HMV hit again

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Issue 1,303 Wednesday 19 January 2011 www.cityam.com FREE

■ Inflation, costs and taxes are surging out of control. Welcome to...

PRICE
HIKE
UK ECONOMY
■ GLOBAL AND LOCAL PRESSURES HIKING UP THE COST OF LIVING
▲

Mark Field, MP for the City and

BY JULIAN HARRIS
FEARS were growing last night that
Britain faces an explosion in the
cost of living, with spiralling infla-
tion threatening to erode savings
and squeeze households already fac-
ing higher taxes.
The consumer price index (CPI)
shot up in December at the fastest
rate since the Office of National
Statistics (ONS) began reporting it in
1996, the ONS revealed yesterday.
The spiralling inflation pours
doubt on the Bank of England’s
credibility after it yet again chose to
keep interest rates at historic lows
last week.
CPI inflation jumped by one per
cent compared to November, push-
ing the annual level to 3.7 per cent –
above the expectations of econo-
mists, who on average expected
inflation of 3.4 per cent.
The retail price index (RPI), which
includes some housing related and
Westminster.
“The inflation we are now wit-
nessing comes as some of us feared
as a direct result of the prolonged
policy of quantitative easing (print-
ing money),” he added.
The criticism was echoed by his
Conservative parliamentary col-
INFLATION FUEL FOOD TRANSPORT league Douglas Carswell, who
described the UK’s inflationary
Petrol has hit £1.30 a litre Officials cited transport
+3.7% +5.7%
dilemma as “hardly shocking.”
as liquid fuel costs have costs as a key element of “If you print lots of new money
surged inflation with quantitative easing, you dimin-
ish the worth of the currency you
Inflation in the UK will Food costs hit their
soon be twice the target
rate, economists say +48.7% highest rate of inflation
since May 2009 +6.5% already have,” Carswell said.
“It appears to be deliberate policy
as a means of coping with the vast
public debts we now face. As hap-
pened in the 1970s, inflation will be
allowed to erode large public debts,
but in doing so, diminish private
wealth,” he added.
Suspicions over the use of infla-
tion to erode government debt were
TAX COAL AND STEEL EATING OUT INSURANCE voiced by a former senior Treasury
official earlier in the month.

council tax costs, increased from 4.7
per cent to 4.8 per cent. The ONS
said that depreciating house values
stopped the measure increasing
even further.
And the tax and prices index (TPI),
which includes direct taxes, is up at
5.2 per cent, despite measuring just
3.2 per cent in January last year. On
top of this month’s VAT hike, house-
holds will face another increase in
National Insurance contributions
from April.
Inflation continues to shock offi-
cial forecasters, such as the govern-
ment’s fiscal watchdog. In June the
+2.5%
Australian floods are caus-
ing coal and steel prices to
soar
On 4 January VAT
increased for the second
time in a year +5.7%
Office for Budget Responsibility
(OBR) predicted inflation would
average just 2.4 per cent this year.
And at the time of last year’s gen-
eral election the Bank cited fore-
casts expecting inflation to drop to
1.8 per cent from April this year.
+3.5%
Food prices have seen
restaurant and hotel fees
also increase
However, inflation has now been
above three per cent for 12 consecu-
tive months.
The ballooning prices were pre-
dicted by Simon Ward, chief econo-
mist at Henderson, who now
expects inflation to reach 4.3 per
Insurance prices rocketed
earlier in 2010, for both
home and car cover
+19.5%
cent by next month.
CPI inflation will likely remain
above four per cent for the whole
year, Ward said.
“The Bank should already have
raised interest rates well beyond 0.5
per cent some months ago,” added
“A dose of inflation is one route
forward for a bad overborrowed
economy,” Sir Steve Robson said.
“Certainly it is not evident what
other route policymakers have in
mind.”
But the Bank’s Paul Fisher insist-
ed that inflationary effects are only
short term and said the Bank is con-
fident of reaching its medium term
objectives.
“It is very uncomfortable,” he
admitted, “but I wouldn't want to
go back and change policy.”
ALLISTER HEATH: P2
WEALTH MANAGEMENT: P22

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 2 News
You can’t fool everyone all the time
EDITOR’S LETTER
ALLISTER HEATH
FOR months now, I have been calling
for an immediate, symbolic rise in
interest rates to stem spiralling infla-
tion and to show markets the UK is
serious about fighting inflation – only
to be criticised as an over-excited
hawk. Yet month after month, infla-
tion has over-shot and still the chorus
is that “the Bank of England should
hold its nerve”. I disagree: we need
some action, and fast. Merely praying
that all will soon be well again is not a
proper economic strategy.
The consumer price index is now
rising at 3.7 per cent, the retail price
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WHAT THE OTHER PAPERS SAY THIS MORNING
NATIONAL GRID AWAITS RULING ON
CHARGES
National Grid will receive a long-
awaited ruling from New York state
regulators on the amount that it can
charge its customers. A positive out-
come would give the company
breathing space to improve the per-
formance of its US business. A nega-
tive outcome, suggested by a draft
ruling last week, would increase the
pressure on Steve Holliday, chief exec-
utive, to sell the US operations.
ARDEN PARTNERS LAPSES INTO THE
RED
Arden Partners topped off a difficult
2010 by swinging to a pre-tax loss, as
the group struggled in tough market
conditions that were compounded by
upheaval in its ranks. In the 12
months to October 31, Arden report-
ed a pre-tax loss of £512,000, com-
pared with a profit of £1.52m in 2009.
index, which includes some housing
costs, at 4.8 per cent; and the tax and
price index, which includes direct
taxes and is the best measure of the
cost of living, by 5.2 per cent. Average
earnings growth including bonuses is
increasing but is still just 2.2 per cent.
Pay growth in the private sector stood
at two per cent. Workers are facing a
cut in real, tax-adjusted wages of
around three per cent. House prices
are also falling in real terms; it is
impossible for anybody paying 40 per
cent or 50 per cent tax to find a single
bank account with a positive, post-tax
interest rate (only a few Isas will do the
trick); stripping out the effects of
inflation, the return on many assets
no longer looks that great.
Of course, a large part of the spike
in inflation is due to higher tax. But
the argument that this means the
Bank of England shouldn’t be doing
anything is flawed, as Simon Ward of
Henderson points out. CPI-CT and
CPIY, which supposedly strip out the
effect of tax, are running at just 1.9
BHP eyed as
potash bidder
COMMODITIES
▲
BY JULIET SAMUEL
MINING giant BHP Billiton might
finally get its chance to buy part of a
major potash producer after
agribusiness Cargill yesterday signed
a deal to sell off its majority stake in
fertiliser producer Mosaic.
Cargill plans to offload its 64 per
cent stake in Mosaic, valued at about
$24bn (£15bn), to free up cash for the
Cargill family and allow them to
diversify their holdings while keep-
ing the firm private.
The shares in Mosaic will first be
offered to current investors in the
company, with some then sold on
the secondary market over time.
BHP is likely to top the list of
prospective buyers, having had its
$39bn bid for Potash Corp squashed
by Canadian authorities. The miner
INTEL FIGHTS TO AVOID FULL EU
PROBE INTO MCAFEE DEAL
Intel, the world’s largest chipmaker
by sales, is fighting to avoid a full
probe by European competition regu-
lators into its proposed $7.7bn acqui-
sition of McAfee, the US security
software company. Although the deal
has been approved by US regulators,
sources in Brussels, say a decision
whether to proceed to an in-depth
inquiry, which could at least stall the
deal for some months, is finely bal-
anced.
EU ANTITRUST OFFICIALS SWOOP ON
TRUCKMAKERS
The world’s biggest truckmakers have
been raided by European antitrust
officials after suspected breaches of
competition rules, potentially expos-
ing the recession-hit industry to
heavy fines. Daimler, Sweden’s Scania
and Volvo, the second-largest produc-
er, and Germany’s MAN all confirmed
that they received “surprise” visits.
per cent and two per cent. But these
esoteric measures are calculated on
the assumption that indirect tax hikes
are passed on in full to consumers.
This is nonsense. Pass-through was
only one-third after the 2008 VAT cut.
Assuming that one-half of the
increase in indirect taxes last year was
reflected in the prices charged to con-
sumers, Henderson calculates that
inflation would now be 2.8 per cent
had tax rates remained stable – still
too high.
Low interest rates have helped
banks to recapitalise themselves and
wean themselves from the public
trough. But it is time to move on as
the policy is now decimating two
other industries: life insurers and pen-
sion funds. Because of the way the
accounting is done, liabilities have
surged and assets have gone down;
the current monetary policy is more
of a threat to the solvency of life insur-
ers globally than a stock market or
property crash would be. Corporate
pension funds are also in trouble.
is keen to get a foothold in the lucra-
tive fertilisers business.
There will be strong competition
for the shares, however, with potash
and phosphate fertilisers becoming
hot commodities globally due to ris-
ing food demand.
Vale, a rival miner, is likely to look
at the opportunity, as could several
firms in Asia.
The Mosaic sell-off has been
approved by its board and that of
Cargill, though it is still to be voted
upon by the rest of Mosaic’s share-
holders.
BHP’s chief executive
Marius Kloppers is
keen to buy into the
fertiliser production
industry.
TESCO REVELS IN THE BEAUTY OF ITS
LATEST BRIGHT IDEA
It already runs its own bank, sells
mobile phones contracts and devel-
ops flats — now Tesco is offering to
style its customers’ hair. In its latest
departure from the “pile-’em-high,
sell-’em-cheap” philosophy of its
founder Sir Jack Cohen, Tesco is open-
ing its first beauty parlour, following
hard on the heels of the manicures
and threading treatments being
offered to customers on a trial basis
at two of its larger stores.
ESSAR REVIVES REFINERY TALKS AS
IT SEEKS KEY TO THE HEART OF
NORTHERN ENGLAND
Essar Energy has moved a step closer
to the acquisition of Britain’s second-
biggest oil refinery from Royal Dutch
Shell with the launch of a $500m
bond issue. It said that the proceeds
would be used to pursue acquisitions.
Of course, inflation has some desir-
able side-effects. The real debt burden
is being eroded for consumers, corpo-
rates and the state. If these defaults
were explicit, there would be panic;
we are getting debt restructuring on
the sly. House prices are readjusting.
The drop in wages will price people
back into jobs.
On balance, however, using infla-
tion to sort out one’s problems is a
mistake. It is better to do it the hard
way. You cannot fool everybody all of
the time. People learn and start put-
ting up prices and wages; this begins
to fuel a self-fulfilling inflationary spi-
ral. Soon, lenders begin to slap risk
premia on the interest rates they
demand – so not only do nominal
rates go up, real ones also rise, chok-
ing off demand. We learnt in the
1970s that inflation doesn’t sustain-
ably boost jobs and growth but merely
leads to stagflation – why has every-
body forgotten?
allister.heath@cityam.com
Follow me on twitter: @allisterheath
The former City minister said the big four’s dominance was a systemic risk
Myners: risk from big four
FINANCIAL SERVICES
▲
BY JULIET SAMUEL
LORD Myners yesterday told a parlia-
mentary committee that the concen-
tration of auditing services among
the “big four” accounting firms rep-
resents a systemic risk.
Appearing before the House of
Lords’ Economic Affairs Committee,
the former City minister said that
successive mergers had led to firms
not having enough alternatives to
Deloitte, Ernst & Young,
BIG BANKS RUNNING AN OLIGOPOLY,
SAYS VIRGIN MONEY CHIEF
Britain’s banks were accused of run-
ning an “oligopoly” by the chief execu-
tive of Virgin Money, as she said the
market for retail banking could bene-
fit from the break-up of the country’s
largest lenders. Jayne-Anne Gadhia,
chief executive of Virgin Money, told a
meeting of the Treasury Select
Committee that the UK’s five biggest
lenders had an “effective oligopoly”
and said more needed to be done to
improve competition.
WORLD NEEDS $100 TRILLION MORE
CREDIT, SAYS WORLD ECONOMIC
FORUM
The world's expected economic
growth will have to be supported by
an extra $100 trillion (£63 trillion) in
credit over the next decade, according
to a World Economic Forum report,
ahead of its anual Davos meeting.
CITYA.M. 19 JANUARY 2011
NEWS | IN BRIEF
AIG picks banks to advise sale
AIG has selected four banks to advise on
the government’s sale of its 92 per cent
stake in the company. Bank of America,
Deutsche Bank, Goldman Sachs and JP
Morgan Chase will manage the deal,
with the insurer said to be gunning for
fees of 0.5 per cent of the sale’s value,
below the 0.75 per cent fee for the gov-
ernment’s float of General Motors last
year. AIG could sell for as much as
$20bn.
Gerova investigates report
Gerova Financial, the US group that last
month agreed to buy Seymour Pierce,
said yesterday it had hired risk analysis
firm Kroll to investigate possible market
manipulation and collusion aimed at
driving down Gerova’s stock. Gerova is
questioning a 10 December document
which it said had been circulated by
Dalrymple Financial. Gerova said the
purportedly independent report was
merely disinformation. It added that
while the Dalrymple Document was
printed and laid out to resemble a report
by a reputable securities firm, it gave no
address or phone number and was pub-
lished on a Bulgarian website.
Picture: PA
PricewaterhouseCoopers and KPMG
when it comes to auditing.
He also came under fire for what
one committee member called
“Delphic nods and winks” given to
auditors on the subject of bank
bailouts.
The lords asked Myners whether
he had given reassurances that the
government would step in so that
auditors could to sign off on banks’
accounts.
Myners said: “It was not my task to
give them comfort.”
J&J WON’T GIVE FULL BONUSES TO
EMPLOYEES
Johnson & Johnson won’t give eligible
employees their full bonuses for 2010,
citing hits to the company's reputa-
tion and the “mixed performance”
for the year. In an email sent to
employees throughout the health-
care giant last week, J&J’s senior exec-
utives said those eligible for
performance bonuses would get paid
90 per cent of the recommended
sum.
RENAULT MANAGER SUES FOR
DEFAMATION
One of the three Renault managers
accused of selling company secrets
sued the auto maker yesterday for
defamation, raising the stakes in a
mysterious case involving electric
vehicles. The suit is from Bertrand
Rochette, a senior manager in
Renault’s electric-vehicle programme.
CITYA.M. 19 JANUARY 2011
Relief for Apple as sales soar
▲
TECHNOLOGY
BY JULIET SAMUEL
APPLE beat expectations with its quar-
terly results yesterday, buoyed by
strong Christmas figures that saw the
company sell 7.3m iPads, 16.2m
iPhones and 19.5m iPods during the
period.
Analysts had expected earnings per
share (EPS) of $3.95 versus an actual
EPS of $4.64. Revenues were $26.7bn
(£16.7bn) compared with a consensus
forecast of $24bn.
Apple executives will hope that the
earnings, which were released after
markets closed yesterday, will give the
HMV supplies
hit by credit “BE SIMPLER THAN
WHAT COULD
insurance cut
▲
RETAIL
BY ALISON LOCK
TROUBLED music retailer HMV came
under further fire yesterday after sup-
pliers revealed that its credit insurers
were drastically cutting the amount
of sales they would insure.
An internal memo from Sony
showed that its credit insurers had
withdrawn all cover for new sales to
HMV after a meeting with HMV chief
executive Simon Fox had failed to
allay their concerns.
Other suppliers have reportedly
also confirmed they cannot access
credit insurance for sales to HMV.
The insurers’ decision is a sign they
believe HMV is very close to becoming
insolvent and may not be able to pay
for stock delivered by its suppliers. It
may make it hard for HMV to access
the stock it needs.
“I need to advise you that our cred-
it insurers have significantly reduced
our insured credit limit on all HMV
entities.
“Based on the current HMV bal-
ances, the limit is not sufficient to
support any sales on an insured basis
moving forward,” the message, sent
MPs join fight for
financial education
FINANCIAL
LITERACY CAMPAIGN
BY ELIZABETH FOURNIER
A PARLIAMENTARY lobbying group
campaigning for compulsory finan-
cial education in schools will launch
on 31 January, with the backing of
prominent MPs and industry experts.
Chaired by Conservative MP Justin
Tomlinson, the all-party parliamen-
tary group is attracting widespread
support even before its official
News 3
MANDELSON MULLS CITY MOVE
LORD Mandelson is
thought to be
mulling an adviso-
company’s stock some relief after the “We had a phenomenal holiday ry position at
news on Monday that chief executive quarter with record Mac, iPhone and Lazard, the invest-
Steve Jobs is to take sick leave. iPad sales,” said Jobs, Apple’s chief ment bank. By min-
Apple shares fell 6.3 per cent in early executive. “We are firing on all cylin- isterial rules, he is
trading before closing 2.3 per cent ders and we’ve got some exciting not allowed to
lower in response to the news about things in the pipeline for this year.” advise on any deal
Jobs, but were up 1.3 per cent in after The bottom line was also helped by that directly relates
hours trading and could regain their a fall in gross margins, which came to to a contract with
losses today on the back of the firm’s 38.5 per cent versus 40.9 last year. the government for
strong results. The only major decline in product 12 months after his
Sale of iPhones, in particular, rocket- sales was among iPods: seven per cent departure from the
ed above expectations, recording an 86 fewer were sold during last quarter Cabinet. However,
per cent jump on the equivalent quar- than during the equivalent period of he can draw on con-
ter a year ago. The company had a par- 2009. Investors will now have to bal- tacts made during
ticularly strong showing ance the strong business growth with government to give
internationally: 62 per cent of rev- the departure of Jobs, seen as Apple’s advice.
enues were from outside the US. mastermind. Picture: PA
SPREADS?
”
to Sony label managers from its cred-
it and collections department, said.
Sony’s email describes the change
as a “quick and drastic reduction”
and says it will discuss alternative
payment terms and options with
HMV.
But it confirms that sales made
after 14 January “will be shipped at
NOTHING.
your financial risk.”
An HMV spokesperson said: “HMV
continues to maintain excellent rela-
tions with all of its suppliers.”
The news is a further blow to HMV
two weeks after it issued a profit
warning over plummeting sales in
the run up to Christmas.
Like for like sales fell 13.6 per cent
in the five weeks to 5 January, and the
group has announced the closure of
60 UK stores to pay down debt, as well
as a programme of cost cuts. It also
said it may breach bank debt
covenants.
Chief executive Simon Fox said at
the time that HMV “remains a prof-
itable and cash-generative business.”
HMV’s shares have lost 70 per cent
of their value in the past year and yes-
terday traded at 26.25p.
Sony declined to comment last night.
launch, with more than 70 MPs inter-
ested in joining.
Tomlinson will be joined at the
House of Commons event by Martin
Lewis, founder of consumer website
MoneySavingExpert.com, and by
Wendy van den Hende, chief execu-
tive of the Personal finance education
group, an independent charity pro-
moting personal finance for students.
Momentum has been steadily gain-
ing in City A.M.’s financial literacy
campaign, with backing already from
both industry groups and educators.
 4 News CITYA.M. 19 JANUARY 2011

