amBones 4.20amNothing to
Declare 5.10am-6amJerry
Springer
BBC THREE
7pmWorlds Craziest Fools 7.30pm
Snog, Marry, Avoid? 8pm
Eurovision Song Contest 2012:
Semi-Final One 10pmEastEnders
10.30pmRussell Howards Good
News 11pmFamily Guy 11.45pm
American Dad! 12.30amEnglands
Worst Ever Football Team2am
Russell Howards Good News
2.30amBritain Unzipped 3.25am
The 16 Year Old Killer: Cyntoias
Story 4.25am-5.25amAre My
Fake Breasts Safe?
E4
7pmHollyoaks 7.30pmHow I Met
Your Mother 8.30pmThe Big Bang
Theory 9pm90210 10pmThe
Inbetweeners 10.30pmCardinal
Burns 11pmThe Cleveland Show
11.30pmThe Ricky Gervais Show
12amBobs Burgers 12.30amThe
Big Bang Theory 1.30amScrubs
1.55amHow I Met Your Mother
2.20amRules of Engagement
2.40amAccidentally on Purpose
3.05amDesperate Housewives
3.50am90210 4.30amGreek
5.15am-6amSwitched
HISTORY
7pmStorage Wars 7.30pmPawn
Stars 8pmCash Cowboys 9pm
Storage Wars 10pmNo County for
Old Men 11pmAmerican Pickers
12amStorage Wars 12.30am
Pawn Stars 1amCash Cowboys
2amNo County for Old Men 3am
Ice Road Truckers 4amHeir
Hunters 5am-6amAncient
Discoveries
DISCOVERY
7pmBear Grylls: Born Survivor
8pmThe Ultimate Climb 9pm
Gold Rush 10pmDeadliest Catch
11pmRiver Monsters 12am
Gold Rush 1amDeadliest Catch
3amIce Pilots 3.50amWheeler
Dealers 4.40amBear Grylls:
Born Survivor 5.30am-6am
Destroyed in Seconds
DISCOVERY HOME &
HEALTH
7pmSay Yes to the Dress 8pmI
Didnt Know I Was Pregnant
9pmMystery Diagnosis 10pm
Untold Stories of the ER 11pmI
Want To Hurt My Baby 12am
Mystery Diagnosis 1amUntold
Stories of the ER 2amI Want To
Hurt My Baby 3amSay Yes to the
Dress 4amA Baby Story
5am-6amBirth Stories
SKY1
8pmTouch 9pmStarlings 10pm
FILMEraser 1996. 12.10amRoad
Wars 1.10amLuton Airport 2am
Brit Cops: Zero Tolerance 2.55am
Caribbean Cops 3.45amBody
Language Secrets 4.35amReal
Filth Fighters 5.05am-6amDont
Forget the Lyrics
BBC2 ITV1 CHANNEL4 CHANNEL5
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6pmBBC News
6.30pmBBC London News
7pmThe One Show
7.30pmEastEnders; BBC News
8pmHolby City
9pmSilk
10pmBBC News
10.25pmRegional News;
National Lottery Update
10.35pmCHOICE The Matt
Lucas Awards
11.10pmFILMGhost Town: 2008.
12.50am Weatherview12.55am
Sign Zone: The Apprentice 1.55am
Horizon 2.55amAntiques Road Trip
3.40amGreat British Railway
Journeys 4.10amGreat British
Menu 4.40am-6amBBC News
6pmEggheads
6.30pmTOTP2: With Dexys
Midnight Runners, the Shamen
and Engelbert Humperdinck.
7.30pmGreat British Menu
8pmChelsea Flower Show
2012: Alan Titchmarsh and
Carol Klein reveal who has won
the Best in Show award.
