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FTSE 100 5,875.93 -14.33 DOW 12,883.95 +5.75 NASDAQ 2,915.86 +11.78 /$ 1.58 -0.01 / 1.19 -0.01 /$ 1.32 unc

Greek talkspostponedonce more

GREEK talks were adjourned yetagain late last night, with noagreement reached between sen-ior government officials over anurgently needed new bailout.

Pension reforms are believed tostill be a stumbling block, withGeorge Karatzaferis leader of thenationalist LAOS party particu-larly opposed to the measures.

Karatzaferis was the first toleave the meeting that spilled onuntil after midnight, having

begun later than scheduled yester-day evening. This morning he willrejoin Prime Minister LucasPapademos and other heads ofthe coalition parties in a bid tofinally patch together a proposal.

Even if a plan is agreed thismorning, the wider Greek cabinet

will then have to give its approval,and a vote is still scheduled forparliament.MORE ON GREECE: P4

BY JULIAN HARRIS

EUROZONE

STEPHEN Hester, chief executive ofRBS, yesterday admitted he was strug-gling to run the bank as a fully com-mercial enterprise due to politicalpressure, a situation that has causedoutcry among some of RBSs biggestprivate shareholders.

City A.M. asked Hester whether hefelt able to run RBS as a fully commer-cial proposition, a condition he insist-ed upon before taking the job and alsoa legal obligation for UKFI, the stateagency that manages the taxpayers83 per cent shareholding in RBS.

Hester, who spent the day in inter-views, said: We are trying to operateas a commercial company whileunderstanding the sensitivities of theenvironment we operate inwe aretrying to, it does involve some compro-mise to our goals and trying to steerthe best route.

He also suggested the political envi-ronment could hit the banks recov-ery: Provided that we have the timeand space to recover and to operate asa commercial company and thats aprovided in RBS theres a strongcompany waiting to get out and pro-ducing good results before the cost ofclean-up. But he warned: For the gov-ernment to get its 45bn back,investors need... to think RBS is a suc-cessful, commercial company, safe,making good profits and managed on

a commercial basis.Richard Buxton of Schroders, whosefunds own 1.6 per cent of the bank,told City A.M. yesterday that he has

BY JULIET SAMUELBANKING

BB

C/T

WITTER

www.cityam.comIssue 1,567 Thursday 9 February 2012 FREE

raised his concerns about politicalinterference with UKFI. In the lastcouple of months, the hands-off UKFIstance that water has been mud-died, he said. We did have a conver-sation with UKFI expressing ourconcerns about the extent to which

UKFIs position has been compro-mised. And its clearly a sad fact Imsure [Hester] would agree that we

would wish that muddying of the

waters wasnt repeated. A spokesman for the Treasury

rejected the idea and said UKFI wasbeing run at arms length.

But Buxton said: We [Schroders]are reasonably unusual in still havinga substantial stake. There are large

numbers of investors who dont ownit precisely because theyre terrifiedby state interference and it not beingmanaged for commercial ends.

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28/11/11 till 01/01/12 is 92,879

BUSINESS WITH PERSONALITY

City A.M. also understands that atleast five other major RBS sharehold-ers have raised the same concerns

with UKFI. They are particularlyangered by the bonus row. Oneinvestor said: No commercial institu-tion can be run with this kind of pub-lic scrutiny. Theres a reason why civilservants dont get paid that much. If

youre under that kind of scrutiny youcant have any economics.

It is understood UKFI is trying todefuse the bonus row, potentially bypegging awards explicitly to somekind of small firm (SME) lending orshare price target.

But there are concerns this coulddistort management priorities andrun afoul of FSA pay guidelines.Hester yesterday said that althoughRBS has a 25-30 per cent share of SME

banking, it accounts for 40-50 per centof lending. This could fuel fears stan-dards are being lowered under pres-sure.

Hester also warned that this kindof spotlight makes it harder to keepand attract people and to motivatethem...it will be harder now... As youget to more senior levels people getmore worried about personal expo-sure to controversies and theyrescarcer animals.

He said that he had considered quit-ting but concluded it would be indul-gent. My own decision-making

varies from moment to moment but

whenever I receive approaches [forother jobs] I give the same answer,that I want to win with RBS.