Rabobank issues
Citigroup hit hybrid bonds to
as its trading fit regulations

revenues slide
BANKING

▲
DUTCH lender Rabobank is market-
ing a new hybrid bond to fit incom-
ing global banking regulations.
The bank is planning a deal where
Vikram Pandit has just booked his first profitable year Picture: REUTERS investors in its new hybrid bond
could lose all their money if its regu-
▲

BANKING
BY HARRY BANKS
A SHARP drop in bond trading rev-
enue pushed Citigroup fourth-quar-
ter profit far below expectations,
highlighting chief executive Vikram
Pandit’s challenges in fully reviving
the bank.
The earnings miss by Citigroup,
which only survived the financial cri-
sis thanks to a massive taxpayer
bailout, stoked concern that the bank
has yet to resolve the operational
weaknesses that have plagued it for
years.
Shares of the US’s third-biggest
bank -- which have rallied strongly
over the past year as the the US gov-
ernment gradually sold off its stake
in the bank -- fell 5.3 per cent after it
reported a net profit of $1.3bn
(£814.6m).
The bank’s fixed-income revenue
alone dropped 58 per cent from the
third quarter – compared to a 7.9 per
cent drop at larger rival JPMorgan
Chase, which reported on Friday.
A Daimler Brand
“This was one of the weaker quarters
for trading,” chief financial officer
John Gerspach said, acknowledging
Citi’s investment bank has also strug-
gled in other areas like the M&A
league tables.
But he argued that trading results
tend to ebb and flow, adding that
“one quarter doesn’t make a trend”.
Gerspach also forecast that “key
hires” made in 2010 would boost secu-
rities and trading performance in
2011. He added that the poor per-
formance had come despite relatively
strong volumes.
ANALYSIS l Citigroup 4.80
$ 18 Jan
5 $1.1bn off fourth-quarter earnings.
4.6
4.2
18 Oct 5 Nov 26 Nov 16 Dec
Back in the black still not good enough
THIS should have been a day of cele-
bration. Citigroup, the bank that
teetered on the brink during the cri-
sis, turned a $10.6bn (£6.6bn) profit
in 2010 – its first profitable year
since Vikram Pandit took the helm
in December 2007. But in the event
it just wasn’t good enough.
It missed expectations for profit
quite spectacularly, posting fourth
quarter per share profit of 4¢
against Wall Street expectations of
7¢. Citi blamed tightening credit
spreads, which it said wiped some
Even taking these charges into
account, Citi still underwhelmed at
the top line, with revenues of
$18.4bn against expectations of
$20.4bn.
Until now, buying Citi shares at a
discount to the bank’s tangible
6 Jan
book was a clever value play, but
now Pandit desperately needs to
show he can build some earnings
momentum.
There was a solitary bright spot,
however, which bodes well for the
rest of the sector: credit quality has
massively improved. Non-perform-
ing assets were down 13 per cent,
while the bank posted its fifth
sequential decline in writedowns.
In truth, there is not much
wrong with Pandit’s strategy. He is
investing in the brand in emerging
markets and waiting for significant
earnings leverage from improving
credit conditions. All he can do is
build it, and hopefully it will come.
BOTTOMLINE
Analysis by David Crow
latory capital ratio requirements fall
below a present threshold, after the
Basel Committee on Banking
Supervision called for mechanisms to
force investors to incur losses to main-
tain the stability of banks.
Regulators believe existing hybrid
bonds failed to absorb losses during
the financial crisis.
The perpetual notes lose money
only if Rabobank’s core Tier 1 consoli-
dated equity capital ratio falls below
eight per cent.
The Utrecht-based lender is the
only private sector bank to hold a top
triple A rating from Moody’s and
Standard & Poor’s and had a Tier 1
ratio of 13.5 per cent in June last year.
For investors to lose money on the
new hybrid bonds the bank would
need to lose €12.3bn (£10.3bn).
Rabobank head of long term fund-
ing Michael Gower said:
“The issue is very significant for the
market as a whole. People are waiting
anxiously to see how this goes and it
could segue into a huge amount of
issuance by other banks.”

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subject to status from Mercedes-Benz Financial Services UK Limited, MK7 8ND. Guarantees and indemnities may be required. Offers subject to availability and cannot be used in conjunction with each other or with any other published offer from the Retailer. These campaigns are available on E-Class Saloon
models ordered and credit approved between 4 January and 31 March 2011 and registered by 30 June 2011, excluding AMG and special request engines. For more information on all offers available on the E-Class range please visit mercedes-benz.co.uk/offers. Prices correct at time of going to press 01/11.
CITYA.M. 19 JANUARY 2011
Intel poaches technology
guru Huggers from BBC
▲
MEDIA
BY DAVID CROW
ERIK Huggers, the BBC’s high-profile
technology chief, has been poached
by chipmaking giant Intel.
The departure, first revealed on
Cityam.com yesterday afternoon, is a
massive blow for the corporation,
which has significantly boosted its
online presence under Huggers.
Huggers, who became the BBC’s
NEWS | IN BRIEF
Boeing sets delivery date
Boeing said the first delivery of its long-
delayed 787 Dreamliner would come in
the third quarter of 2011, clearing up
fears about the schedule after a
November electrical fire on a test flight
threw the timing into doubt. Boeing
shares rose more than three per cent as
investors were relieved the delay was not
longer. The Dreamliner is nearly three
years behind its original schedule.
director of future media & technolo-
gy in August 2008, is emigrating to
Silicon Valley in California to become
corporate vice president and general
manager of Intel’s digital home
group.
Sources close to Intel said Huggers
would earn “considerably more” than
he does at the BBC. Last year, he took
home a pay cheque of £407,000.
He is following a similar path to his
predecessor Ashley Highfield, the
Comcast cleared to buy NBC
American regulators have cleared
Comcast’s proposal for a $13bn
(£8.15bn) takeover of NBC Universal. The
plan to buy the 51 per cent stake, from
General Electric, was approved by the
Federal Communications Commission.
Comcast is America's largest US cable
firm, while NBC owns TV stations, theme
parks and a movie studio. The deal still
requires Justice Department approval.
News 5
architect of the BBC iPlayer, who quit
the state-funded broadcaster in 2008
to join Microsoft.
In a memo to BBC staff, seen by City
A.M., director general Mark
Thompson said Huggers was not
being directly replaced.
Instead, chief technology officer
John Linwood will be given extra
duties while Ralph Rivera will
become director of future media,
with responsibility for the iPlayer. Erik Huggers joined the BBC in 2008 Picture: GETTY
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 6 News
Barclays fined £7.7m for
serious failings in sales
REGULATION
▲
BY ALISON LOCK
BARCLAYS has been fined £7.7m for
mis-selling two Aviva funds after one
in seven of the investors complained
to the City regulator.
The Financial Services Authority
(FSA) yesterday imposed its largest-
ever fine for retail sales breaches after
identifying “serious failings” in
Barclays’ sales practices for two Aviva
income funds.
The bank raised £692m from 12,331
individuals, most either retired or
approaching retirement, between
July 2006 and November 2008.
More than 1,730 people com-
plained to the FSA, prompting it to
investigate the bank. An internal
investigation by Barclays has since
found more than half of sales of each
fund to be questionable.
Staff were found to have failed to
check the funds were suitable for cus-
tomers’ needs, failed to explain the
CITYA.M. 19 JANUARY 2011
SANTANDER UK BOSS VOWS BETTER SERVICE
risks involved, and of issuing
brochures and documents that did
not explain the risks clearly. Barclays
was also found to have responded
slowly when problems came to light.
“We view these breaches as partic-
ularly serious and fully deserving of
what is a very substantial fine,” said
Margaret Cole, an FSA managing
director.
Barclays must also pay £60m in
compensation to customers. It has
already paid out £17m.
SANTANDER’S new UK chief executive Ana Patricia Botin yesterday told MPs on the
Treasury Select Committee that improving service was a top priority, after the Financial
Services Authority showed Santander had the highest number of customer complaints of
any British bank. Having pulled out of group government talks – Project Merlin – to boost
lending, Botin said loan commitments would be made “in our own way”. Picture: REUTERS
CITYA.M. 19 JANUARY 2011
IRISH PM SURVIVES NO-CONFIDENCE VOTE
UK: EU ratings
agency plans
open to abuse
▲
EU REGULATION
BY JULIET SAMUEL
EUROPEAN Commission (EC) propos-
als to give sovereign states three
days’ notice when their debt is about
to be downgraded were slammed by
the UK’s top three regulatory bodies
last night.
In a rare move, the Treasury, the
FSA and the Bank of England
released a joint statement condemn-
ing the EC’s suggested creation of a
public ratings body that would give
sovereign’s notice of ratings moves.
The UK bodies said that “a sover-
eign might be tempted to make use
of the additional time to alter its
debt issuance plans”. They also
warned that such a system would be
subject to leaks
Summarising Britain’s position on
the proposed body, they said: “The
UK authorities strongly oppose any
issuance of credit ratings by a public
European credit rating agency, cen-
Saxo Bank confident of recovery
▲
ECONOMY
THE ECONOMIC recovery is set to con-
tinue in Britain this year as a result of
the government’s fiscal austerity
measures, according to Saxo Bank.
The Copenhagen-based lender said
“impressive” austerity measures
would help the economy hit two per
News 7
You worked hard
for your money
You shouldn’t have to
NEWS | IN BRIEF work even harder to get
the best exchange rates
IRISH Prime Washington Mutual to pay out
Minister Brian Washington Mutual could be out of
Cowen survived a bankruptcy in March after reworking its
no-confidence vote recently rejected plan of reorganisation,
by his own Fianna the attorney overseeing the company's
Fail party yester- bankruptcy said yesterday. “Our goal is
day, sparking the to go effective in March," said Brian
resignation of for- Rosen, an attorney from law firm Weil,
eign minister Gotshal & Manges, representing the
Michael Martin, bank. Once the company’s reorganisa-
who said before the tion plan is approved and goes into
vote that he would effect, it will begin distributing more
vote against his than $7bn (£4.4bn) to creditors. Those 020 7801 9080
leader. The vote was creditors range from hedge funds that worldfirst.com
called after details hold the company’s securities to vendors
surfaced of meet- such as phone companies and software
ings Cowen had providers. The bank has been in bank-
with the manage- ruptcy since September 2008 after its
ment of Anglo Irish savings and loan was seized by regula-
Bank. Picture: PA tors and it was sold to JPMorgan.
Cell,
cell,
tral banks, or public-private partner-
ships.”
“The use of such ratings would
potentially heighten scope for moral
hazard and harm the independence
of these institutions... A public
agency would also risk crowding out
private sector ratings and inevitably
stifle competition in the industry.”
Ratings have long been controver-
sial, with only three agencies –
Moody’s, S&P and Fitch – dominat-
cell.
ing the industry and having massive
power to increase or decrease the
borrowing costs of companies and
states.
The British statement backed the
attempt to move away from such a
heavy dependence on so few agen-
cies but said that the Commission’s
suggested measures were not appro-
priate.
The EC is due to come up with a
final draft of the regulations later
this year, but they will have to be rat-
ified by the EU parliament.
cent GDP growth for the year, despite
tough budget cuts.
The bank said the global economic
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www.cityam.com
 8 News
CITY VIEWS: DOES LONDON NEED MORE AIRPORT
CAPACITY? Interviews by Richard Partington

PAUL KNIGHT | LLOYDS

“No, I would be against any expansion in the City.
It’s already congested in the City and it’s not too
much hassle to get to Heathrow. The links there
are reasonably efficient as it is.”

ANDREW MACEWAN | LORIEN

“More capacity would be good. I flew down this
morning from Edinburgh to City airport and the
facilities were pretty poor. Expansion at Heathrow
would be a good idea. With the congestion it
could do with another runway.”

MURIEL VINARD | Darwin Rhodes

“No, because we don’t need more airports in
London. I take the Eurostar to France to visit fami-
ly and friends, I find that much better than the
plane. It’s not ecological to take the plane for
such a short distance.”

Calls for new

London airport
of Commerce Colin Stanbridge said:
▲

AVIATION
BY RICHARD PARTINGTON
CALLS for expansion at Heathrow
were rekindled yesterday after a
report found the airport was losing
out to European rivals.
The report, overseen by Transport
for London deputy chairman Daniel
Moylan, found rivals including
Frankfurt, Madrid and Paris had
pushed Heathrow to seventh in terms
of destinations served by international
airports worldwide, from second in
1990.
Business leaders pounced on the
report to call for renewed considera-
tion of expansion at the airport.
Chief executive of London Chamber
“The capital cannot afford to wait for
thirty to forty years for a new airport
without real improvements in the
medium to short term. London is
already under economic threat
because of the lack of runway capaci-
ty.
“A third runway at Heathrow would
bring relatively swift economic bene-
fits generating between £8.6bn and
£12.8bn through increased productivi-
ty and around £20bn in wider benefits
including new jobs.”
London mayor Boris Johnson
backed the report, and called for a
new airport to be constructed, urging
a reconsideration of his idea for a new
hub in the Thames estuary.
CITYA.M. 19 JANUARY 2011
Risk concern
driving cash
to hedgies
▲
HEGDE FUNDS
BY JULIET SAMUEL
INSTITUTIONAL investors are plan-
ning to increase their allocations to
hedge funds in the next year, a new
report by SEI and Greenwich
Associates shows.
Fifty-four per cent of 97 investors
surveyed said risk management was
the greatest appeal of the asset class.
The survey shows that hedge funds
are increasingly seen as a main-
stream asset class, rather than being
the preserve of a few eclectic risk-tak-
ers.
In line with concerns about risk,
“accessing non-correlated strategies”
came out as a top priority at a time
when asset classes are unusually cor-
related with one another.
Eighteen per cent also said that
reducing their portfolio’s volatility
was a reason to use hedge funds, defy-
ing the industry’s reputation as
being primarily for professional spec-
ulators with high risk tolerance.
However, investors still have doubts
about the less regulated aspects of
hedge fund investment. Seventy per
cent of investors say that transparen-
cy is a concern, and 58 per cent say
liquidity is their main worry.
Many hedge funds do not have to
give daily valuations to their
investors as do conventional funds,
which can make it harder to with-
draw cash at short notice.
But even as investors plan to push
more money into hedge funds, they
are staying price-sensitive: 13 per cent
say that “value for money” is a major
challenge, up from four per cent last
year.
•Meanwhile, figures out yesterday
from the EDHEC-Risk Institute show
that the most successful hedge fund
strategies last year were those
focused on distressed securities and
convertible arbitrage.
Short selling took the last place for
returns, with short hedge funds hav-
ing delivered a 16.9 per cent loss on
average. Of that loss, 5.5 per cent
occurred in December, when the
stock market rallied strongly.
News 9
IBM shares
SAT NAV BOSS SUSPENDED FOR STUPID JIBE
rally after
strong results
TECHNOLOGY
▲
IBM’s results exceeded expectations
last night, raising hopes that global
companies are becoming confident
enough to spend more on technolo-
gy.
IBM shares rose 2.4 per cent after-
hours to $154.34 after the company
reported net income for the fourth
quarter of $5.3bn (£3.3bn), or $4.18
per share, compared with $4.8bn, or
$3.59 per share, a year earlier.
Analysts on average expected earn-
ings per share of $4.08, according to
consensus forecasts.
The company yesterday forecast
that 2011 earnings per share would
rise further still to “at least $12.56”,
up from $11.52 in 2010.
The results show that IBM man-
aged to reverse a decline in signings
of services contracts, including book-
ings for outsourcing and other IT
projects.
It signed services contracts worth
$22.1bn during the quarter, up 18
per cent.
Revenue rose to $29bn from
$27.2bn, higher than the market’s
forecast for $28.3bn.
BERRY Smutny, the chief executive of OHB Technology, which has a £475m contract Weak signings had been seen as
building 14 Galileo satellite navigation systems, is the latest to fall victim to embarrass- the company’s weak point in recent
ing comments in US diplomatic cables circulated by Wikileaks. The boss of the German quarters, and a signal that many cor-
company was suspended yesterday after allegedly calling the project a “stupid idea” and porate clients were wary of multi-
“a waste of taxpayers’ money”. year technology investments.
 The Capitalist
10 EDITED BY CITYA.M. 19 JANUARY 2011
STEVE DINNEEN
GOT A STORY? EMAIL
thecapitalist@cityam.com

Artist Andrew Vicari

(left), who has donat-
ed two specially com-
missioned paintings
for auction at the
event, including the
one pictured, and
respected London
butcher Gordon
Hogg (right) who
will provide meat City A.M. managing
for the Square Mile director Lawson
Salute. Muncaster (above),
Master of Ceremonies
Brian Turner and
Pictures: Alex Ridley/ RAC chef Philip
CITY A.M. Corrick (left). RBL
director Russell
Thompson (right).