9pmGreat Ormond Street
10pmCHOICE Later Live
with Jools Holland
10.30pmNewsnight; Weather
11.20pmThe Great Euro Crash
with Robert Peston
12.20amBBC News
4am-6amBBC Learning Zone
6pmLondon Tonight
6.30pmITV News
7pmEmmerdale
7.30pmTrash to Treasure
8pmMartin Clunes
Horsepower
9pmDirty Britain
10pmITV News at Ten
10.30pmLondon News
10.35pmCelebrity Juice
11.20pmNatures Fury:
Fire Storm
12.15amJackpot247:
Interactive gaming; ITV News
Headlines
3amLoose Women
3.50am-5.30amITV Nightscreen
6pmThe Simpsons 6.30pm
Hollyoaks 7pmNews 7.55pm
Nathan Stephens Warrior 8pm
Embarrassing Bodies: Live from the
Clinic 9pmHidden Talent 10pm
CHOICE My Big Fat Fetish 11.05pm
Alan Carr: Chatty Man 12.05am
4thought.tv 12.10amRandom Acts
12.15amPoker 1.20amKOTV
Boxing 1.45amSailing: Americas
Cup Uncovered 2.15amThe Grid
2.40amBritish F3 3.05am
Freesports on 4 3.35amFreesports
on 4 4amBrief Encounters of the
Sporting Mind: Golf 4.05amRoad
to London 2012: Paralympics Extra
5amBrief Encounters of the
Sporting Mind: Ma Bar
5.15am-6.10amDeal or No Deal
6pmHome and Away
6.30pm5 News at 6.30
7pmDirty Great Machines;
5 News Update
8pmWar Hero in My Family;
5 News at 9
9pmCSI: Crime Scene
Investigation
10pmCSI: NY: Mac reconnects
with his first partner.
10.55pmCSI: NY
11.55pmCSI: Miami
12.50am SuperCasino
3.55amHouse Doctor 4.20am
Nicks Quest 4.45amNicks Quest
5.10amWildlife SOS 5.35am-6am
Wildlife SOS
Fill the grid so that each
block adds up to the total
in the box above or to the
left of it.
You can only use the
digits1-9 and you must not
use the same digit twice in
a block. The same digit may
occur more than once in a
row or column, but it must
be in a separate block.
COFFEE BREAK
Using only the letters in the Wordwheel, you have
ten minutes to nd as many words as possible,
none of which may be plurals, foreign words or
proper nouns. Each word must be of three letters
or more, all must contain the central letter and
letters can only be used once in every word. There
is at least one nine-letter word in the wheel.
Place the numbers from 1 to 9 in each empty cell so that
each row, each column and each 3x3 block contains all the
numbers from 1 to 9 to solve this tricky Sudoku puzzle.
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk
KAKURO
QUICK CROSSWORD
LAST ISSUES
SOLUTIONS
KAKURO
WORDWHEEL
SUDOKU
SUDOKU
QUICK CROSSWORD
WORDWHEEL
1 2 3 4 5
6
7 8 9 10
11 12
13 14
15
16 17 18 19
20 21
22 23
24 25
20 6 15
45
11 9
17 24 8
14 16
12 14
34 18
9 10 8
8 27
45
10 3 6
16
10
11
13
18
15
12
23
15
22
16
7
17
32
11
21
11
4
9
7
35
33
13
5
7
6
ACROSS DOWN
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W S H O W M E A L
S A T W F P T
G G A S O L I N E
C O W W R C O D
A G I T A T E D V
S L Y B L A B
S O D A L O P E A
I R E A D E T
S C O T C E N S U S
5 8 3 2 1 8 6
2 3 7 8 4 7 9
7 1 9 5 7 9 8
9 3 8 3 2 6 1
2 6 5 2 1
1 5 3 4 8 6 9 2 7
7 8 9 5 8
5 3 1 2 4 8 9
6 1 2 7 3 1 6
8 2 3 8 1 4 2
9 8 1 4 2 7 9
4
4
4
4
4
4
4
4
4
The nine-letter word was
BESTOWING
1 Cleaned with a
broom (5)
3 Pair of game birds (5)
7 Keen on (4)
9 Domesticated
llama (6)
11 Leisurely walk (5)
13 Body (5)
14 Become rotten,
as of an egg, for
example (5)
15 Pallid, weak (3)
16 Public announcement
of a proposed
marriage (5)
17 North African
port (5)
20 Run o to marry (5)
22 Farmyard manure
in uid form (6)
23 Border (4)
24 Burn with steam (5)
25 Full-grown (5)
1 Garment worn on
the upper half of
the body (5)
2 Formal school or
college balls held at
the end of a year (5)
4 Deserted (9)
5 Fill with high
spirits (5)
6 Buddy (3)
8 Large, hairy,
tropical spider (9)
10 Rough shelter at the
side of a house (4-2)
12 Light tanker for
supplying water
or fuel (6)
16 Footing (5)
18 Flip to a vertical
position (2-3)
19 Perfume (5)
21 Caustic washing
solution (3)
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BBC1 BBC2 ITV1 CHANNEL4 CHANNEL5
TUESDAY 22 MAY
THE MATT LUCAS AWARDS
BBC1, 10.35PM
Highlights from the first series of the
comedy panel game, in which Matt
Lucas invites guests to make
nominations for imaginary awards.