CITY VIEWS: P17

INVESTORS HIT BACK

OVER RBS MEDDLING

HARRY ACQUITTEDCLEARED REDKNAPPWANTED BY FA P30-31

Stephen Hester yesterday finally broke his silence on the bonus row

CAPELLO QUITSENGLAND BOSS GOESAFTER TERRY ROW P30

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BARCLAYS Capitals last-minute inclu-sion in the adviser list for theGlencore-Xstrata merger, which haslifted its place in the ThomsonReuters league table for M&A world-wide, has been challenged by one ofits rivals.

Thomson Reuters, which has liftedBarCap from eighth to sixth follow-ing the banks declaration that it isan adviser on the 56bn merger, said yesterday that a rival had com-plained.

The challenge focuses on the roleof BarCap and whether they shouldbe credited as an adviser on the deal,said Leon Saunders Calvert, ThomsonReuters head of global deals and pri-vate equity.

Calvert said the bank now neededto provide proof of the advisory workit was providing on the bid. Theyneed to provide an engagement letterand we want to see details of whatthey advised on. If they provide suffi-cient proof which is consistent withthe details we expect, they will retaintheir credit. Otherwise their accredi-tation will be removed from thetransaction.

News of BarCaps inclusion as anadviser to the deal took bankers bysurprise when they heard about it.

One of the 18 named bankers work-ing on the deal over the past fewweeks said: Weve not seen hide norhair of BarCap over the past fewweeks.

The extent to which one majortransaction can influence the rank-ings, and the suddenness of BarCapsarrival on the scene, has promptedsome to criticise the way the tablesare put together.

One of the complaints is that somewidely followed tables rank the num-ber and value of deals, and one banksadvisory work is given the sameweight as anothers, regardless of theamount of work.

In the case of Xstrata and Glencore,for example, banks such as Citi andMorgan Stanley, JP Morgan, Nomuraand Deutsche may have been workingon the deal for weeks and yet will getthe same weighting in the leaguetable as BarCap, which came in at thelast minute.

Thats pretty tough for an adviserwho has just endured several sleep-less nights, said one banker.

Yesterday advisers on the deal weretalking to shareholders.

BarCaps role

in 56bn dealis challenged

ONLINE discount website Grouponposted a $42.7m (27m) net loss for itsfourth quarter despite almosttripling revenue to $506.5m in itsfirst ever earnings report as a publiccompany.

However, the loss attributable toshareholders, which Groupon putdown to particularly high tax rates in

certain countries, decreased 89 percent on last year.The daily deals website reported its

first quarterly operating income inthe black since expanding overseas inmid-2010, reaching $15m comparedto an operating loss of over $336m inthe same period last year.

Full year revenues increased a stag-gering 419 per cent to $1.6bn, in line with analysts expectations, whilelosses from operations more than

halved to $203.4m.The company said it now has 33musers, up 20 per cent on last quarter.

Groupon hit the market inNovember for $20 a share, but wasdisappointed when its stock whichinitially jumped to $28 fell tounder $15 within weeks.

Shares have since returned toabove their IPO price, but plummetedalmost 15 per cent in after-hours trad-ing yesterday to $21.

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BY LAUREN DAVIDSONTECHNOLOGY

News 3CITYA.M. 9 FEBRUARY 2012

2012 WORLDWIDE ANNOUNCED ADVISER RANKINGS

Adviser Rank value (US$m) Rank Mkt Share% No of deals

Citi 73,136.4 1 35.6 15

JP Morgan 72,678.7 2 35.3 25

Goldman Sachs 67,537.0 3 32.8 17

Deutsche Bank 64,534.3 4 31.4 15

Morgan Stanley 64,061.8 5 31.2 33

Barclays Capital 60,985.2 6 29.7 15

Nomura 54,556.8 7 26.5 12

B of A Merrill Lynch 18,674.7 8 9.1 14

Credit Suisse 14,064.2 9 6.8 13

Moelis 8,341.4 10 4.1 14

INCLUDING GLENCORE/XSTRATA

(+2)*

(+9)*

SOURCE: THOMSON REUTERS

*Number in brackets represents the places each bank has climbed after Xstrata deal

BYDAVID HELLIER

EXCLUSIVE

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SHARES in British mobile paymentsbusiness Bango rocketed yesterday asthe company did a deal with Facebook,despite both parties refusing to dis-close the terms of the agreement.