FINEST FEAST IS BEST

WAY TO BLOW BONUS
A ONCE in a lifetime event raising
money for three war veterans’ chari-
ties held a glamorous promotional
evening last night, with some of the
best chefs in the country promising to
lay on one of the finest feasts the City
has ever seen.
The evening, dubbed Square Mile
Salute, will be held at the legendary
Guildhall on 10 February and will
bring together nine of the country’s
top chefs.
Master of Ceremonies for the night
will be Brian Turner, chairman of the
Academy of Culinary Arts, who has
worked in restaurants including
Claridge’s, the Savoy Grill and most
recently Brian Turner Mayfair at the
Millennium Hotel.
He told City A.M., which is proud to
be official media partner to the
event, that the evening will be
the perfect opportunity for
bankers to “reinvest their
bonuses in three hugely
worthwhile charities”.
He said: “Forces who have
been injured were fighting
to protect their country;
when they return it is
their country’s turn to
protect them.
“People who work
in the City are in a
unique position to
help them through
events like this.
“And it will be worth their while.
The Academy of Culinary Arts gets
accused of being elitist, and we are a
little bit proud of that. Gordon Ramsay
may disagree but that’s a different
matter.”
The event will also auction off two
specially commissioned paintings by
artist Andrew Vicari, who was himself
involved in the first Gulf War.
Director of fundraising at the Royal
British Legion, Russell Thompson,
whose charity is one of those benefit-
ting from the night, told City A.M. how
the money raised by the event will be
spent helping veterans.
He said: “We have committed £50m
to work with what we call the
Afghanistan Generation, helping veter-
ans get back on their feet – often liter-
ally. “We will be opening four new
personnel centres and a new ‘battle
back’ (sports and adventurous train-
ing) facility for this specific
purpose. These events
are incredibly
important for that
and we know people
in the City are incred-
ibly generous and
important to our
cause.”
City A.M. managing
director Lawson
Muncaster also urged City
workers to dig deep for the
cause and snap up the last of
the tables. To book yours go
to: www.squaremilesalute.com.
CITYA.M. 19 JANUARY 2011
Meggitt buys
parts maker
for $685m
▲
M&A
BY ALISON LOCK
AEROSPACE engineer Meggitt is to
buy Pacific Scientific Aerospace (PSA),
which manufactures fire extinguish-
ers and aircraft parts, for $685m
(£431m) in cash, it said yesterday.
Dorset-based Meggitt will use a
69.8m share placement, equivalent to
about 10 per cent of total share capi-
tal, to raise about £255m to fund the
deal. The remaining £176m will be
funded using debt, it said, adding
that the acquisition is expected to be
earnings enhancing immediately.
Meggitt chief executive Terry
Twigger said the acquisition was a
“further major step” in the group’s
strategic growth, and would fill spe-
cific gaps in Meggitt’s product lines.
PSA’s fire suppression products will
fit with Meggitt’s fire detection sys-
tems to enable them to sell combined
units that customers have been ask-
ing for, he said. It will widen the num-
ber of aircraft models Meggitt can
supply, and brings expertise in new
electric aircraft systems to replace the
older hydraulic systems that Meggitt
already supplies.
The share placement is the second
Meggitt has used to fund an acquisi-
tion after it bought US firm K&F
Industries in 2007 for $1.8bn.
Meggitt has consistently said it
does not want to take on a debt ratio
of greater than 3.5 times overall earn-
ings. At its last interim results debt
was 2.3 times earnings. It estimates it
will have a 2.5 times debt to earnings
ratio by 30 June this year, which will
fall to two times by 31 December.
ANALYSIS l Meggitt
400 p 367.60
18 Jan
360
320
18 Oct 5 Nov 25 Nov 15 Dec 7 Dec
Meggitt chief executive Terry Twigger said the acquisition would fill product line gaps
ROBERT LEITÃO Among his most prestigious recent
deals is the huge $9.6bn (£6bn) sale
ROTHSCHILD of a majority stake in Cairn Energy’s
Indian arm to Vedanta Resources,
which required agreement from the
Indian government to secure.
Other deals include Babcock’s
£1.32bn acquisition of VT group in
March; investment fund Melrose’s
ROTHSCHILD’S head of investment $855.6m disposal of McKechnie
banking, Robert Leitão, is an expert in Aerospace in 2007, and Thales’ £51m
M&A deals, particularly those involv- takeover of data security firm nCipher
ing public companies. in 2008, among others.
Since joining the bank in 1998 from A chartered accountant, Leitão
Morgan Grenfell, where he spent nine qualified at Peat Marwick Mitchell
years, he has built Rothschild’s M&A (now KPMG) and holds an engineering
arm to be the City’s top M&A bank by degree from Imperial College London.
number of transactions, specialising in He is working with Ravi Gupta at
deals in the mid-market range. Rothschild to advise Meggitt.
News 11
Saudi Arabia
accused of oil
output increase
ENERGY
▲
THE International Energy Agency
(IEA) said yesterday that OPEC leader
Saudi Arabia had stealthily boosted
output to cool an oil price rally, while
OPEC accused the agency of providing
inconsistent oil price views.
Tensions between oil exporter
group OPEC and the agency, repre-
senting industrialised consumers,
have risen as Western countries put
pressure on the Saudis and their
allies, the only producing nations
with spare capacity, to meet unex-
pectedly robust demand that has driv-
en crude up near $100 a barrel.
“It appears Saudi Arabia has been
making more crude available to the
market in the past six months, judg-
ing by export data from independent
tanker trackers,” the IEA, which advis-
es 28 countries on energy policy, said.
On Monday the IEA said current oil
prices were alarming. Yesterday
OPEC’s secretary general, Abdullah al-
Badri, produced an unusually harsh
statement criticising the IEA for
inconsistency in being willing to add
to oil prices by imposing taxes, then
asking OPEC to curb prices to safe-
guard the world economy.
“In 2009 when the oil price was
lower, the IEA had advised its mem-
bers that they needed to increase
petroleum taxes,” he said.
CITYA.M. 19 JANUARY 2011
London house
prices avoid
national drop
HOUSING
▲
BY JULIAN HARRIS
HOUSE prices fell for the third con-
secutive month in November, official
data showed yesterday.
However, in London prices actually
rose by 0.9 per cent compared to
October with the average house price
standing at £340,013, the
Department for Communities and
Local Government (DCLG) reported.
Across the UK as a whole, prices
dropped by 0.1 per cent. And average
house prices were 0.6 per cent lower
in the three months to November.
The decline reduced the average UK
house price to £208,585.
But excluding London and the
South East, the average UK price in
November was just £173,203.
Month-on-month prices across the
UK also fell by 0.1 per cent in October,
and by 0.8 per cent in September, the
data showed.
Compared to the same time in
2009, prices were up four per cent in
November – yet this was lower than
October’s yearly increase of 5.5 per
cent.
The decline in house prices was
reflected in figures also released yes-
terday by the Royal Institution of
Chartered Surveyors (RICS).
While RICS reported a slowdown in
falling prices, some economists think
the housing marking has a little way
to go before bottoming out.
“Given that house prices have
already fallen by some three per cent
on the Nationwide and Halifax meas-
ures, we believe that they will fall by
around seven per cent in 2011,” com-
mented Howard Archer of IHS Global
Insight.
FAST FACTS | AVERAGE HOUSE PRICES
● England: £216,065 ● Scotland: £164,098
● N. Ireland: £157,336 ● Wales: £150,374
● North East England has the lowest prices of
any region: £134,293
● London has the highest average: £340,013
Economics 13
ANALYSIS l Inflation across Central and Eastern Europe
10
NEWS | IN BRIEF
Year on
year price
inflation,
December New York factory output surges
8
New York could be set to replicate the
economic recoveries in Germany and the
UK with a boom in manufacturing,
according to data released yesterday.
Source: Unicredit Research
6
The US Empire State manufacturing
index jumped from 9.9 to 11.9 for this
month. Yet the most positive data came
in new orders, which shot up to 12.4
4
2
from 2.0. Shipments hit a ten month
high of 25.4, up from 7.1.
German survey expects rate hike
Confidence among German investors has
soared to its highest rate since July,
according to the Zew survey results
released yesterday. The index rose to
15.4, from 4.3 in December. And half of
0
CEE Russia Romania Turkey Estonia Hungary Bulgaria Poland Czech Slovakia all surveyed investors expect a Eurozone
average Rep
interest rate hike within six months. Last
week the European Central Bank opted
Rising inflation smashes
to keep rates at their historical low.
IEA statement sees oil prices drop
Brent oil dropped back yesterday after
through CEE price targets
the International Energy Agency (IEA)
said that OPEC members were in fact
quietly increasing output, despite OPEC
representatives insisting the market was
already amply supplied. On Monday oil
almost hit $100 (£62.50) a barrel. But
EUROPE ECONOMY “Higher food and energy prices yesterday afternoon, following the IEA
▲
BY JULIAN HARRIS have played a key role in pushing report, prices dropped to $96.80
inflation higher,” commented Gillian (£60.50).
INFLATION targets are being overshot Edgeworth of Unicredit Research.
throughout central and eastern “Nonetheless, core pressures have Thai exports market picks up
Europe (CEE), mirroring price worries been showing some signs of increase,” Thailand’s exports grew 18.8 per cent
in the UK and elsewhere. she added. last month, compared to the previous
While consumer price index (CPI) Interest rate hikes are anticipated year, according to data revealed yester-
inflation remains low compared to throughout the region, in response to day. The rise was above the expectations
the long term average, the CEE aver- core price pressures. of economists. The pick-up is in line with
age has increased every month since Today the Polish central bank conditions in other parts of the region
June last year, rising from 3.6 per cent announces its latest decision on inter- such as South Korea and Taiwan, said
in June to 5.5 per cent last month. est rates. Rahul Bajoria of Barclays Capital.
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CITYA.M. 19 JANUARY 2011
Revenues jump at Eurotunnel RBS offloads its stake in
▲
TRANSPORT
BY MARION DAKERS
CHANNEL TUNNEL operator
Eurotunnel posted a 26 per cent rise in
revenue for 2010 yesterday after the
number of trucks carried on its shut-
tles through the tunnel rose 35 per
cent.
Eurotunnel said the volcanic ash
disruption in April helped the firm
return to its historic market share in
cross-Channel transport, following the
impact of a fire in the tunnel in
September 2008.
Eurotunnel is close to completing
the first of four “safety stations” in the
IG Group hurt
by Japanese
writedown
▲
FINANCIAL SERVICES
BY MARION DAKERS
SPREAD-BETTING company IG Group
announced a half-year loss yesterday,
blaming weak trading activity and a
£143m write-down on its Japanese for-
eign exchange business FXO.
Chief executive Tom Howkins said
much of the stall in sales was down to
a three-year low in market volatility
towards the end of 2010.
“We’ve got lots of good quality
clients with lots of money in their
accounts – it’s simply that for part of
the period they were trading much
less because the markets were just
plain dull,” he told analysts.
“It was the worst sort of market for
us, but we did see an improvement in
November, which carried on into
December. The long-term fundamen-
tals of the business remain very
strong.”
Net trading rose nine per cent to
£156.7m, mostly due to strong growth
at the start of the period.
The firm said its Japanese business
was suffering from increasingly strict
regulations, which limited investors
to trade with leverage of 50 times in
August and will restrict them to 25
times in the coming year.
Taylor Wimpey thanks stabilisation in Safestore swings into the
the US and Canada for higher wins black and names chief
▲
PROPERTY
BY HARRY BANKS
BRITISH housebuilder Taylor Wimpey
said stabilisation in the US market
helped lift 2010 profit and led to sev-
eral approaches for its North
American unit, which is under the
hammer.
Volumes and margins beat expecta-
tions in Canada and the United
States, driving group underlying
operating profit and pre-tax profit
above expectations, the company said
channel tunnel, to ensure passengers
can escape trains that get stranded
mid-journey.
Bad weather during the fourth
quarter, however, led to a five per cent
drop in the number of cars on its pas-
senger shuttles and a slight dip in traf-
fic on Eurostar trains.
Revenue rose to €187m (£156.6m) in
the fourth quarter from €144.6m a
year earlier, excluding insurance
indemnities. Eurotunnel’s shuttles
carried 305,100 trucks and 455,121
vehicles in the quarter.
Eurotunnel chief executive Jacques
Gounon said the tunnel’s planned
high speed service, to be provided by
IG Group said it has booked a
£143.1m write-down thanks to
impaired goodwill and customer rela-
tionships in its Japanese business, but
said the charge would not alter group
cash flow or capital position.
The charge wiped out IG’s profits
and led to a £69.1m pre-tax loss for the
six months to the end of November.
The company raised its interim divi-
dend by five per cent, however, on the
back of underlying earnings per
share.
Analysts at Panmure Gordon said
that “while the write-down is signifi-
cant, we expect it to finally draw a line
under an issue which has weighed on
the investment case for two years”.
IG shares lost 7.2 per cent to close at
481p yesterday.
ANALYSIS l IG
560 p
481.00
18 Jan
540
520
500
18 Oct 5 Nov 25 Nov 15 Dec 7 Dec
yesterday.
“Relative to our consensus expecta-
tions and our internal forecast, both
(the US and Canada) outperformed in
the period,” chief executive Pete
Redfern said.
“I wouldn’t say a recovery quite yet
(in the United States), but we certain-
ly saw stabilisation at the back end of
the year.”
The company is due to report
results for 2010 on 3 March.
Taylor Wimpey shares closed up 6.7
per cent, helped by the improved
Deutsche Bahn, was ready to start in
2013 providing the French and UK gov-
ernments resolve an argument over
safety and the bidding process for the
route.
“The tests in October made it clear
that there is no issue regarding the
length of the trains. It’s a political dis-
pute which doesn’t involve the compa-
ny,” Gounon said.
“I am in a position to sue the govern-
ments, as it’s unfair for our company
and passengers to block Deutsche
Bahn trains for unfair reasons.”
He added that Eurotunnel hopes to
win several large freight customers in
the coming months.
Chief executive of Canary
Group George Iacobescu (left)
and managing director of
London Portfolio at Land
Securities, Robert Noel
guidance, and after it confirmed
interest in its North American opera-
tions.
“We have received interest regard-
ing our North American operations
and we are in the early stages of eval-
uating these approaches,” the compa-
ny said.
Taylor Wimpey put its US home-
building unit Taylor Morrison on the
auction block in November, after the
operations were earmarked for dis-
posal to focus on its domestic opera-
tions and lower debt.
rehab clinic owner Priory
▲
HEALTH
ROYAL Bank of Scotland (RBS) will
finally part company with the
Priory Group, the care homes opera-
tor famous for its celebrity clien-
tele.
The 84 per cent state-owned bank
will sell the firm to buyout company
Advent International in a deal worth
up to £925m.
However, RBS will only receive
around £133m in cash for its stake in
the group after the settlement of
Picture: GETTY
▲
STORAGE
SELF-storage retailer Safestore yester-
day swung to a full-year pre-tax profit
helped by strong occupancy growth
and robust rental rates, and raised its
final dividend.
The company, which generates
much of its revenue from individuals
moving houses, also named Peter
Gowers its new chief executive after
Steve Williams retires on 30 April.
Gowers was most recently the chief
executive for Asia Pacific at
News 15
debt.
RBS had been in talks with several
private equity and buyout firms over
much of last year, and the sale marks
a further step in the bank’s plans to
sell non-core assets and shore up its
balance sheet.
Advent International beat out com-
petition from the likes of Bain
Capital, Blackstone and Cinven to win
the Priory Group auction.
RBS said the Priory Group sale car-
ried an enterprise value of up to
£925m.
Work starts
on Walkie
Talkie tower
▲
PROPERTY
CONSTRUCTION work began on the
Walkie Tower on Fenchurch Street
yesterday, kicking off three years of
building work that is set to cost
£500m and create around 3,000 jobs.
Developers Land Securities and
Canary Wharf Group agreed to resur-
rect the project as a 50-50 joint ven-
ture last October after it was shelved
in 2009.
Demolition of the previous 20
Fenchurch Street building, which was
once home to investment bank
Kleinwort Benson, has finished and
the first foundation works will start
this week.
Canary Wharf Group chief execu-
tive George Iacobescu said at the
ground breaking event: “It’s a fantas-
tic combination – it’s a dream ticket
to have these two big developers
working together. It’s going to be a
boost for the London economy.
“This is our second project in the
City and we hope to continue our
diversification by working in the
West End and the City.”
Robert Noel, London portfolio man-
ager for Land Securities, said the proj-
ect was part of 1.9m square feet of
development planned by the firm in
the last year.
The building will have floor plates
ranging between 14,000 and 28,000
square feet, though the developers
remained tight-lipped about poten-
tial tenants yesterday.
InterContinental Hotels Group, the
world’s biggest hotelier.
“The group continued its trend of
improving rental rates per square feet
with the average rate for the year at a
record high of £25.55m,” the compa-
ny said in a statement.
Safestore, whose closing occupancy
increased more than six per cent,
raised its final dividend by 8.3 per
cent to 3.25p, taking the total divi-
dend for the year to 4.95p. Pre-tax
profit was £29.2m, compared with a
loss of £9.4m a year earlier.
 16 News
Vodafone slams Essar’s plans
▲
ENERGY
BY RICHARD PARTINGTON
TELECOMS giant Vodafone yesterday
fell out with its Indian joint venture
partner Essar Group which plans to
merge its telecoms business – which
owns an 11 per cent stake in Vodafone
Essar – into its small quoted financial
business India Securities (ILS).
In a letter to India’s markets regula-
tor, Vodafone complained that the
value of India Securities with that
stake “could be misinterpreted” to
indicate the “fair market value of
Vodafone Essar” with small amounts
of buying or selling distorting the
Iron boosts
Rio Tinto but
coal suffers
▲
MINING
BY HARRY BANKS
GLOBAL miner Rio Tinto posted a six
per cent rise in iron ore production in
the fourth quarter, powered by
Chinese demand, but said coal pro-
duction suffered after flood-related
disruptions in Australia.
Rio Tinto said in a production
report yesterday that it produced
50.05m tonnes of iron ore in the
fourth quarter versus 47.23m a year
ago, in response to strong demand
from Chinese steel-makers and set-
ting an Australian mining record.
Fourth-quarter output of hard cok-
ing coal was 2.28m tonnes, against
2.12m tonnes a year ago. Rio Tinto’s
Australian thermal coal production
increased to 5.15m tonnes from
5.02m.
The company said it was unable to
estimate the full impact to coal min-
ing operations from Australian flood-
ing, and that force majeure
declarations on some sales contracts
remained in place after Australia’s
wettest spring on record. A force
majeure is a legal clause that allows a
company to miss deliveries because of
circumstances beyond its control.
The floods led Australia and
Orders from Middle East and Asia drive African Barrick misses
a surge in full-year profits at Chemring gold production targets
▲
DEFENCE
BY HARRY BANKS
BRITISH arms firm Chemring posted
a 14 per cent rise in full-year profit
yesterday, helped by growing sales in
the Middle East and Asia, and said it
is confident on its prospects for 2011.
Chemring, whose products help
fighter planes avoid missile attacks,
reported an underlying pre-tax profit
of £116.8m on revenues 18 per cent
higher at £597.1m for the year to the
end of October 2010.
price of ISL.
“Vodafone does not wish a compa-
ny in which it holds a majority inter-
est to become the subject of a false
market,” it said.
Essar said that it would respond in
due course.
The row emerged as Essar Energy –
spun out of parent Essar last year and
listed in London – offered $500m
(£312.7m) in convertible bonds in a bid
to fund its acquisition plans.
The London-listed company plans to
use the proceeds raised from the sale
of the bonds, priced with a coupon of
4.25 per cent payable semi-annually in
arrears, to pursue acquisition opportu-
London-listed Rio Tinto to make dec-
larations of force majeure on coal
sales over the Christmas period.
And last week the company
declared another force majeure after
halting shipments of aluminium
from its 538,000-tonnes-per-year
Boyne Island smelter.
Rio Tinto’s mined and refined cop-
per output was down nine per cent
and six per cent on the fourth quarter
of 2009 and down 16 per cent and five
per cent on full-year 2009.
The report showed total production
of mined copper from the world’s
biggest mine, Escondida in Chile,
increased to 786,800 tonnes in 2010
from 774,400 in 2009, but dropped to
194,600 tonnes in the fourth quarter
from 233,000 a year ago.
ANALYSIS l Rio Tinto 4,450.00
4,600 p 18 Jan
4,400
4,200
4,000
18 Oct 5 Nov 25 Nov 15 Dec 7 Dec
The company raised the dividend
by 18 per cent to 59p and said the out-
look for 2011 was good despite tighter
defence budgets both at home and
abroad.
“We remain confident that the
United States represents an area of
future growth in all of our market
segments ... it is our non-NATO cus-
tomers that represent the largest
opportunity for growth over the next
five years,” the company said.
“In 2010, our revenues from Middle
East and Far East customers grew by
nities within the power, coal, oil and
gas sectors. It could also use funds for
general corporate purposes, including
to provide financial flexibility for new
projects, or to refinance existing debt.
ANALYSIS l Essar Energy
580 p
533.00
18 Jan
540
500
18 Oct 5 Nov 25 Nov 15 Dec 7 Dec
STAGECOACH ARTS SEES PROFIT DIP
UK THEATRE franchise Stagecoach Theatre Arts reported a fall in revenue against 2009
yesterday, with group revenue dropping to £2.9m from £3m last year. Its first-half profits
were significantly down, falling to £72,000 pre-tax from £267,000 in the previous year.
The group put the drop down to a planned investment in marketing material, as well as
a reduction in agency brochure income and initial fees.
over 60 per cent and we believe that
future growth in these regions
should be substantial.”
Chemring was expected to post an
average full-year pre-tax profit of
£119.6m, according to a consensus
poll of nine analysts.
The company said its order book
stood at a record £90m, up 54 per
cent on January 2010.
Shares in Chemring, which have
climbed seven per cent in the last
month, closed down 0.7 per cent at
£32.33 yesterday.
BP shares gain despite
Abu Dhabi project delay
BP ROSNEFT
DEAL
BY MARION DAKERS
BP shares climbed to their highest
level in almost eight months yesterday
on enthusiasm for its deal with
Russia’s state-owned oil giant Rosneft.
The rise came in spite of news that a
$2.2bn (£1.4bn) joint venture between
BP and Masdar to build a hydrogen
power plant has been delayed pending
approval from the Abu Dhabi govern-
Picture: GETTY
▲
MINING
AFRICAN Barrick Gold posted mixed
fourth-quarter figures yesterday, as it
missed output targets for the year but
saw its new Buzwagi mine overcome
production difficulties by mid-
November.
It produced 179,730 ounces of gold
in the fourth quarter, a nine per cent
improvement on the third quarter
but a 16 per cent drop from last year.
Production for the full-year was
700,934 ounces. In October, the group
CITYA.M. 19 JANUARY 2011
ment. The stock gained 1.66 per cent
to close at 509p yesterday – the firm’s
highest share price since it capped the
Gulf spill on 27 May.
BP holds a 40 per cent stake in the
hydrogen power project, which is
linked to carbon capture and storage.
BP said in a statement that it and
Masdar would redistribute resources
that were intended for the project
while it awaits the green light from
the government, which reportedly has
problems with the sale price of the
energy produced by the venture.
Bidding war
to buy Regal
Petroleum
▲
M&A
A BATTLE to purchase British oil
explorer Regal Petroleum was last
night emerging following a second
offer for the firm from a rival bidder.
The oil and gas company had
agreed to be taken over by Energees
Investments, the principal holding
company of Ukranian Smart Holding
Group, for 24p per share in December.
Yet, Cyprus-based financing compa-
ny Heamoor and private oil explorer
Geo-Alliance, the Ukranian oil compa-
ny owned by oligarch Victor Pinchuk,
yesterday entered the running with a
joint rival offer of 25p per share in a
reverse takeover.
The Regal board continues to sup-
port the earlier offer, which share-
holders must decide on by next
Monday, yet is exploring ways to max-
imise value for investors who had
been holding out for an improved
offer.
Shares in the oil firm had traded at
a 2010 high of 85p per share,
although have slumped since. The
company closed higher than both
offers at 31p per share on Monday.
Shareholders have until next
Monday to back the Energees bid,
though could wait for the findings of
a Regal due diligence report into the
new offer.
AIM listed Regal Petroleum sus-
pended trading yesterday on the
London Stock Exchange in accor-
dance with takeover regulations.
cut its 2010 output target for the sec-
ond time in three months to 716,000
ounces after uncovering fuel theft at
its Buzwagi mine in Tanzania.
The company, a unit of the world’s
biggest gold producer, Barrick Gold, is
the first of the London-listed gold
miners to announce production fig-
ures for the year.
African Barrick will release guid-
ance for 2011 output alongside full-
year results in February, with the
Buzwagi mine expected to boost the
forecasts.
CITYA.M. 19 JANUARY 2011
SABMiller boosted by Asia
▲
CONSUMER
BY JOHN DUNNE
BREWING giant SABMiller beat fore-
casts with a three per cent rise in beer
volumes in the last three months of
2010, boosted by growth in Africa and
Asia.
The London-based brewer of Miller
Lite, Peroni and Grolsch said that beer
price rises helped boost its quarterly
revenue by six per cent.
Strong volumes growth in Asia and
Africa offset volume dips in Europe
and both North and South America in
its October to December third quarter
which is heavily dependent on sum-
Chinese boom
fuels surge in
Burberry sales
▲
RETAIL
BY JOHN DUNNE
BURBERRY yesterday said the Chinese
retail boom had helped to fuel its lat-
est sales surge.
Like-for-like sales across Burberry’s
stores around the world rose by 14
per cent in the last three months of
2010, it said yesterday.
The luxury goods company’s star
performing market was China where
comparable sales leapt by more than
30 per cent.
The company – known for its
Burberry check – predicted that its
profits for the current financial year
would be at the top end of analysts’
forecasts.
Burberry said strong sales of coats
and large leather goods had flown off
the shelves – accounting for around
half the sales growth.
Men’s accessories and its Prorsum
menswear range also sold well.
Chief executive Angela Ahrendts
(pictured) said that “ongoing initia-
tives in retail, digital, product devel-
opment and new markets underpin
our confidence in the future”.
Burberry’s strong sales figures – fol-
lowing impressive results from
Cartier owner Richemont Group –
Experian returns to growth as banks
recover and call on credit services
▲
FINANCIAL SERVICES
BY HARRY BANKS
UK CREDIT information firm Experian
said it had returned to growth in all its
major markets, drawing a line under
the financial crisis which sapped rev-
enues from its banking sector clients.
Experian, best known for carrying
out consumer credit checks for banks
and retailers, said yesterday it had
returned to “positive growth across all
regions and principal activities,”
helped by recovery in its core markets.
mer beer drinking in the southern
markets of South Africa and Latin
America.
Investors were looking for slightly
higher beer volumes. Second quarter
volumes had been up three per cent
after a one-per cent first quarter fall.
The brewer, which earns over 80 per
cent of its profits in emerging markets
Colombia, South Africa, Poland and
China, is seeing a strong recovery in
many of these markets, while mature
markets are being held back by high
unemployment hitting consumption.
Columbian sales were held back by
flooding in the country.
But third quarter lager volumes
suggest the luxury goods market is
profiting as the economy improves.
Burberry recently bought out its
trading partner to take closer control
of operations in China as it pins its
growth plan on emerging markets.
Ahrendts also said she expects to
open another 50 stores in China over
the next five years.
Analysts group Numis Securities
increased its pre-tax profits forecast
from £271m to £287m yesterday.
Burberry chief financial officer
Stacey Cartwright said: “It’s not just
China – we’re seeing growth in the
global luxury consumer generally.
“We have a big year ahead and have
pumped a lot of money back into the
company through capital expendi-
ture.”
ANALYSIS l Burberry
1,200 p 1,115.00
18 Jan
1,100
1,000
18 Oct 5 Nov 25 Nov 15 Dec 7 Dec
Experian finance chief Paul Brooks
said the company, whose credit-check-
ing activities were hit hard after the
2008 financial crisis choked much
bank lending, had benefitted from a
banking sector upturn in the US.
“In the US right now we do see the
major lenders cautiously looking to
grow their businesses again, and we’re
seeing the major lenders looking to
acquire new customers,” he said.
Banks in Britain and mainland
Europe have lagged their US counter-
parts by about six months since the
News 17
Minimum booze price
plans on the table
THE COALITION yesterday
posals as a “pragmatic solu-
tion”.
“By introducing this new
proposal we are sending
a clear message that
unveiled plans for a mini- the government will
were up 16 per cent in China as it con- mum price for alcohol in not stand by and let
tinues to be the key growth driver. England and Wales. drink be sold so
Growth in Britain and Ukraine Ministers want to ban cheaply that it leads
helped offset falls in Russia and the shops and bars from sell- to a greater risk of
Czech Republic as its premium brands ing drinks for less than health harms or drunk-
Pilsner Urquell and Grolsch sold well. the tax paid on them. en violence,” said Home
“Trading momentum, as evidenced That will mean a can Office minister James
by today’s trading update from of lager must cost at Brokenshire in a state-
SABMiller, remains strong; while least 38 pence and a ment.
regional comments from the group one-litre bottle of vodka Last year, the Scottish
reinforces our pecking order among at least £10.71. Parliament rejected plans
the brewers – SABMiller is our top pick Health campaigners for a minimum price per
in beer,” said analyst Simon Hales at say that is too low to unit of alcohol of 45p,
brokers Evolution Securities. have an impact, but because it was feared the
The brewer’s shares closed 1.7 per the drinks industry move would penalise
cent higher at 2,209p after the results described the pro- responsible drinkers.
impressed investors.
Like-for-like sales
across Burberry’s
stores around the
world rose  by
14 per cent
Burberry expects
to open another in the last three
50
stores in China over
months of 2010
the next five years.
The luxury
goods company’s
star performing
market was China where
comparable sales leapt
by more than
30 per cent
ANALYST
By John Dunne
VIEWS: CAN BURBERRY SUSTAIN ITS SALES MOMENTUM?
SAM HART| CHARLES STANLEY KATE CALVERT| SEYMOUR PIERCE
“ “
The Group will face the challenges of Burberry not only has significant geo-
higher raw material prices and tough compara- graphical and product mix and leverage opportu-
tives over the next year, but initiatives in retail, nities but operates in a market with long-term
digital, product development and new markets growth credentials geared in to global growth.
underpins its confidence in the future. Excess cash With Burberry forecast to grow at at least twice
” ”
will be put into the business, so no resump- the rate of its peers, we believe at least a
tion of share buyback programme. 20 per cent premium is justifiable.
KEITH BOWMAN| HARGREAVES LANSDOWN
“
The group’s high-end customer base is perceived to have aided performance, a fact which looks to be evidenced
”
by a new pricing policy where core products are never marked down in price. On the downside, Spain has provided some-
thing of a drag. On balance the update is only likely to strengthen existing investor confidence.
NEWS | IN BRIEF
Money Dashboard launches in UK Financial Stability Oversight Council.
A new online personal finance service But the council also said that the new
will be launched today to provide sim- standards could reduce volatility in the
ple budgeting and financial planning asset-backed securities market, and
tools for consumers struggling to keep help reduce pro-cyclicality in the lend-
track of their money. Visitors to the ing markets that can lead to market
onset of the crisis, and remain in website www.moneydashboard.com bubbles.
defensive mode for now, Brooks added. will have access to tools that can
Experian’s total revenues in the aggregate information from bank S&P sees no chance of US default
third quarter were up 12 per cent at accounts, store cards and credit cards Debt ratings agency Standard & Poor’s
constant exchange rates, driven by in one place, helping people keep track said yesterday there was no significant
Latin America, where they rose 18 per of spending, and even sending warning chance of a US government debt
cent. emails if budgets or approved over- default. The agency also said that if the
Experian’s expectations for the year drafts are exceeded. debate now stirring in Congress to
to 31 March 2011 are unchanged, and boost the US debt ceiling above its cur-
the company is “reasonably comfort- US risk rules could restrict credit rent $14.3 trillion (£8.96 trillion) level
able” with analysts’ current consensus Risk retention rules introduced in the resulted in a long delay or a refusal to
forecast for a 10.3 per cent rise in earn- US by the Dodd-Frank Act could harm boost that ceiling, dramatic measures
ings before interest and tax, Brooks the economy by restricting access to would eventually be required to avert a
said. credit, according to a study by the default.
 18 News CITYA.M. 19 JANUARY 2011