LATER LIVE WITH JOOLS
HOLLAND BBC2, 10PM
Jimmy Cliff returns to the studio with
songs from Re:Birth. Also performing
are the Hives, Paloma Faith, Esperanza
Spalding, Beach House and Jake Bugg.
MY BIG FAT FETISH
CHANNEL4, 10PM
The lives of overweight women who
have chosen not to diet, and have
instead attracted online followings of
men who pay to watch them eat.
TVPICK
CAPTAIN Andrew Strauss admitted
his relief last night after England sur-
vived a scare to start their summer
on a winning note with a five-wicket
victory in the first Test against West
Indies at Lords.
A cool stand of 132 from opener
Alastair Cook and Ian Bell ushered
the hosts towards their second-
innings target of 191, but only after
England had flirted with a hugely
embarrassing defeat.
The early dismissals of Jonathan
Trott and Kevin Pietersen, who made
just 13 runs apiece, left England four
down and needing another 134 to
clinch a final-day triumph and take a
series lead.
Were very happy to have regis-
tered a victory, said Strauss, whose
departure for just one on Sunday
afternoon set the tone for a nervy
run chase.
Whenever youre chasing theres
a bit of pressure, so it was an out-
standing effort from Cook and Bell.
They played in a very classy manner.
It got a bit harder, but we had faith
the wicket would stay flat and slow.
Bell (63 not out) hit the winning
runs after Cook (79) fell two short of
Nervy England
prevail in Cook
and Bell story
the victory target, but Strauss hailed
Englands pace attack, among whom
Stuart Broad stood out with 11 match
wickets. He added: The bowlers did
outstandingly in very tough condi-
tions, and it wasnt a formality.
England have named an
unchanged 13-man squad for the sec-
ond Test, which starts on Friday at
Trent Bridge and could see them
clinch a series victory.
That prospect looked distant short-
ly after they resumed yesterday morn-
ing on 10-2, when the normally
reliable Trott was snared at second
slip off Kemar Roach. Home hopes
dipped further when Pietersen edged
Shannon Gabriel behind, leaving
England on 57-4.
But the pitch aided Cook and Bell,
who amassed runs with increasing
ease. Cooks edge off West Indies cap-
tain Darren Sammy barely delayed
the now inevitable, and Bell claimed
the decisive four before Jonny
Bairstow had even got off the mark.
Sammy was content to have made
England battle, with the tourists
given little chance before the series
began. He said: We were told no
fifth-day tickets were printed, but we
showed a never-say-die attitude and
produced some good performances.
Colsaerts gives
his Ryder Cup
hopes a boost
B
ELGIAN Nicolas Colsaerts
enjoyed a fantastic win and
put himself right into Ryder
Cup contention at the World
Match Pl ay Champi onshi p i n
Spai n on Sunday.
Colsaerts started slowly in the
group stage but once he had come
through the play-off to reach the last
eight he was brilliant, playing
beautifully and showing real class.
In the final he had to see off a
gritty Graeme McDowell, who played
well all week, and offered Europe
captain Jose Maria Olazabal a good
indication of his matchplay pedigree
and Ryder Cup potential.
Olazabal, meanwhile, has wisely
decided on naming four vice-
captains for this years competition.
With four matches taking place
simultaneously on the first two days
its very important to have a pair of
eyes on each contest as you need to
know how your players are coping.
Until the team is known its
difficult to have a good idea of who
the vice-captains will be, although
Miguel Angel Jimenez would be a
candidate. You work closely with
these guys so its important to pick
people you get on well with.
Lastly this week, I was delighted to
see Jason Dufner win his second PGA
Tour title in the space of three weeks
at the Byron Nelson Championship
in Texas.
I felt a little sorry for runner-up
Dickie Pride, whom he pipped with a
25-foot birdie at the last hole, but I
really like Dufners swing and love
the way he plays.
The Americans sudden
breakthrough he hadnt won a
single PGA Tour title until three
weeks ago underlines how
confidence breeds confidence. After
his biggest win yet, perhaps the same
thing will happen for Colsaerts.
Sam Torrance OBE is a multiple Ryder
Cup-winning golfer and media
commentator. He captained Europe to
victory in 2002.
IN BRIEF
Nadal rewrites history in Rome
I TENNIS: World No2 Rafael Nadal
claimed a record sixth Rome Masters
title with a straight-sets win over Novak
Djokovic. King of clay Nadal beat the
planets top-ranked player 7-5, 6-3 in a
final postponed from Sunday due to
bad weather.