Bango said in a statement it willprovide payments services toFacebook. This follows last weeksconfirmation after a rise in shareprice around the time of FacebooksIPO filing that the Cambridge-basedcompany was in the final stages of dis-

cussions with a leading platform. While 85 per cent of its revenues

come from advertising, Facebook doesnot currently display adverts on itsmobile platform.

This deal reflects Facebooks moveto capitalise on its mobile market, which currently accounts for half ofthe websites monthly active users, inthe run-up to its long awaited IPO.

Bango has been considered a mar-ket leader in carrier billing, whichallows consumers to put payments for

purchases via mobile on their networkbill, since its 2005 deal with AT&T.

However, Bango also offers analyticsfor mobile websites and could also beworking with Facebook in this area.

A similar level of secrecy surround-ed the deal Bango signed withAmazon in December which has beenlinked to the retail giants app store forAndroid, featured on the Kindle Fire.

The AIM-listed company also pro- vides mobile payments services toRIMs App World on BlackBerry.

Bingo shares jumped 40 per cent toclose at 137.5p.

Facebook dealsends Bangostock sky high

NETWORK equipment maker CiscoSystems last night promised furtherrevenue growth after its second quar-ter results beat estimates thanks to arestructuring, leading to a dividendincrease.

The company, a sector bellwetherbecause of its global scale and diverseclient base, forecast five to seven percent growth in fiscal third quarter rev-enue.

That translates into a sales outlookof $11.4bn to $11.6bn (7.2bn to7.3bn), matching or slightly exceed-ing Wall Streets average forecasts.

Executives also forecast gross mar-gins of 61.5 to 62 per cent in the fiscal

third quarter ending April.Broadly speaking, people expecteda good quarter. This is probably a littlebetter than expected and the dividendis an added surprise, said MizuhoSecurities analyst Joanna Makris.

Revenue rose 10.6 per cent from theyear-ago quarter to $11.5bn. Analystson average were expecting $11.23bn.

Net income grew to $2.2bn, or 40cents per share, from $1.5bn, or 27cents share, a year earlier.

Credit card giant Visa posted afirst quarter profit of $1bn, up 13 percent, as revenues grew 14 per cent to$2.5bn.

BY LAUREN DAVIDSON

TECHNOLOGY

News4 CITYA.M. 9 FEBRUARY 2012

BYHARRY BANKS

TECHNOLOGY

Cisco trumps estimatesand increases guidance

ANALYSIS l Bango

p

2 Feb 3 Feb 6 Feb 7 Feb 8 Feb

160

130

140

150

120

110

100

137.508 Feb

Greek bailout held up by politicians refusal

to accept plans to cut the cost of pensionsGREEK Prime Minister LucasPapademos said last night that onefinal area of disagreement requiresfurther elaboration and discussionwith the troika, as talks over a newbailout package dragged on.

The troika the European Union,

European Central Bank andInternational Monetary Fund requires Greece to implement reformsand austerity measures to ensure itsdebts become sustainable beyond thenext tranche of aid.

Many reforms are thought to havebeen accepted by senior members ofthe coalition parties, including a sig-nificant reduction in the youth mini-

mum wage, and the selling off ofmore state-owned assets.

There was broad agreement on allthe programme issues with the excep-tion of one, Papademos said in theearly hours of this morning. Theexception is believed to be cuts to pen-sions. Negotiations to overcome thehurdle will take place immediately[today], Papademos promised.

Lenovo resultsbeat forecasts

LENOVO Group, the worlds second-

biggest PC maker, this morning post-ed a 54 per cent rise in third-quarternet profit, beating expectations.

But growth at Hong Kong-listedLenovo slowed for a third straightquarter on weak global PC demandand a shortage of components.

The firm, which last year edged outDell to rank behind market leaderHewlett Packard in PC sales, reporteda net profit of $153.46m (97.1m) forthe three months ended December,up from $99.65m a year earlier.