Dissatisfied bank customers still remain loyal

This week we ask whether that
actually matters, as a new report
from YouGov SixthSense into the
customer journey suggests that cus-
tomer inertia may give Santander
hope.
Only 15 per cent of adults have
changed their main bank in the past
BRANDINDEX five years, and most of those have
done so for lifestyle reasons.
STEPHAN SHAKESPEARE
the past five years, the impact of pos-
itive reviews on financial websites
(49 per cent), positive reviews in the
personal finance pages of newspa-
pers and magazines (40 per cent) and
features in the best buy tables of
price comparison websites (40 per
cent) are strong.
Assuming their reluctant loyalists
make their voices heard, Santander
bank’s offerings that people look at
when considering a new provider.
“Better value for money” (50 per
cent) and “bank charges” (49 per
cent) both outperform “customer
service” (42 per cent) as factors pre-
cipitating change.
ANALYSIS l General impression
The challenge, then, is first to
overcome the inertia by playing on
service dissatisfaction and then to
show that they have better offerings
than their competitors.
Stephan Shakespeare is founder and
chief executive of YouGov.
ANALYSIS l Why bank customers remain loyal
60 %

branches are conveniently situated

15
The reason for this low customer is likely to record poor reviews, but

It’s too much hassle to change

50

Satisfied loyalists

All the banks are the same, so

churn is that 40 per cent of those the main impact of this will proba- 5

My banks/building society’s
L
AST week we saw that that haven’t changed are “reluctant bly be that the bank fails to attract 40

Reluctant loyalists
-5
HSBC

no point in changing
Santander had a difficult 2010 loyalists” – those who are not satis- new customers, rather than losing 30
in terms of customer percep- fied with their provider but remain existing ones. -15 Santander
tions, with poor service quality loyal. The conundrum for banks chasing RBS 20

Don’t know
-25
leading to customer dissatisfaction The concern remains, however, as Santander’s dissatisfied customers is 10

Other
and driving down scores across all the report reveals that among adults that whilst it is customer service lev- -35
BrandIndex measures. who have changed their provider in els that drive satisfaction, it is the 0

ARM and Forecasts for

WHAT TO LOOK OUT FOR THIS YEAR
TV NETWORKS

IBM sign TV will continue

to fend off
Social networks
will produce an

2011 in media
attacks from estimated two

new alliance
new media. On- trillion adverts,
demand will generating $5bn
reach half of in revenue.
homes but live Upward trajecto-
viewing will ry could be
remain the norm capped as the
TECHNOLOGY MEDIA video recorders will hit 50 per cent
▲
▲

but believes the majority of consump- for most people. market matures.
BY STEVE DINNEEN BY STEVE DINNEEN
tion will still be live TV, which is good
UK CHIPMAKER ARM will work with DELOITTE yesterday unveiled its tele- news for traditional advertising. GAMING MOBILE
IBM on the next generation of micro- coms and media predictions for the This year will be the first time dig- Revenue and dis- Video conferenc-
processors, the firm announced yes- coming year. ital sales outstrip CD sales in a major tribution ing will become
terday. And while Steve Jobs may have tem- market, with the US probably reach- models will Calend
ar
Photos
Camera

a staple on
It will work with the computing porarily stepped out of the limelight, ing the tipping point marginally Text

giant on a new range of low powered technology he has championed – ahead of the UK. Record companies shift dra- e
Stocks
Maps
Weath
er
mobile phones
YouTub

processors for mobile devices. including digital downloads and are set to continue the trend towards matically 11 12 1 2
10
9
3
4
Setting
s
but consumers
8
7 6 5 Notes

this year, with will continue to

tior
Calcula

The deal comes after ARM received video calling – dominates the list. live music rather than recordings, Clock

a major boost from Microsoft at the Deloitte believes 400m phones although overall investment in more subscrip- N
snub the tech-
Consumer Electronics Show earlier with front facing cameras for video artists looks set to fall by $500m.
L

tion fees and nology in favour

O

this month, with the US firm
announcing ARM chips will be the
basis for a new version of its Windows
operating system.
ARM has already cornered the mar-
ket for mobile processors, storming
ahead of more established rival Intel.
IBM and ARM have collaborated
since 2008 on a range of 32 nanome-
ter (nm) and 48nm processors. The lat-
est venture will focus on 14nm chips
and will solidify ARM’s position as the
market leader in mobile micro-
processors by allowing extended bat-
tery life and better internet access.
ARM shares rose 4.28 per cent in
trading yesterday.
calls will be shipped in 2011, with The gaming world is set to change downloadable of good old voice
the format becoming cheaper and of dramatically, with an explosion in games on offer. calling.
a far higher quality. However, the downloadable games and increasing-
firm believes consumers will contin- ly complex revenue models, includ-
ue to give the technology the cold ing subscription fees and in-game
MUSIC WI-FI
shoulder, with demand remaining purchases, which could eventually Music sales will Wi-fi will remain
low. represent half of the industry’s rev- reach the tipping important for
Wi-fi hotspots will be increasingly enue. point where users of mobile
important, with customers unwill- Deloitte believes social networks – downloads out- devices thanks
ing to pay data charges for streaming led by the $50bn-valued Facebook – strip CD sales to the prohiba-
video over 3G networks. Deloitte also will churn out an astonishing two for the first time tive cost of data
says it does not expect next genera- trillion adverts but only pull in
in a major mar- usage. 4G
tion 4G networks to take off in 2011. $5bn in revenue. It says that by the
In media, Deloitte expects TV to end of 2011 half of computer-based ket. Live music networks will
continue to hold its own against the internet users could be signed up to will continue to not usurp 3G
barrage of new media. It says the a social network, placing a poten- drive revenue. this year.
number of households with digital tial glass ceiling on future growth.