Adebayor keen to seal Spurs move
I FOOTBALL: Manchester City striker
Emmanuel Adebayor wants to make his
loan switch to Tottenham permanent,
despite Spurs missing out on
Champions League qualification.
Adebayor, who scored 18 goals in 37
games last season, wrote on Twitter:
Loved my spell at Tottenham. We are
working hard with the chairman to
make it permanent.
Kearney crowned Europes best
I RUGBY UNION: Leinster and Ireland
full-back Rob Kearney has been
recognised for his Heineken Cup
winning exploits by being named
European player of the year. The 26-
year-old saw off competition from
team-mate Jonny Sexton, ex-England
fly-half Jonny Wilkinson and Ulster pair
Stephen Ferris and Ruan Pienaar.
GOLF
COMMENT
SAM TORRANCE
Bell hit the winning boundary after his stand of 132 with Cook eased England nerves
THE QUEENS granddaughter Zara
Phillips is due to carry the Olympic
torch on horseback tomorrow when
the London 2012 flame arrives at
Cheltenham Racecourse.
Phillips and Toytown, who
together won the Eventing World
Championship in 2006, will ride
Cheltenhams finishing straight
before lighting a cauldron. Her
Zara and Toytown to showcase
Olympic flame at Cheltenham
participation will mark the end of
day five of the relay, which is due to
end on 27 July at the opening
ceremony in the Olympic Stadium in
east London.
It comes after the flame was
briefly extinguished during its
journey through Devon yesterday,
prompting organisers to scramble to
light a replacement from the so-
called mother flame, which is kept
in a wind-proof lantern.
TUESDAY 22 MAY 2012
30
SPORT
cityam.com/sport
BY FRANK DALLERES
BY SPORTS DESK STAFF
Photography: Simon Procter
Millinery: Stephen Jones
Attire: Antonio Berardi
royalascothospitality.co.uk
0844 411 5081
G
E
T
T
Y
31
G
E
T
T
Y
cityam.com
TUESDAY 22 MAY 2012
CHELSEA look to have lost their bat-
tle to keep Champions League hero
Didier Drogba after the striker told
team-mates he has decided to end his
eight-year stint in west London.
Ivory Coast star Drogbas most like-
ly destination is believed to be ambi-
tious Shanghai Shenhua, who lured
his former colleague Nicolas
Anelka from Stamford
Bridge during the January
transfer window.
The 34-year-old could
earn as much as
250,000 a week in
China, while Chelsea
were thought ready only
to offer a 12-month exten-
sion to his current contract,
rather than the two-year deal
he had been seeking.
Drogbas admission to the Blues
dressing room came on Sunday, just
hours after he scored the winning
penalty in Saturdays final shoot-out
against Bayern Munich in Germany,
according to reports in France.
We will no longer be together
next season, he is quoted as saying
in France Football magazine. As I
have decided to leave, I wanted to tell
them to their faces. Except that I
could not do it. They made me crack.
Even though its three years since
I said I wanted to leave, I find it hard
to admit that its over with this club.
But I couldnt see myself sitting on
the bench to watch others play when
the club plans to build a new team.
Chelsea chairman Bruce Buck
said on Sunday that the club
planned further talks with
the former Marseille,
Guingamp and Le Mans
player, but Drogba
appears to have sent a
clear signal that his
mind is made up.
Saturday saw Drogba
claim the only major club
honour to have previously elud-
ed him with the Blues, having won
three Premier League titles, four FA
Cups and two League Cups.
The totemic target man has
become synonymous with the most
successful spell in the clubs history,
his 24m move from Marseille having
been one of the earlier record buys of
the Roman Abramovich era.
BY FRANK DALLERES
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Drog days are over:
Blues star nears exit
4
Drogba is the only
man to score in
four FA Cup finals
Conditions: Refund applies to pre-match rst/last goal scorer, correct score and scorecast single bets.
Max refund 100 per customer. See paddypower.com for details
IN NUMBERS: DROGBA AT CHELSEA
SEASON GAMES GOALS GOALS/GAME
2004-05 41 16 0.39
2005-06 41 16 0.39
2006-07 60 33 0.55
2007-08 32 15 0.47
2008-09 42 14 0.33
2009-10 44 37 0.88
2010-11 46 13 0.28
2011-12 35 13 0.37
OVERALL 341 157 0.46
Drogba, 34, scored the winning penalty in Saturdays Champions League triumph
You dont want to have to justify your place in
the side as a captain. That takes the monkey off
my back
Andrew Strauss on his first-innings ton against West Indies

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