The company has been diversifyinginto smartphones and tablet PCs withits LePhone and LePad devices.

BY JULIAN HARRIS

EUROZONE

BYHARRY BANKS

TECHNOLOGY

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C I T Y H A L L , T H E Q U E E N S W A L K , L O N D O N , S E 1 2 A A W W W . L O N D O N . G O V . U K

Dear captains of industry,

As Mayor of London, Im determined to find ways to helpget business moving again and propel our great cityseconomy forward.

With the Olympic and Paralympic Games, 2012 is set to be anextraordinary year, but not without its challenges for our youngpeople. Talented individuals are our citys future, so Im askingyou to look for opportunities where you could take on a

dynamic apprentice.Together we have already created over 50,000 apprenticeshipsin London, but that is only the beginning. They boost productivity,theyre good for your company and they increase loyalty as well.Whats more, the Government could provide up to 100% fundingfor the training of your apprentice.

I believe apprenticeships are absolutely vital, not just forLondoners but for the bottom line of the companies concerned.My office and the National Apprenticeship Service are ready tohelp so get in touch. Contact [email protected] vis it www.london.gov.uk/apprenticeshipsYours,

Boris JohnsonMayor of London

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BRITISH Airways and Japan Airlineshave agreed a revenue-sharing dealfor flights between Europe and Japan, potentially giving theironeworld alliance more competi-tive muscle.

The joint venture would lead tomore choice of flights and couldlead to more routes, BAs parentInternational Airlines Group (IAG)said yesterday.

Despite the difficulties the

Japanese aviation market has facedin recent years, we have great confi-dence in JALs business outlook andthe overall markets futureprospects, IAG chief executiveWillie Walsh said.

Walsh has previously indicatedthat IAG, formed between BA andSpanish airline Iberia, was keen topursue a joint venture with JAL,praising the carriers recovery fromlast years devastating earthquakeand tsunami.

The Japanese airline, whichforms part of the oneworld alliance with BA and American Airlines,emerged from bankruptcy lastMarch and is planning to relist thisyear.

The group plans to raise morethan 500bn (4.1bn) ahead of re-listing its shares as early asSeptember.

JAL has submitted an applicationto the Japanese government seek-ing antitrust immunity and IAG was in contact with the EuropeanUnion, IAG said.

BA and JapanAirlines agreerevenue share

GENERAL Motors is preparing for aclash with unions following reportsthat the carmaker is planning to shutdown manufacturing plants in theUK and Germany.

The firm is set to report a quarterlyloss of more than $300m (189m) atits troubled Opel unit next week.

The division branded as Vauxhallin the UK is in the middle of a 100-day restructuring plan designed toslash costs.

General Motorsconsiders UKfactory closure

News Corp, led by Rupert Murdoch, generated $8.98bn in the quarter Picture: GETTYBYHARRY BANKS

AVIATION

MANUFACTURING


ANALYSIS l International Airlines Group

p


188

190

192

186

184

182

183.008 Feb

News Corp results rocketdespite hacking expenses

NEWS Corp forked out $104m(65.8m) in the second half of 2012due to phone-hacking investigations,of which 15 per cent was paid out tovictims with the remainder related tolawyer and adviser fees.

The Murdoch-controlled companygrew revenues two per cent to $8.98bnin the second fiscal quarter, with prof-its up 65 per cent to $1.06bn.

News Corps film unit, whichincludes 20th Century Fox produc-tions, more than doubled its profits to

$393m, largely spurred by Oscar-nom-inated movie The Descendants.

The media conglomerates cablenetwork grew 20 per cent in the quar-ter to $882m, but profits from its pub-lishing unit dropped 43 per cent to$218m due to lower advertising salesand ongoing repercussions of the Julyclosure of The News of the World.

News Corp subsidiary News GroupNewspapers settled claims from a fur-ther 19 phone-hacking victims yester-day, dishing out 40,000 to SteveCoogan, 45,000 to Simon Hughes MPand 68,000 to Paul Gascoigne.

MEDIA

THE US Treasury Department yester-day enlisted five EU nations to helpcrack down on offshore tax evasionby Americans and ease the burdensthe effort has imposed on manybanks and f inancial institutions.