Carphone says
Pearson expands further it will reach top
into Indian education of expectations
▲
▲

HEALTH
PUBLISHING group Pearson
showed its commitment to
emerging markets yesterday
by taking a further 59 per
cent stake in Indian educa-
tion firm TutorVista for
$127m (£80m).
India’s education sector,
worth a staggering $86bn, is
seeing fresh interest from for-
eign firms and large funds
which are pumping money
into services, technology and
infrastructure.
John Makinson, chairman of
Pearson India, said: “India,
China and Brazil are the focus
now. We are spending hun-
dreds of millions of dollars in
these markets.
“The acquisition gives us a
platform to develop school
learning in India.”
Pearson, which had
acquired a 17.2 per cent stake
in TutorVista in 2009, will now
own 76.2 per cent of the online
firm. It plans to increase the
holding to 80 per cent by
February.
The British educational tech-
nology provider, which also
owns Penguin Books and the
Financial Times, expects the
deal to add to adjusted earn-
ings per share in 2012.
Its move from a pure book
publisher to the leading educa-
tional technology provider has
enabled the company to gain
market share in North
America and helped improve
results.
The Indian firm, which is
currently valued at $211m, has
raised $38m in venture fund-
ing in the last four years.
Blended growth rate in
Indian education services
firms is seen at 21 per cent
over the next 12 months,
according to estimates, out-
stripping the 18 per cent
growth forecast in the infor-
mation technology sector.
TELECOMS
CARPHONE Warehouse yesterday
reported brisk trading, driven by a
strong performance in its US joint
venture with Best Buy.
Europe’s biggest mobile phone
retailer said it expects full-year earn-
ings to be at the top end of forecasts.
The group, which owns 50 per cent
of the venture with Best Buy as well as
a 47.5 per cent stake in Virgin Mobile
France, said sales phones based on
Google’s Android software and grow-
ing demand for pre-pay smartphones
were the highlights of its Christmas
trading. Carphone said its share of
full-year profit from its joint venture
would be £90-100m.
CITYA.M. 19 JANUARY 2011
Hutchison in $6bn stock offer
the company’s net debt and increase
▲
COMPANIES
the company’s financial flexibility,”
BY HARRY BANKS said Kalai Pillay, senior director at
HUTCHISON Whampoa plans to spin Fitch’s Asia-Pacific corporates team,
off its holdings in two ports assets, a noting that the deal will also reduce
move expected to raise $6bn (£3.8bn) cash flows to Hutchison from the
in what could be Southeast Asia’s ports business.
largest ever stock offering. The key assets of Hutchison Port are
The listing by Hutchison, a ports-to- deep-water container port operations
telecom conglomerate owned by Hong in Hong Kong, China’s southern
Kong tycoon Li Ka-shing, will take Guangdong province and Macau.
place on the Singapore Stock Hutchison proposes to spin off
Exchange, allowing the company to Hutchison Port Holdings Trust in a
use the proceeds for investments in its separate listing in Singapore, where
ports and infrastructure business. regulations are favourable for trusts-
“Hutchison’s divestments will likely like companies to list, it said in a filing
result in a meaningful reduction in with the Hong Kong stock exchange
Blockbuster
granted more
time to plan
and competitors such as mail-order
▲
RETAIL
pioneer Netflix and Redbox, a
BY HARRY BANKS
Coinstar unit that rents movies
VIDEO rental chain Blockbuster said through kiosks.
yesterday that it had received an addi- Blockbuster has closed about 1,000
tional three weeks from its lenders to stores in recent years as it tries to cut
file a bankruptcy reorganisation plan. costs, but still had about 2,900 in the
The company received an exten- US when it filed for bankruptcy.
sion to 4 February from 14 January As part of its reorganisation the
to file a plan, a regulatory filing company is renegotiating leases with
shows. thousands of landlords.
It is common for debtors to seek The company hopes to emerge
such extensions, and US bankruptcy from bankruptcy by the beginning of
courts routinely grant them. the second quarter of this year, with
Blockbuster disclosed the exten- fewer but more profitable stores.
sion after reports that the company The company entered bankruptcy
had asked its bondholders for an with a plan that would put billionaire
additional $200m-$250m (£125m- investor Carl Icahn and his hedge
£156m) to help fund its exit from fund partners in control of the com-
bankruptcy. pany when it emerges.
The bondholders, led by billion- According to court reports, a
aire investor Carl Icahn and hedge group of shareholders in Blockbuster
fund Monarch Alternative Capital, are considering an investment in the
have not decided whether to provide bankrupt video chain and want
the funds or put the Dallas-based information about its push into dig-
company up for sale. ital.
Blockbuster may also close as Under the current plan, the com-
many as 1,000 of its more than 5,000 pany would wipe away most of its
remaining stores following a weak $1bn of debt by giving the compa-
holiday season. ny’s equity to its secured bondhold-
Blockbuster filed for bankruptcy in ers. Most of the company’s $665m in
September, weighed down by its secured bonds is held by the Icahn
debts and stung by video-on-demand group.
CITY MOVES | WHO’S SWITCHING JOBS
Fuller, Smith & Turner
The brewer has appointed Lynn Fordham, chief
executive of FTSE 250 private investment man-
ager SVG Capital, to its board as a non-execu-
tive director. She will join both the
remuneration and audit committees in addition
to her seat on the board. Fordham has previ-
ously held senior financial, strategic and opera-
tional roles at Barratt Developments, BAA,
Boots Group, Man Group, BAT and Mobil Oil
including roles focused on audit and risk.
BT Save the Children International, is to
Jasmine Whitbread, chief executive of join the BT board as a non-executive
To appear in CITYMOVES please email your career
updates and pictures to citymoves@cityam.com SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT
yesterday.
The statement helped explain why
Hutchison would float the ports unit
in Singapore rather than Hong Kong,
where heavy demand from invest-
ment funds have made Hong Kong by
far the top exchange for public listings
in the last two years.
Shares of Hutchison fell 2.4 per cent
yesterday to HK$93.65 per share in a
broader market down 2.4 per cent.
Traders attributed the dip to the run
up the stock has enjoyed this year.
Hutchison’s shares have risen 17 per
cent since the beginning of the year,
making it the second-best performer
among the main Hang Seng index.
BEST OF THE BROKERS
ANALYSIS l Greencore Group
1.5
€ 1.27
18 Jan
1.3
1.1
18 Oct 5 Nov 25 Nov 15 Dec 7 Jan
GREENCORE
RBS rates the Irish convenience foods pro-
ducer “buy” with a target price of €1.50.
The broker believes Greencore enjoyed
solid trading over Christmas, though it
expects raw material cost inflation to con-
tinue to dampen profits. RBS believes its
short-term price is likely to be driven by its
proposed merger with Northern Foods.
Ashtead walks away from Lavendon
▲
M&A
INDUSTRIAL hire firm Ashtead and
Belgium’s TVH Services walked away
from its bid for Lavendon Group yes-
terday, ending a two-month-long bat-
tle for control of the British
rental-equipment firm.
The news sent Lavendon shares
down 11 per cent to 97.25p, making
them the top percentage losers on the
London Stock Exchange, as investors
feared few other buyers would emerge
in a depressed construction market.
On the day before TVH’s initial bid
Edited by Steve Dinneen
director. She has been with Save the
Children since 2005, initially as chief
executive of Save the Children UK,
where she revitalised one of the coun-
try’s most established charities, posi-
tioning it at the centre of relevant
public policy debates and growing top-
line income by 70 per cent. Before
working in the non-profit sector,
Whitbread had a career in international
marketing in the technology sector. In
the 1990s she served as managing
director of a Thomson Financial busi-
ness based in the US. She is an existing
member of BT’s Committee for
Lindor truffles boost US
and UK sales for Lindt
▲
RETAIL
SWISS premium chocolate maker
Lindt & Spruengli will meet its 2010
operating profit goal after North
American and UK consumers bought
more of its Lindor truffles, helping to
offset the strong franc.
The company said it had seen a
double-digit increase in demand for
its chocolates in its most important
market of North America as well as in
Britain, the largest European choco-
late market.
ANALYSIS l Prudential 688.50
700 p 18 Jan
660
620
500
18 Oct 5 Nov 25 Nov 15 Dec 7 Jan
PRUDENTIAL
Nomura has downgraded the insurance
group from “neutral” to “reduce” with a
target price of 700p. The broker thinks the
market is underestimating the Pru’s expo-
sure to the US, which it expects to lose
growth momentum this year. Nomura
prefers Prudential’s one-time takeover tar-
get AIA for exposure to the Asian markets.
To appear in Best of the Brokers email your research to notes@cityam.com
was made public, the stock had closed
at 79p. Ashtead shares were up seven
per cent at 170.3, and were among the
top risers.
“With few other likely buyers, we
believe Lavendon will now trade closer
to fundamental valuations once
again,” said Panmure Gordon analyst
Paul Jones.
Lavendon had rejected the sweet-
ened £189m Ashtead-TVH bid on 13
January, saying the sweetened offer
undervalued it, a month after it
rebuffed TVH’s £183m offer.
Ashtead said the joint offer was sub-
in association with
Sustainable and Responsible Business.
Saffery Champness
The private client accountancy firm has
announced the appointment of Julian
Hedley as a partner in its Media and
Entertainment group. Hedley joins from
RSM Tenon, where he spent over 20
years as head of RSM Tenon Media. He
was also the firm’s London office man-
aging director for the past 10 years. A
highly experienced tax accountant, he
has worked primarily in the entertain-
ment industry for the last 30 years. He
has also worked as inspector of taxes
News 19
But the franc’s strength against the
euro, dollar and pound weighed
slightly more than expected and sales
in francs rose 2.2 per cent to 2.6bn
francs ($2.7bn). Analysts had on aver-
age expected sales to rise 2.8 per cent
in francs.
“Strong set of figures and company
beats its five to seven per cent organic
growth target for 2010 on the back of
US and UK – where it probably bene-
fitted from its affordable treat status
even during a recession,” said Kepler
Capital Markets analyst Jon Cox.
ANALYSIS l Xstrata 1,497.00
18 Jan
p
1,500
1,400
1,300
1,200
18 Oct 5 Nov 25 Nov 15 Dec 7 Jan
XSTRATA
Morgan Stanley rates the miner “over-
weight” and has upgraded its target price
from £15.74 to £21. The broker has raised
targets across the sector after it revised its
long-term commodity forecasts, but
Xstrata benefits the most due to its expo-
sure to copper. The broker also sees the
prices of iron ore, silver and gold rocketing.
ject to completion of confirmatory
due diligence and a recommendation
by Lavendon’s board.
“Lavendon’s rejection means these
pre-conditions cannot be fulfilled and
as a result the joint acquirers will not
proceed with an offer,” Ashtead said in
a statement.
Lavendon chairman John Standen
said after the announcement: “I’m
delighted that this uncertainty has
been removed. We have a clear set of
objectives to enhance shareholder
value and Lavendon is very well posi-
tioned.”
within the Special Compliance Office
and was part of the implementation
team that introduced the UK’s Artist
Withholding Tax in 1987.
RICS
Mark Walley has been appointed as the
UK executive director of the Royal
Institution of Chartered Surveyors.
Based in Parliament Square, he will
work with the UK board to develop
strategy and promote RICS in its most
mature market. His focus will be to con-
tinue to build RICS’ status and market
recognition.
+44 (0)20 7557 7245
morganmckinley.com
 Wealth Management
20 CITYA.M. 19 JANUARY 2011

Families need
to talk about
long term care
Without discussion and planning, the effects
can last for generations, writes Marc Sidwell

A
THIRD of Britons aged over 55 who
own their homes expect that they
will have to sell their property to
meet the costs of long term care for
themselves or their partner. That figure
comes from new research, commissioned
by the wealth management team at solici-
tors Dickinson Dees. The YouGov survey
also finds that nearly three-quarters of
those aged 35-54 have never discussed the
costs of long term care with their parents
– and almost one third of those under 55
feel that inheriting their parents’ home is
important to their retirement plans. That
sounds like a recipe for problems sooner
rather than later, what the report calls a
“ticking time bomb for Britain’s middle
aged”. With one in four women and one in
six men needing long term care, according
to the 2006 Wanless report, the probabili-
ties of being affected are too high to ignore
this explosive financial problem.
The issue is even more worrying when
considered in terms of its cascading effects
across the generations: if a parent does
have to sell the family home to cover their
care, not only will their children potential-
ly find themselves facing difficulties in
managing their own retirement without
that inheritance, but their grandchildren
may find themselves faced with infirm
parents who lack the resources to pay for
their care.
While the statistics show that few of us
discuss this vital issue, communication
and early planning are essential to reduc-
ing the risk of losing one’s home to pay for
care. Deborah Jude, a partner at Dickinson
Dees, says: “Families need to break the
taboo of silence on infirmity and mortali-
ty that currently leads to two generations
being robbed of a pleasant retirement,
replacing it with the misery of a battle to
meet escalating care costs.”
The government is aware of the prob-
lems with long term care, and the inde-
pendent Dilnott Commission is due to
report by July of this year on the best
options for public policy. But in the cur-
rent climate of austerity and overstretched
tax revenues, it would be unwise to wait
for government recommendations in the
hope that they will be lavish.
So what can you do to protect yourself?
The Department for Health produces the
Charging for Residential Accommodation
Guide (CRAG), updated annually. This pro-
vides guidance on how your capital is
assessed if you are seeking assistance in
paying for care. Married couples heading
for retirement should be careful of joint
savings accounts and joint tenancies, as
separate holdings are less exposed to being
taken to help cover the costs of a partner’s
care. It is also wise to think about setting
Don’t wait too long up a Lasting Power of Attorney (LPA), that
Picture: GETTY specifies who can look after your affairs
if you become incapacitated. After the
fact, this is much harder and the Court
of Protection will have to become
involved.
But before contacting lawyers and
financial advisers, the first step is to dis-
cuss this challenge with your family.
Jude adds: “No matter how difficult the
issue, our research shows that many
retirement-aged people would welcome
their children broaching the subject of
what happens when they become infirm
– although clearly diplomacy is needed.”

Banks propel FTSE upwards US stocks climb on

to end three-day losing streak hiked price targets
Commodities were also helped by a est rates may need to rise. Offsetting the news was a gain in
THELONDON weaker dollar, which waned after
upbeat business data from Germany.
“By just hoping that prices will
come back down in a year’s time in THENEW YORK shares of Google, up 2.5 per cent at
$639.63 after several brokerages

REPORT Energy stocks were particularly

strong, although India-focused refin-
er and power generator Essar Energy
fell 4.4 per cent after it launched a
not going to mean they will, so the
Bank of England must act to tackle
inflation before it gets out of control,”
REPORT raised their price target on the com-
pany’s stock ahead of the world’s No.
1 Internet search engine’s earnings
Angus Campbell, head of sales at later this week.

B U
ANKS and commodity stocks
helped Britain’s top share index
break a three-day losing streak
yesterday, as upbeat corporate
results from Burberry, SAB Miller and
Rio Tinto lifted investor sentiment.
The FTSE 100 index closed up 70.73
points, or 1.2 per cent, at 6,056.43,
eradicating losses sustained over the
previous three trading days.
Banks were among the top gainers
as EU finance ministers inched closer
towards beefing up the euro zone's
rescue fund.
Risk sentiment was helped as
investors cheered results from
London’s blue chip companies.
In a strong mining sector, Rio Tinto
rose 1.5 per cent after a record-break-
ing production update.
“Investors are gushing at what they
have seen so far from some of the
companies both in the UK and the
US,” Jimmy Yates, head of equities at
CMC Markets, said.
“The hope is that they will contin-
ue to outperform and shrug aside
macro economic concerns.”
$500m, five-year convertible bond
issue.
Luxury goods firm Burberry
topped the list of FTSE 100 risers, up
5.3 per cent after forecasting full-year
profit at the top end of market expec-
tations and beating third-quarter rev-
enue forecasts.
Brewer SABMiller rose 1.7 per cent,
beating forecasts with a three per
cent rise in quarterly volumes.
The broad-based rally stretched to
defensively-perceived utility compa-
nies, with Severn Trent and United
Utilities up 2.1 and 1.3 per cent
respectively after Evolution Securities
upgraded both stocks.
On the downside, GlaxoSmithKline
shares extended losses, falling a fur-
ther two per cent after shedding 1.6
per cent on Monday when the drug-
maker announced a £2.2bn legal
charge that will wipe out profits in
the fourth quarter.
The UK blue chip index briefly
pared gains after British consumer
price inflation rose more than expect-
ed, adding to expectations that inter-
Capital Spreads, said.
“The economy is on a much
stronger footing than a year ago and
can withstand a couple of quarter
percentage hikes in rates.”
In the United States there was
mixed data for investors to chew on
as a gauge of manufacturing in New
York State rose less than expected.
Meanwhile, US homebuilder senti-
ment in January was flat at a low
level for the third month in a row.
And Citigroup disappointed investors
after revealing fourth quarter results
that missed estimates.
ANALYSIS l FTSE 6,056.43
6,100 18 Jan
5,900
5,700
18 Oct 5 Nov 25 Nov 15 Dec 7 Jan
S stocks gained yesterday, over-
coming weak Citigroup results
and concerns circling Apple
after Chief Executive Steve Jobs’
medical leave.
Investors focused instead on
increased price targets for Google,
which reports later this week, and
Dow component Caterpillar, whose
results are due next week.
Shares of Apple slipped 2.3 per cent
to $340.65 ahead of its quarterly earn-
ings, after the company said Jobs is
taking his third medical leave since
2004.
Shares of the bellwether technolo-
gy company pared earlier losses and
eased pressure on stock indexes.
Apple has about a 21 per cent weight-
ing in the Nasdaq 100, which edged
up 0.2 per cent.
“To me, it seemed like the news
was troubling for the company, but
it’s Apple, it ain’t going to matter,”
said Stephen Massocca, managing
director of Wedbush Morgan in San
Francisco. He correctly predicted the
firm would report strong results.
The Dow also rose moderately,
boosted by gains in Caterpillar. The
heavy equipment maker’s stock was
up 2.8 per cent at $96.23 after
Raymond James raised its price target
to $116 from $95.
Also lifting the Dow was Boeing,
which gained 3.4 per cent to $72.47
after the plane maker alleviated fears
about the delivery schedule of its
long-delayed 787 Dreamliner jet.
Optimism about earnings has
helped bolster stocks in recent weeks,
with the S&P 500 posting its seventh
straight week of gains on Friday.
Aside from Apple, gains were tem-
pered by Citigroup, whose shares fell
6.4 per cent to $4.80 after the third-
biggest US bank reported a sharp
drop in bond trading revenue that
pushed profits below expectations.
The Dow Jones industrial average
rose 50.55 points, or 0.43 per cent, to
end at 11,837.93. The Standard &
Poor’s 500 Index added 1.78 points, or
0.14 per cent, to 1,295.02. The Nasdaq
Composite Index gained 10.55 points,
or 0.38 per cent, at 2,765.85.
CITYA.M. 19 JANUARY 2011 Wealth Management | Markets 21

LONDON’S TOP 250

Company Name Closing Price Price Change 52wk high 52wk low Company Name Closing Price Price Change 52wk high 52wk low Company Name Closing Price Price Change 52wk high 52wk low Company Name Closing Price Price Change 52wk high 52wk low
(p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p)

3i Group 332 4.75 340 250 COBHAM 226.50 2.25 276 192.25 Jardine Lloyd 634 3.50 634 459 Rolls-Royce Group 661 7 665 473.50
3i Infrastructure 116.50 0 125.25 101 Colt Telecom 145 1.50 145 109 John Wood Group 544 -0.50 581.50 293 Rotork 1727 36 1895 1215
A.B. Foods 1116 4 1182 873.50 Compass Group 576 9 594 425 Johnson Matthey 1985 5 2100 1446 Royal Bank of Scot 43 0.50 58 31.25
Aberdeen Asset.Man. 223 3.25 223 112.75 Cookson Group 641 -2.50 687.50 367.50 Jupiter Fund Man 307.50 3 314 180.25 RSA Insurance Grp 135.75 0.75 136.50 114.75
Admiral Group 1620 49 1693 1114 Croda International 1602 0 1625 751 Kazakhmys 1665 49 1671 965 SABMiller 2209 37 2306 1650
Aegis Group 145.25 2 145.50 103.50 CSR 416 9 505 281 Kenmare Res. 32 1.25 35 9.25 Sage Group 287 3.75 289 222
Afren 156 2.75 161.75 79 Daily Mail & Gen 582.50 3.50 590 432.50 Kesa Electricals 150.75 -2 174 99.25 Sainsbury (J) 385 4.50 395 313
African Barrick Gold 560 -4 670 503 DAVIS SERVICE 450 8.50 450 360.25 Kingfisher 271.25 7.25 271.25 198.50 Schroders 1851 10 1922 1116
Aggreko 1542 31 1685 882 De La Rue 829 41 997.50 549.50 Ladbrokes 132 3.75 162.75 122.75 Schroders NV 1443 0 1508 929.50
Alliance Trust 376 5 378 293.50 Debenhams 69.75 0.75 79 53 Lancashire 578 2 647 435 Scot.& Sth. Energy 1213 12 1258 1010
Amec 1224 19 1226 733.50 Derwent London 1577 6 1605 1208 Land Securities 698.50 5.50 707 545 Scottish Mortgage 717.50 7 717.50 475
Amlin 388.50 3 433 366.75 Diageo 1250 15 1250 1000 Legal & General 111 3 111 69.75 SEGRO 300.75 2 341.25 250.25
Anglo American 3320 30.50 3410 2254 Dixons Retail 21.75 0.50 36.50 21.25 Lloyds Banking Grp 67.75 -0.25 77.50 46.50 Serco Group 573.50 7.50 651 494.25
Antofagasta 1531 42 1634 761 Domino’s Pizza 549 9 586 309.25 Logica 137 2.25 148 101.75 Severn Trent 1446 30 1499 1086
Aquarius Platinum 363.25 5.75 458 227 Drax Group 400.50 -7.50 437.75 326.25 London Stock Ex. 868.50 -12 906 544 Shaftesbury 452 1 460 349.25
ARM Holdings 536.50 22 536.50 188.50 DS Smith 220 -1 226 104 Lonmin 1896 9 2113 1355 Shire 1674 47 1674 1220
Ashmore Group 360 4 383.75 218 Dunelm 490 10 550 325.25 Man Group 307.75 4 310.50 202 SIG 153.25 3.50 153.25 90.75
Ashtead Group 170.25 11 177 77 easyJet 454 7 496.50 348.50 Marks & Spencer 382 1 427.50 323.50 Smith & Nephew 714 5 714 537.50
AstraZeneca 3005.50 27 3385 2732 Edin.Inv.Tst. 441.75 1 467.25 364 Meggitt 367.50 -3 381 251.50 Smiths Group 1388 7 1388 995.50
Autonomy 1463 -2 1975 1271 Electrocomponents 262 1 279.50 174.75 Melrose 329 3.50 329 162 Soco International 365 23.25 484.25 292
Aveva Group 1650 31 1673 1007 Enquest 144.75 0.75 150.50 89.25 Mercantile Inv Tst 1133 14 1133 828 Spectris 1418 30 1418 735
Aviva 435 6.25 435 294.25 Essar Energy 533 -24.50 589.50 383 Michael Page 540.50 12.50 565.50 346.50 Spirax-Sarco 1902 0 2025 1240
AZ Electronic Materials SA (WI)317.50 1.50 317.50 249 Eurasian Nat Res 1101 29 1266 818 Micro Focus 404.50 0 546.50 276 Spirent 138.25 -1 160.25 102.75
Babcock International 580 2 635 492.75 Euromoney Inst. 710 4 727 461 Millennium & Cop. 576.50 -4 594.50 368.50 Sports Direct 172.50 2.50 174.75 92.25
BAE Systems 361 11.75 388.75 294.75 Experian Group 779 3.50 819 572 Misys 332 1.25 343 201.50 St James’s Place 283 8 292 204.25
Balfour Beatty 324.25 -2 327 229.75 Ferrexpo 448 16.50 448 197 Mitchells & Butlers 355.75 4.25 361 265.50 Stagecoach Group 211 0.25 224 160.75
Barclays 307.75 1.25 383.25 255.25 FirstGroup 398 -0.50 412.50 336 Mitie Group 237 3 241 188.75 Standard Chartered 1725.50 25.50 1950 1351.75
Barratt Development 101 4.50 137.75 70 For.&Col.Inv.Tst 316.25 3.25 316.25 251.50 Mondi 522 -6.50 557.50 338.25 Standard Life 225 1.75 236 173
BBA Aviation 227 1 228 158 Fresnillo 1466 27 1682 669.50 Monks Inv.tst. 360.75 2.50 363 271 Supergroup 1590 70 1638 535
Bellway 680 13 809 511 G4S 273.75 2.50 283.50 237.75 Morgan Crucible 271 -1 274.25 159.75 SVG Capital 244.50 2.50 244.50 125.25
TalkTalk 162 1.25 168.25 108.50
Berkeley Grp Hldgs 960 18.50 960 742 GKN 228.75 -1 237 102 Morrison (Wm) 271 3.50 306.25 257.50 Talvivaara Mining 589 -3 620 342.50
Betfair Group 994.50 31.50 1550 882 GlaxoSmithKline 1181.50 -23.50 1318.50 1095 Murray Int.Tst 941 16 966 736.50 Tate & Lyle 538 -4 546 388.75
BG Group 1366 52.50 1366 984 Great Portland Est. 362.50 1 369.25 279 National Express 253.50 1 259.50 195.50 Taylor Wimpey 38 3 44 22.25
BHP Billiton 2502 35 2616 1684.50 Greene King 459 2 491.50 376.25 National Grid 540.50 8.50 596.25 484.25 Telecity Group 459.50 -0.50 532.50 360
BlackRock Mining 807 12 815 492 Halfords Group 409.50 0.75 550 372.75 Next 2153 53 2344 1817 Templeton Emrg. 654 -3.50 689.50 471.50
BlueCrest AllBlue 170 -0.50 174.50 156.25 Halma 343.50 2 366.50 223 Northumbrian Water 324 3.50 361.50 252.75 Tesco 409 -1.50 454.50 377.50
Booker Group 58.50 -1 60.50 38.75 Hammerson 437.50 2 437.50 336.25 Ocado Group 205.25 0.75 205.25 123.50 Thomas Cook Group 202 -2.75 272 171.75
BP 509 8.25 655.50 303 Hargreaves Lansdown 544.50 -2.50 599 276.50 Old Mutual 128.50 1.75 145.25 97.25 Travis Perkins 1101 13 1127 664.50
Brit Insurance 1055 1 1055 728 Hays 128.75 2 133.50 88.50 PartyGaming 212 3.25 334.50 205 TUI Travel 270.50 0.50 308.50 190
British Airways 300 3 305 184.25 Henderson Group 155.50 6.75 155.50 112.75 Pearson 1006 5 1051 855 Tullett Prebon 408.50 1.75 420.50 262
British Amer.Tob 2371.50 18.50 2521 1959 Heritage Oil 449 -0.75 581 296.75 Pennon Group 650 13 650 483 Tullow Oil 1374 9 1388 991.50
British Empire Tst 504 6.50 512 396.50 Hikma 894.50 8.50 894.50 525 Persimmon 459 23.50 507.50 336.50 UK Commercial Prop 81.50 0 85 72.75
British Land 532 11.50 537 418.25 Hiscox 387.50 0.75 399 326.25 Petrofac 1685 67 1685 876.50 Ultra Electronics 1777 5 1895 1265
Britvic 451.75 1.50 518 404.50 Hochschild Mining 529 -16 658 234 Petropavlovsk 1117 16 1365 852 Unilever 1890 9 1997 1688
Brown (N.) Group 311.25 3.50 311.25 206.50 Home Retail Group 225.50 1 295 188.50 Phoenix Group Hldgs 621 -4 758 557.50 United Utilities 570.50 7.50 628.50 503.50
BSkyB 746 3 746.50 524.50 Homeserve 451.25 6 487.50 326.25 Premier Farnell 289 3.25 304.50 174 Utd Business Media 712 11.50 712 409.75
BT Group 184 0.75 190.75 110 HSBC Holdings 709.25 5.75 719.50 596.25 Premier Oil 2013 8 2025 1017 Vedanta 2498 61 2934 1839
Bunzl 775 8.50 777 616.50 Hunting 760 -17 806 439.50 Provident Financial 971.50 10.50 999.50 728.50 Victrex 1408 -7 1522 806
Burberry Group 1115 56 1156 590.50 ICAP 568.50 -1 570.50 294 Prudential 688.50 -1.50 697.50 487.50 Vodafone Group 178.75 3.75 178.75 129.50
C&W Comms 50.25 0.25 63.75 44.25 IG Group 481 -37.50 553 362.50 PZ Cussons 398 -3 409 234.75 Weir Group 1688 -2 1861 735.50
Wellstream Holdings 783.50 0 793.50 436
C&W Worlwide 70 -0.25 100 60.50 Imagination Tech 405 2.50 441.75 215 QinetiQ Group 135.50 1.50 142 96.75 Whitbread 1826 8 1887 1266
Cairn Energy 454.50 7.25 493.25 318.25 IMI 953 9.50 953 530.50 Randgold Res 5150 105 6655 4209 William Hill 176.75 7 216.50 155.50
Caledonia Inv. 1885 10 1928 1512 Imperial Tobacco 1926 6 2154 1753 RDS ‘A’ 2137.50 33 2162 1624 Witan Inv Trust 517 4.50 522 410
Capita Group 730 12.50 826 635.50 Inchcape 394.75 1.50 394.75 237 RDS ‘B’ 2129.50 31.50 2159.50 1554 WOLSELEY 2187 7 2195 1223
Capital & Counties 147.50 2 157 100 Informa 447.75 3 448 304.50 Reckitt Benckiser 3491 54 3655 3037 WPP Group 802 24 802 572.50
Capital Shop Centre 377 5.50 424.75 301 Inmarsat 642 4.50 821 606.50 Reed Elsevier 560 6.50 563 460.50 Xstrata 1497 20.50 1535 845.753i
Carillion 375 -2 387.50 273 InterContinental Htl 1332 9 1332 887 Regus 100 -0.75 120 66
Carnival 3109 -10 3153 2037 Intermediate Cap.Grp 356.75 -3.50 360.25 240.50 Renishaw 1329 9 1342 565.50
Catlin Group 370.25 -0.75 393 320 International Pers Fin 356.25 -5.50 386.50 183.25 Rentokil Initial 105 3 138.50 87.75 LONDON TOP 250 BY MARKET CAPITALISATION
Centamin Egypt 163.25 -3.75 197 106.75 International Power 426 6.50 448.50 284.50 Resolution 253.50 1.50 329.25 211.25
Centrica 335.50 6.75 346 264 Intertek Group 1850 7 2000 1150 Rexam 345.25 -4.25 356 276.50 POWERED BY
Charter 829.50 -8.50 853.50 567 Invensys 360 1.50 364.25 230.25 Rightmove 799 29 812 500.50
Chemring Group 3233 -23 3663 2598 Investec 525.50 3 562 417.75 Rio Tinto 4450 65.50 4584 2812 www.digitallook.com
Close Brothers 887 11.50 888.50 664 ITV 78.50 0.75 78.50 48.25 RIT Capital Partners 1305 11 1305 971.50
 22 Wealth Management | Foreign Exchange
POLITICIANS
ARE DRIVING
EURO-DOLLAR
BORIS SCHLOSSBERG
DIRECTOR OF CURRENCY RESEARCH, GFT
T
HE euro/dollar found itself on a
decidedly more shaky ground at the
start of this week’s trade after
Germany’s Finance Minister stated
that the EU’s largest and most important
economy had no intention of adding more
capital to the EFSF fund. Wolfgang
Schauble told German media he does not
support expansion of the EFSF, calling last
week’s reports that the EU was consider-
ing such an option a “misunderstanding”.
The EU has already allocated 440bn
euros to the EFSF, but markets continue to
worry that even this may not be enough to
save the euro if Spain runs into trouble.
Schauble’s reluctance to provide more aid
is clearly the result of strong domestic
opposition. Angela Merkel’s government
must walk a fine line between appeasing
its constituents at home and complying
with EU obligations. Yet by delaying the
discussion until the next meeting in
March, German officials may be creating a
bigger problem for themselves.
Yesterday, the euro/dollar received a
boost when Russian Deputy Minister
Zhukov suggested that Russia may invest
in Spanish debt, but the statement was as
much political as economic and it is
unclear how much capital the Russians
will commit to this idea.
In the meantime, Eurozone credit mar-
kets will see a flood of issuance from both
Northern European economies as well as
Spain and Greece this week. If those disap-
point, euro/dollarcould slide towards the
1.300 level again as sovereign debt con-
cerns return with a vengeance. European
officials would then have to scramble to
appease the credit markets and the solu-
tion may prove more costly for all
involved. While the dollar is backed by the
full faith and credit of the US government,
such a clear vote of confidence from the
Eurozone appears to be missing, leaving
the euro vulnerable.
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CITYA.M. 19 JANUARY 2011
Inflated expectations
are driving up sterling
The rate rise priced
in may not happen,
says Daniel Knowles
I
NFLATION is the curious way in
which, over time, the same amount of
money buys progressively less stuff. So
it was strange to see yesterday that, as
a result of higher than expected inflation
in Britain, the value of sterling hit its high-
est level in two months. Against the dollar,
the pound rose by about 1 per cent.
Theoretically, all else equal, a rise in infla-
tion ought to weaken a currency, not
strengthen it – Zimbabwean dollars are
not worth very much right now. So why is
sterling rising?
Well, all else is not equal. The Bank of
England (BoE) has a mandate to maintain
CPI inflation at 2 per cent, plus or minus
one. Persistently high inflation – CPI infla-
tion is now running at 3.7 per cent –
could well force the monetary policy com-
mittee (MPC) to raise interest rates, which
would in turn lead to an appreciation of
sterling. Anticipating that, traders spent
yesterday buying up sterling. High inflation ought
But the question traders should now be to make a currency
asking is whether the market has been too less expensive
optimistic. Many economists are urging Picture: GETTY
that interest rates be held steady to protect
the economic recovery. One MPC member,
Adam Posen, has even called for further target by 2012, even without a rate rise. If fortable with the current state of affairs” –
quantitative easing. Might not rates be the MPC agrees with that analysis, then and the markets know it. The issue for the
kept at 0.5 per cent for a while yet? they will likely refuse to raise rates, and so BoE is how to dampen inflation expecta-
Certainly it seems a possibility. While sterling will depreciate from yesterday’s tions without strangling the recovery or
British inflation is curiously high among highs. initiating a dramatic leap in sterling.
developed countries, dovish economists Others are less sanguine. Julien Holmes, For the moment, however, it seems like-
point to external causes. Sterling has chief operations officer at Crown Mortgage ly to adopt the dovish line. Traders would
depreciated by about 20 per cent against a Management said: “With inflation as per- seem well advised to cut their long posi-
basket of currencies since the start of the sistent as it is, it is hard to justify keeping tions then. Inflation is rarely a good thing.
financial crisis in 2008, increasing the cost rates as low as they are. The Bank of
of imported goods. Moreover, the RPIY England has a clear credibility issue and if ANALYSIS l Ernst and Young predictions
measure of inflation, which excludes indi- they don't do something soon, inflation for UK inflation (CPI), 2004-2014
rect taxation, is closer to 2 per cent – VAT expectations will just keep trending up.” 7
%
Source: Ernst and Young
increases account for much of the rise in Holmes argues that the British economy 6 Actual Forecast
prices. Finally, rising commodity prices, may be operating much closer to capacity 5
which have increased the price of food and than is realised, and so rate rises eventual-
4 CPI
petrol, are universal and temporary, and so ly will be inevitable. Even if the BoE stays
3 (Consumer
not necessarily a cause for alarm. dovish for the moment, if the markets Price Index)
Based on that logic, economists at the expect rate rates later, the appreciation 2
ITEM club, a forecasting group sponsored may still last. 1 CPIY (CPI excluding
by Ernst and Young, predict that CPI infla- And as Richard Wiltshire of ETX Capital indirect taxes
tion will drop back below the 2 per cent pointed out, the BoE is “unlikely to be com- 2004 2006 2008 2010 2012 2014
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CITYA.M. 19 JANUARY 2011 Wealth Management | Foreign Exchange 23

THE
Aussie’s upstream TIPSTER
RELENTLESS

adventures could PRESSURE

ON THE EURO

T
HE sovereign debt woes that were stran-

be over for now

gling the euro last week may have been
diminished after the successful bond
issues, and further upside has been deliv-
ered from agreement amongst finance ministers
to increase the size of the bailout fund. However
both the psychological level of $1.3500 and the
fact that further draws on the stability fund look
inevitable could start to constrain the rally. IG
The Australian dollar faces many challenges Index quotes euro-dollar at $1.3395-$1.3397.
Play dollar-yen from the short side because
in the next quarter, writes Donata Huggins it looks likely that the consistent selling interest
in euro-yen from Japanese exporters and
investors will put pressure onto it. On the top-

A
USSIE traders might feel a little like
the 19-year-old Australian (pictured
right) who tried to use a blow up
doll to work his way through the
floodwaters last week. It wasn’t so long ago
that the Aussie dollar looked certain to be
travelling upstream; the Reserve Bank of
Australia was sure to raise rates. But now
that the floodwaters have come and an
area the size of Germany and France com-
bined has been submerged in water, the
fate of the currency is less clear.
Wayne Swan, the Australian treasurer,
has said that the flooding along the east
coast has been the nation’s most expensive
natural disaster ever. Some estimates say it
will cost £12bn. Damage to the economy is
virtually certain. Duncan Higgins of
Caxton FX believes this has pared back any
chance of an interest rate rise for some
time, calling the event a “turnaround in
the fortunes of the Australian dollar.” “Our
expectation,” he explains, “is that the
Australian dollar will remain under pres-
sure in the near term. Given how strong it
was by the end of last year, there is certain-
ly plenty of room for the currency to weak-
en.”
But he adds that market reaction to the
devastation might be overdone: “The rise
in commodity prices should, to a certain
extent, offset the lost volume.” Advising
that those with a longer-term view should
expect a climb. After all, if the mines get
up and running again quickly, Australia’s
economy will continue to benefit from the
commodities price boom. This should
soothe the financial impact of the floods.
But there are bigger concerns for the
Aussie dollar in terms of commodities
prices. The long-coming Chinese fiscal
tightening is – as Michael Hewson of CMC
Markets puts it – “not a matter of ‘if’ but
‘when’.” The adjustments will rein in sub-
stantial amounts of cash now being spent
on Australian commodities. Hewson pre-
dicts that the next tightening will come
prior to Chinese New Year. The effect are
always palpable – and traders should
beware. For instance, when the People’s
Bank of China raised its reserve require-
ments last week, mining and commodity
stocks fell back on the news, with coal
miner Xstrata losing 1.65 per cent and
Antofagasta losing 2.4 per cent.
Yet from a technical analysis perspective,
David Jones of IG Index says that we don’t
have to worry about the Aussie losing
value: “It hasn’t really threatened a major
low since early December at $0.9530 or the
minor low at $0.9750 since 8 December... It
doesn’t look too ambitious to expect the
uptrend to resume.” And he suspects that
only a break below the $0.9530 level would
indicate a loss of momentum.
Traders keen to get a steer on the direc-
side, market offers are at ¥83.40-60 and the
three weeks high is at ¥83.70. On the downside,
bids remain at ¥82.50 but stop losses are
placed below ¥82.30 which is the Ichimoku
cloud bottom. For a short term view play dollar-
yen from a short perspective and sell on any
rallies towards ¥83.00 with the stop loss above
¥83.50, initial target at ¥82.30 with stops
below to exaggerate the down move to ¥81.70-
80. ETX Capital quotes a fixed 2 basis point
dollar-yen spread.
Excitement has been surrounding the
Canadian dollar as investors await the Bank of
Blow up dollar? tion of the Australian dollar need to be cautious Canada’s interest rate announcement. It is
in the next few weeks. After all, when the water expected to remain at the 1 per cent level as
Picture: REX recedes, you don’t want to still feel like the man the Canadian government wishes to tighten.
in the picture: left on dry land with a blow up The loonie has risen against 12 of the 16 most
doll. traded currency counterparts, and hit levels
against the dollar not seen since 2008. On the
ANALYSIS l The performance of the Australian dollar against the technical side, the relative strength indicator is
dollar over the last year around the 30 mark, which is quite bearish.
1.05 AU$ Capital Spreads is quoting $0.9840-$0.9844.
Last week’s tipster call that sterling-Aussie
1.00 would reach $1.60 was achieved on Friday as
the pair surged to highs around Au$1.6075. It
0.95 seems to have found some technical resistance
there, which has held it in check since then. But
0.90 the momentum still seems strong and could
well see it push through and shoot to
0.85 Au$1.6220 before long. Spread Co offers a
spread on sterling-Australian dollar of $1.6020
0.80 – $1.6032.
Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010 Jan 2011 Daniel Knowles

FOREX ANALYST PICKS

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

My pick: Buy US dollar-Canadian dollar at Ca$0.9800
Expertise: Technical analysis
Average time frame of trades: 1 to 6 weeks
The market has been under some intense pressure and, after managing
to match the lows of last April on the final day of the year, has now
extended declines to fresh multi-month lows into the Ca$0.9800’s. But
daily studies are starting to look a little stretched, leaving us looking for
opportunities to buy rather then selling into the downtrend. Look for a
weekly close back above Ca$1.0100 to officially relieve downside pres-
sure and open the door for a bullish reversal.
My pick: Remain short euro-US dollar at $1.3315
Expertise: Global macro
Average time frame of trades: 1 week to 6 months
I sold euro-dollar on 15 December, expecting the euro to fall in 2011 as growth
in the eurozone underperformed that of the US – narrowing yield spreads in
favor of USD – while the European debt crisis continued. Prices rebounded last
week after an unexpectedly hawkish ECB policy statement, but I expect sell-
ing to resume as EU finance ministers fail to boost the markets’ confidence in
their ability to deal with sovereign threats. I will remain short, targeting
$1.2867 with a stop-loss triggered at a daily close above $1.3499.
My pick: Short sterling-Aussie from Au$1.6040. Long on Canadian dol-
lar-yen above ¥84.00
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 to 7 days
Neither of my breakout scenarios from last week (sterling-dollar and
Canadian dollar-yen) confirmed themselves as we wait for a meaningful
fundamental drive. I’m sticking with the loonie-yen setup; but in the place
of the cable, I am looking at a sterling-aussie setup. After a nine-day rally,
a correction was formed at a Au$1.6050 confluence. An initial stop and
target of 100 points seems reasonable given the higher level of risk.

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 Lifestyle
24 CITYA.M. 19 JANUARY 2011
24

| Motoring WORDS BY
RYAN BORROFF

Electric cars get their city socks on

2011 sees the dawn
of a new breed of
energy efficient cars

T
HIS year will belong to zero emis-
sion cars, particularly the electric
vehicle. A bunch of small city cars
are coming to market with nine of
them officially recognised by the govern-
ment’s incentive grant scheme. And with
city populations increasing, even the
most cynical of car drivers must at least
concede that this could be a good thing.
According to recent research by BMW,
more than half of the world’s population
became urban dwellers rather than living
in rural areas three years ago (in 2007).
They also estimate that by 2050, 70 per-
cent of people on the planet will live in
towns and cities.
To begin with, cars like the Mitsubishi
iMiEV (£23,990, including a £5,000 govern-
ment subsidy), the smart fortwo electric
drive, the Peugeot iON and Citroen CZero,
and the Nissan Leaf (not cheap at £23,990,
including the £5,000 subsidy) and Tata
Vista EV, and later, in 2012, the Toyota
Prius Plug-in, Vauxhall Ampera, and
Chevrolet Volt (around £25,000) will most-
ly look like conventional cars, albeit pow-
ered by alternative super clean motors.
But there’s a subsequent wave of clean,
green city cars that should be even better
and will look quite different. Unlike the
first wave of these cars, the next genera-
tion will be more clean sheet in terms of
their design so they’ll be more innovative
from the tyres up. Rather than having to
share existing parts with their conven-
tionally powered siblings, these cars
should be even more efficient as a result.
Gordon Murray Design’s T.25 city car
project may yet be “a bigger step forward
in vehicle packaging than the Mini was in
1959”, according to its designer Gordon
Murray, famous for his work on the iconic
McLaren F1. Still in development and
shrouded in secrecy, it’s already one of the
most anticipated cars in decades. Called will be built in a whole new way, using This new generation Not to be outdone, BMW is creating a premium car but a vehicle that is sustain-
the T.25 (forecast to be available for as lit- plastic body panels so that, in theory, it of energy efficient new EV brand. Its Megacity car – which able and seen to be cool and cutting edge.
tle as £6,000), the tiny car should be fun, will be possible to introduce different cars will have slick should arrive in 2013 – is another exam- Such innovation should mean the next
low-cost and green and will be hugely types of body styles easily and cheaply on designs and sleek ple of this second wave of EVs that will be generation of city cars – electric or other-
influential. Its T.27 sibling (forecast to the production line. The weight advan- interiors. built differently in order to optimise per- wise – should be a more innovative and
start at £12,000) – an identical electric ver- tage of using plastic, in combination with formance. more exciting to look at and to drive.
sion – is already in development as well. other lightweight materials, will mean far Constructed from carbon-fibre rein- They may even be cool. Which will mean
The T.25 and T.27 will be shorter and greater fuel economy, as much as 80 miles forced plastic and aluminium, the they’ll be a far more enticing proposition
narrower than competitor vehicles yet to the gallon on the combustion-engined Megacity should be cheaper to build too for City drivers. Of which there may well
offer more versatility in terms of their use powered T.25, and greater range for the as it will be made of fewer parts. BMW be many, if the predictions are anything
of interior space. What’s more, these cars electric T.27 too. will target wealthy car buyers who want a to go by.

CAR TALK BY RYAN BORROFF

ORLA KIELY CITROEN COLLECTION
British designer Orla Kiely has created a limited edition version of
Citroen’s DS3. Known for her distinctive prints that usually adorn
purses and mugs, the Orla Kiely Collection DS3 features her trade-
mark acorn and stem patterns on the cars’ roof, floor carpets, head-
rests, windows and tailgate. Just 500 of the cars have been produced,
so you’ll have to be quick if you want a car to match your favourite
handbag. It goes on sale on February 1, for £16,000.
NEW BRITISH SPORTSCAR MODEL
Caterham has developed a prototype race car which hits 60mph in a
mind-blowing 2.5 seconds. The Caterham-Lola SP/300.R, revealed at
this week’s Autosport International Show in Birmingham, was created
in partnership with British racecar-maker Lola for a new one-make
series and the trackday community. The cars feature a supercharged
Ford Duratec engine which delivers about 300bhp. Just 25 will be pro-
duced each year.
MERCEDES-BENZ SLK
Whether you think it’s your dream sports car or a hairdressers’ car par
excellence, the Mercedes-Benz SLK is an iconic sports car, and the third
generation model has just been revealed. It’s the first to showcase new
MB’s “Magic Sky Control” technology on its glass roof; it can go from
almost transparent to a dark tint at the flick of a switch. The car is also
up to 25 percent more economical than the previous model, thanks to its
BlueEFFICIENCY engine and ECO start/stop function.
CITYA.M. 19 JANUARY 2011 Lifestyle | TV& Games 25

BBC1 BBC2 ITV1 CHANNEL4 CHANNEL5 TV PICK

TERRESTRIAL
6pm BBC News
6.30pm BBC London News
7pm The One Show
7.30pm Rip Off Britain;
BBC News
8pm FILM Indiana Jones and
the Last Crusade 1989.
10pm BBC News
10.25pm Regional News
10.35pm The National Lottery
Wednesday Night Draws
10.45pm CHOICE Film 2011
with Claudia Winkleman;
National Lottery Update
11.25pm FILM Amistad 1997
1.55am Sign Zone: Country Tracks
2.50am Ian Hislop’s Age of the Do-
Gooders 3.50am Filthy Rotten
Scoundrels 4.35am-6am BBC News
6pm Eggheads: Quiz show.
6.30pm Great British
Railway Journeys
7pm Simon King’s Shetland
Diaries: Spring brings an influx
of wildlife to the islands.
8pm Michel Roux’s Service: The
trainees take charge of an
exclusive Cheshire brasserie.
9pm CHOICE Edwardian Farm:
Rain disrupts the oat harvest.
Last in the series.
10pm Never Mind the
Buzzcocks
10.30pm Newsnight: Weather
11.20pm The Planets:
12.10am Bowls
1.10am BBC News 4.35am-6am
Close
6pm London Tonight 6pm The Simpsons 6pm Home and Away
6.30pm ITV News 6.30pm Hollyoaks 6.25pm Live from Studio Five
7pm Emmerdale: Cain warns 7pm Channel 4 News 7pm Five News at 7
Jai to stay away from Charity. 7.55pm 4thought.tv 7.30pm Monkey Life;
7.30pm Live FA Cup Football: 8pm Will My Crash Diet Kill Me? Five News Update
Leeds United v Arsenal 9pm CHOICE Mary Portas: 8pm Cowboy Builders;
(Kick-off 8.00pm). Secret Shopper Five News Update
10.10pm ITV News at Ten 10pm The Joy of Teen Sex 9pm NCIS
10.40pm London News 11.05pm Comic’s Choice: 10pm Law & Order:
10.45pm FILM Highlander: Jessica Hynes Criminal Intent
Fantasy adventure, starring 12.10am Shameless 10.55pm Law & Order: Special FILM 2011 WITH CLAUDIA …
Christopher Lambert. 1986. 1.10am My Family’s Crazy Gap Year: Victims Unit: A teenage TV BBC1, 10.45PM
The Pindoria family goes on an The host is joined by journalist Danny
12.50am The Zone; African driving adventure. 2.05am celebrity is attacked.
ITV News Headlines 11.55pm Poker Leigh to discuss the week’s new
Who Do You Think You Were?
2.55am FILM The Sting: 2.30am Dispatches: Fish 12.55am SuperCasino releases, which include Morning Glory
Depression-era comedy drama, Unwrapped 3.20am Food: What 3.55am The Business Inspector and Black Swan.
starring Robert Redford and Goes in Your Basket? 4.15am 4.45am HouseBusters
Paul Newman. 1973. 5.05am- Brothers & Sisters 5am ER 5.10am Wildlife SOS
5.30am ITV Nightscreen 5.45am-6.30am Countdown 5.35am-6am House Doctor

SKY SPORTS 1 BRITISH EUROSPORT LIVING 11pm Alan Carr: Chatty Man 5.30am-6am How Does That
SATELLITE & CABLE

6.55pm Live Copa Del Rey
Football 11.30pm Football’s
Greatest 12am Scottish Cup
Football 1.30am Copa Del Rey
Football 3.30am You’re on Sky
Sports! 5am Football’s
Greatest 5.30am-6am
European Tour Weekly
SKY SPORTS 2
7pm Inside the PGA Tour
7.30pm Live Greyhound Racing
10pm You’re on Sky Sports!
11.30pm Great Run Series
12am Test Cricket 1am
Watersports World 2am
Sports Adventure 2.30am Test
Cricket 3.30am Cycling 4am
FIFA Futbol Mundial 4.30am-
5am Great Run Series
SKY SPORTS 3
7pm Test Cricket 8pm Live
PGA Tour Golf 11pm European
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QUICK CROSSWORD
   

SUDOKU KAKURO
7 27 14 21 39 8 22 
10 21 8
  
8 13 12
Place the numbers from 1 to 9 in each empty cell so that each 11 10  
row, each column and each 3x3 block contains all the numbers Fill the grid so that each block 16 34
41
from 1 to 9 to solve this tricky Sudoku puzzle. adds up to the total in the box 6 4  
above or to the left of it. 20 14 6
28 7 
You can only use the digits 1-9
  and you must not use the
11 9 12
45   
same digit twice in a block.
  The same digit may occur 5 30  
5 29
     more than once in a row or
column, but it must be in a 12 24
3
10
9
11
 
17 19
   separate block.
16 
17 23 9
   10 15 10
 

   ACROSS DOWN
1 Salve, ointment (4) 1 Fundamental (5)
    
  WORDWHEEL R A
3
6
7
Provide a brief summary (5)
Having a strong healthy body (4)
Box lightly (4)
2 Trading
place (4)
3 Practise (8)
Using only the letters in the Wordwheel, you have 9 4 Draught
  ten minutes to find as many words as possible,
P E 10
Decompose (3)
Pupil (7) animal (9)
none of which may be plurals, foreign words or
proper nouns. Each word must be of three letters P 12
13
Container used for drinking (3)
Fruit of a rose plant (3)
5 Raise (3,2)
8 Disparaging
LAST ISSUE’S or more, all must contain the central letter and
letters can only be used once in every word. There
N D 14 Government order imposing remark (9)
11 Characterised
SOLUTIONS KAKURO is at least one nine-letter word in the wheel.
S A 15
a trade barrier (7)
Primitive fish (3) by a lack of
16 Chafe (3) partiality (8)
QUICK CROSSWORD 18 15 Harmless
SUDOKU
5 7 9 2 1 2 8 Ability to walk steadily on the
3 9 8 6 7 5 7 9          deck of a pitching ship (3,4) tropical house-
S L A C K S N C
A N T R O C H E
1 4 7 2 3 2 1 6
         20 The 22nd letter of the lizard (5)
B O N N E U A
2 8 8 9 7 4 6
         Greek alphabet (3) 17 Carried (5)
O O S P O N S O R 2 5 2 1 3 8
T E T R A C U S E 8 3 4 5 4 9
        
21 Edward __, British artist and 19 Scottish
         valley (4)
A
G
A
O T
U G
D
H
R E
P
E V
V
E
5 1 3 4 7
5 6 7 8 9
3
6 9
WORDWHEEL         
22
writer of nonsense verse (4)
Fencing sword (4)
E R E M I T E R R         
G A R F I B S
3 2 1 9 5 4 7 8 The nine-letter word was 23 Admitted to something (5)
T A H I T I O A 9 6 5 4 2 1 3 7         
N D P L U R A L 8 4 9 2 2 1 5
CINEMATIC          24 Appellation (4)
 Sport
26
Van Persie was a member of the Arsenal
side which won the FA Cup in 2005 Pic: PA
Cup success is a
real possiblity,
says Van Persie
FOOTBALL
▲
ARSENAL striker Robin van Persie
admits Arsenal need a major improve-
ment on their last two cup perform-
ances if they are to get the better of
Leeds this evening.
The Gunners were well below par in
their FA Cup third round tie at
Emirates Stadium 10 days ago, when
they required an 89th minute Cesc
Fabregas penalty to earn a replay,
while the first leg of the Carling Cup
semi-final ended in embarrassing
defeat at Ipswich last week.
Van Persie has identified this compe-
tition as an opportunity to end the
club’s six-year trophy drought, but
accepts games against lower league
opposition cannot be taken lightly.
“The last two cup games were not
good enough,” he said. “This game is
vital because we have a big chance. If
we win against Leeds, then after that it
will be a game against Huddersfield.
“I have looked at the draw, there are
a lot of other Premier League teams
playing each other. Lots of teams will
go out, so we have big chances.”
Murray through to face Marchenko
▲
TENNIS
BY TOM CLARKE
BRITISH No1 Andy Murray banished
his pre-tournament jitters by cruising
into the second round of the
Australian Open.
The Scot sealed his progress Down
Under after opponent Karol Beck
retired with injury with the No5 seed
leading 6-3, 6-1, 4-2.
Murray, still hunting a first grand
slam, entered the tournament on the
back of an unconvincing end to 2010,
with a fourth-round exit from the US
Open leading to his slip to fifth in the
world rankings.
And he conceded to having doubts
about his form before the tourna-
ment began, saying: “Everyone
always has slight doubts before the
start, you are always a bit nervous. It’s
nice to be through to the second
round with no drama.”
The 24-year-old took the opening
set after breaking Beck’s first service
game and then breezed through the
second set as his game improved.
Slovakian Beck called a medical time-
out at 2-1 down in the third set and
conceded defeat after dropping
another service game. Murray faces
Angry Spurs fans planning
to step up Olympic protest
▲
FOOTBALL
BY FRANK DALLERES
TOTTENHAM supporters are plan-
ning sit-in protests if the club press-
es ahead with controversial plans
to leave their home of 112 years
and move five miles across London
to the Olympic Stadium in
Stratford.
Aggrieved fans desperate for
Spurs to stay in their home bor-
ough say they are also considering
boycotting games, as they and West
Ham prepare for next week’s deci-
sion on who will take over the
arena after the 2012 Games.
The development comes after
Crystal Palace announced they
hope to relocate to the National
Sports Centre, a move that could
scupper Tottenham’s plans to rede-
velop the athletics facility as part
of its Olympic project.
Hundreds of fans carrying ban-
ners protested at
Tottenham’s proposed
move in the streets
surrounding
White Hart Lane
before Sunday’s
draw with
Manchester
United.
We Are N17,
which opposes
the switch to
Stratford, said
yesterday that it
plans to step up its
Murray will face Illya Marchenko in round two
something of an unknown quantity
in the second round in Ukrainian
Illya Marchenko. “I don’t really know
him that well,” Murray added. “I saw
him play a little bit when Ukraine
played Great Britain in Davis Cup –
he has improved a lot since then.”
Murray, who reached the final of
last year’s tournament, was joined in
the second round by world No1
Rafael Nadal who also progressed fol-
CITYA.M. 19 JANUARY 2011
campaign and will consider boy-
cotting home games if the Olympic
Park Legacy Company next week
picks Spurs over West Ham.
“Those are exactly the type of
measures we’ll take,” Tim Framp, a
spokesman for the group, told City
A.M. “It doesn’t stop at the pre-
ferred bidder stage – it doesn’t stop
until the fat lady sings. We may do
a sit-in protest after a game. We
don’t want to leave Tottenham, so
what could be more appropriate?”
The Tottenham Hotspur
Supporters’ Trust (THST) says its
members are opposed to a move
away from north London by a ratio
of two to one, but said it would
consult before joining protests.
Spurs hope to save around
£200m by relocating instead of
building a new ground next to
White Hart Lane, but THST chair-
man Bernie Kingsley told City A.M.:
“We worked with the club before
Christmas and those figures
weren’t on the table or
explained.”
Tottenham have a
strong economic case
for being preferred
by the Olympic Park
Legacy Company
but their plan to
scrap the athletics
track has caused a
swell of support for Spurs fans are to stage
West Ham, who also more vigorous protests
argue their proximi- against the move from
ty makes them the log- White Hart Lane
ical choice.
Picture: GETTY
SPORT | IN BRIEF
White admits interest in RFU job
RUGBY UNION: South Africa’s World
Cup winning coach Jake White is consid-
ering applying to become the Rugby
Double-bagel woe Football Union’s new performance direc-
to. “I am interested but I am waiting for
for fading Safina a detailed job description and to find out
how much responsibility the director will
have," said White, who is spending this
week with London Irish as a consultant.
DINARA Safina became the first
former world No1 to suffer a grand England pondering pace options
slam double-bagel as she crashed CRICKET: England seam quartet Ajmal
out of the Australian Open to Shahzad, Chris Tremlett, Steven Finn
Belgium’s Kim Clijsters. The and Chris Woakes have been left sweat-
Russian, who has plummeted 74 ing on their World Cup places after
places in the world rankings in just bowling coach David Saker admitted
15 months, lost 6-0, 6-0 to third conditions in the sub-continent are likely
seed Clijsters in just 44 minutes. to mean there will be only four spots left
Elsewhere there were straight-set for pace bowlers. England name their 15-
victories for second seed Vera man squad today, and with James
Zvonareva, Samantha Stosur [5] Anderson, Tim Bresnan and Stuart Broad
Picture: ACTION IMAGES and Serbian Jelena Jankovic [7]. certainties, there is just one spot left up
for grabs. Saker said: “If we get condi-
lowing an opponent’s injury. The tions that would be right for four seam-
Spaniard was 6-0, 5-0 ahead when ers we probably would go with four.”
Marcos Daniel retired hurt. HIGHLIGHTS | TODAY IN MELBOURNE
Should Murray make it to the Olazabal confirmed as skipper
quarter-finals he is expected for face Men’s Singles: GOLF: Jose Maria Olazabal has been
Robin Soderling, who defeated R Federer (SUI) [2] v G Simon (FRA) unveiled as Europe’s Ryder Cup. The
Italian Potito Starace 6-4, 6-2, 6-2. N Djokovic (SRB) [3] v I Dodig (CRO) Spaniard, 44, succeeds Colin
Home favourite Lleyton Hewitt Women’s Singles: Montgomerie and will become the third
crashed out to David Nalbandian in a continental European to lead the side
epic encounter which ended 3-6, 6-4, C Wozniacki (DEN) [1] v V King (USA) when the 2012 tournament takes place
3-6, 7-6 (7-1), 9-7. J Henin (BEL) [11] v E BALTACHA (GBR) a the Medinah Country Club in Illinois.
CITYA.M. 19 JANUARY 2011
Tottenham beat
Chelsea in battle
to sign Pienaar
SOUTH AFRICA international
Steven Pienaar has completed his
move to Spurs after signing a four-
and-a-half year deal with the north
London club yesterday.
The 28-year-old midfielder
passed a medical before putting
the finishing touches to his transfer
from Everton for a fee believed to
be between £2.5m and £3m.
A Spurs official statement read:
“We are delighted to announce that
we have reached agreement with
Everton and Steven Pienaar for the
player's transfer to the club.”
The capture of Pienaar repre-
sents something of a coup for
Spurs, who beat off competition
from Chelsea after the champions
failed to agree personal terms.
Meanwhile, defender Jonathan
Woodgate made his first appear-
ance for the club in 14 months for
a Spurs XI against QPR reserves in
a training-ground friendly. The
injury-plagued 31-year-old played
45 minutes.
C
Easter: I’ll grab England
armband with both hands
▲
EXCLUSIVE
BY FRANK DALLERES
ENGLAND No8 Nick Easter says he
would relish the chance to lead his
country into the Six Nations if asked
to take over as captain from the
injured Lewis Moody.
Regular skipper Moody was yester-
day ruled out for up to six weeks,
meaning he is likely to miss
England’s first three matches of the
competition, starting in Wales on 4
February.
Harlequins star Easter (right) is
favourite to be handed the armband,
as he was when Moody was rested in
November against Samoa, and he
would be delighted to wear it again.
“I thoroughly enjoyed being captain
against Samoa in the autumn and if
the opportunity came again I’d grab it
with both hands,” he told City A.M.
“But I’ve got to concentrate on my
own performance first. We’ll wait
and see. Mike Tindall captains
Gloucester [and is another option] so
Sullivan backs Grant
▲
FOOTBALL
BY JAMES GOLDMAN
WEST HAM manager Avram Grant
has the “100 per cent” backing of the
club’s board, according to co-owner
David Sullivan, after it was con-
firmed that the Israeli would remain
in the Upton Park hotseat yesterday.
The former Portsmouth and
Chelsea boss was widely expected to
be replaced by Martin O’Neill after
Saturday’s 3-0 drubbing at the hands
of Arsenal appeared to hammer the
final nail in Grant’s coffin.
But after O’Neill, who has been out
of the managerial game since his
shock decision to leave Aston Villa
last summer, opted against leading
the Hammers survival mission,
Sullivan and the board backed under-
fire Grant (right).
“The entire board is 100 per cent
behind Avram,” said Sullivan. “He is a
decent person who deserves support.
Boss facing moment of truth
FOOTBALL COMMENT
FRANK DALLERES
OMPETENT coach unfairly tar-
nished by hopeless causes in
Portsmouth and now West
Ham, or under-qualified charis-
we’ll have to see what [manager]
Martin Johnson decides.”
Flanker Moody, who injured knee
ligaments playing for Bath at the
weekend, joins fellow forwards
Courtney Lawes and Tom Croft in
the treatment room. Easter admits
their loss is untimely but is confi-
dent England have enough talent
in their ranks to pick up where an
encouraging November left off.
“Every time I look another
player seems to be out
injured,” he joked.
“Three of the starting
forwards are out now
but we’ve got strength
in depth. What will have to be spot
on are the details when we go
away to Portugal next week [for
a training camp].
“There shouldn’t be any
fear that we’ll lose momen-
tum from the autumn –
it’s a squad effort. It’s
great that the first game
is in Cardiff – there’s no
“West Ham United is a club that
does the right thing and the right
thing at this time is to support the
manager. We will do all we can to
bring in players over the next 12
days and once we have achieved
that we hope it will keep us up. I
urge all supporters to rally behind
the club at this time.”
An officical club state-
ment added: “West Ham
are committed to retain-
ing Avram Grant as man-
ager and have
identified potential
transfer targets to give
us the best chance of
retaining Premier
League status.”
The Hammers also
vowed to find and
punish the informant
who told a national
newspaper that vice-chair-
man Karren Brady had
played the leading role in
ma-void still dining out on his fleet-
ing association with a great Chelsea
side? Whatever you might think of
Avram Grant, he certainly divides
opinion like few other managers.
Grant’s supporters will point to
the fact he led Chelsea to the
Champions League final in 2008 –
something no other Blues boss, not
even Jose Mourinho, has done before
or since – and finished second in the
Premier League that same season.
They might also argue that his dour
manner makes him an easy target,
and that Portsmouth’s tawdry slide
into administration made it impossi-
ble for him to avoid relegation.
better place it could be.”
England will call up a replacement
for Moody on Monday, with Tom
Wood, Chris Robshaw, Andy Saull and
Phil Dowson candidates for promo-
tion from the Saxons squad.
Easter, meanwhile, is refus-
ing to dream of club glory,
despite a run of seven straight
wins taking Quins to
fourth in the
Premiership and
to the brink of
the Amlin
Challenge Cup
last eight.
“We’ve been
in this position
before,” he said.
“Two years ago we were
second in the league
and in the semi-finals in
Europe, but we ended
up with nothing. We’re
not looking any further
than Bayonne [on
Saturday].”
27
Sven’s Eastlands
return a losing one
attempting to undermine Grant.
SVEN-GORAN ERIKSSON’S return to
Eastlands ended in defeat as
“West Ham United categorically Manchester City booked their place
deny the allegations made with in the FA Cup fourth round with a 4-
regard to Karren Brady,” contin- 2 win over Leicester.
ued the statement. “West Ham Carlos Tevez put City ahead before
intend to identify the source of Paul Gallagher’s immediate response
these unhelpful and untrue from the penalty spot. Two goals in
comments and remove them 90 seconds before half-time, from
from the club.” Patrick Vieira and Adam Johnson,
Meanwhile, one of put the favourites in command.
Grant’s main trans- Lloyd Dyer gave Leicester late hope
fer targets, Paris but Aleksandar Kolarov sealed the
Saint Germain win with his first goal for the club.
striker Peguy
Luyindula, 31,
admits the
idea of a move
Bent puts seal on
to the capital
is a tempting
prospect.
record Villa move
He said:
“West Ham is ASTON VILLA have smashed their
London, and I have transfer record by paying £18m – a fee
half my family in which could eventually rise to £24m –
London. In football, to Sunderland for England striker
nothing is impossible.” Darren Bent.
Bent, who signed a four-and-a-half
year deal, denied his move was moti-
vated by money. He said: “I could could
have gone to West Ham for more
money but chose Spurs for footballing
reasons. It’s the same here.”
The Israeli’s critics, meanwhile,
insist it was the team he inherited
Babel looks set for
from Mourinho, led by senior play-
ers, that came within a missed
penalty of European glory that night
Hoffenheim switch
in Moscow, and that Grant would
have struggled to keep Pompey up HOLLAND forward Ryan Babel looks
anyway, as he has West Ham. set to part company with the
But now that Grant has the back- Liverpool after an offer from German
ing of the board and money to side Hoffenheim was accepted.
spend, he has the chance to show his
true colours once and for all. Failure
Babel cost Liverpool in excess of
£10m when he arrived from Ajax in
to avoid the drop – or the sack – 2007 but scored just 22 goals in 146
would severely dent his career in appearances. Liverpool are expected
this country, but few could deny him to use the funds from the Babel
credit if he defied the odds and transfer to fund a move for Ajax’s
steered the Hammers to safety. £15m rate striker Luis Suarez.
City firm to put £1m into fencing
towards GB teams, the British
FENCING
▲
Fencing National Academy and
increasing grassroots participation in
CITY insurance firm Beazley has the sport.
pledged £1m of funding for British Richard Kruse, a leading member
fencing to boost hopes of Olympic of the British fencing foil team, said:
gold at London 2012. “Our target [for 2012] is one medal
The five-year partnership comes at and if we don’t produce that then
a crucial time for the sport following financially with UK Sport we would
59 per cent cuts in funding from UK be in a lot of trouble so external spon-
Sport. The investment will be put sorship is a good thing.”
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