The new law, entitled FACTA, gives banks in the UK, France, Germany,Italy and Spain simpler data disclo-sure agreements starting in 2013, inexchange for information on US taxavoiders.

US makes a taxdeal with banksPOLITICS

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TIME Warner rounded off a better-than-expected year on the back of itsgrowing cable networks and the lucra-tive final Harry Potter film.

The New York-based media andentertainment company reportedfourth quarter profits of $772m(488m), up slightly on last years$766m, from a five per cent rise inquarterly revenue to $8.2bn.

This contributed to a full year rev-enue of $28.9bn up an annual eightper cent in Time Warners highestgrowth rate since 2003 and pro-duced $2.9bn in profits.

However, the company ended the year with 24 per cent increased netdebt of $16bn, due to share repurchas-es and investment spending.

The eighth installment of the Harry

Potter series boosted full-year revenuesfor Time Warners filmed entertain-ment division nine per cent to $12.6bn.

The most successful franchise infilm history will keep the money pour-

ing in due to continuing DVD salesand Orlandos Wizarding Worldtheme park, soon to launch in LA.

Hotly-awaiting films hitting screensin 2012, such as The Hobbit and TheDark Knight Rises, are expected to giveTime Warner another bumper year.

However, Time Warners largestchunk of revenue in 2011 came fromits cable networks, which grew nineper cent to $13.7bn.

Subscription fees at its networks,

including HBO, rose five per cent to$3.5bn, while cable advertising rosetwo per cent, driven by non-US mar-kets.

The firm also announced a new$4bn stock repurchase authorisationby its board.

Chief executive Jeff Bewkes said thecompany would invest aggressivelyand expand internationally this year.

Shares rose three per cent to $39.24before closing flat at $38.11.

Harry Potter conjures upprofits for Time Warner

Time Warner rolled in revenues of $28.9bnin 2011, spurred by the latest Harry Potter

BY LAUREN DAVIDSONENTERTAINMENT


CANACCORD Financial said yesterdayits third-quarter profit plunged 94 percent on a weak market and one-timecharges, but the core result toppedanalysts estimates, promptinginvestors to push the Canadian bro-kerages shares higher.

Canaccord, which agreed to buyLondon stockbroker Collins Stewartin December, said it earned C$2.5m(1.59m) in the final quarter of 2011.

Revenue in the quarter dropped 42per cent annualised to C$147.9m, asslumping market activity hurt invest-ment banking and trading activity. Thefigure was a 24 per cent improvementon the previous quarter, however.

Advisory revenue from subsidiaryCanaccord Genuity rose 53 per cent toC$38.5m, however, due to robustcross-border merger activity, the com-

pany said. The firm booked costs of C$2.7m

related to its purchase of CollinsStewart, which it expects to befinalised on 22 March.

Canaccord saysweak marketsdented earnings

BROKING

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London netsfootball cashcapital titleMANCHESTER clubs might currently

be bullying their southern rivals inthe Premier League, but London has

been pronounced the undisputedfootball finance capital of the world.

London boasts three teams Arsenal, Chelsea and Tottenham among Europes richest 11 clubs, withtwo more West Ham and Fulham inside the top 40, according toresearch published today by Deloitte.

The figures, based on last season,place the Gunners fifth, the Bluessixth and Spurs 11th in the continent-

wide survey based on annual revenue.The Hammers were 29th and Fulhamjust outside the top 30.

Deloittes Dan Jones, who editedthe Football Money League, told CityA.M.: You cant argue with it: theresno other city with more than twoclubs in the list. Thats a product of

London being the biggest city in thecountry with the biggest league inthe world.

Spanish superpowers Real Madrid(433m) and Barcelona (407m) con-tinue to enjoy the strongest revenues,

with Manchester United (331.4m)third and Bavarian giants BayernMunich (290.3m) fourth.

Arsenal (226.8m) and Chelsea(225.6m) remain closely matched ina top six whose positions stayed staticfor a fourth consecutive year.

Tottenhams run to the Champions

League quarter-finals boosted rev-enue to 163.5m, leaving them wellplaced to return to the top 10 and fur-ther strengthen Londons position.

Overall the top 20s income contin-ued to grow, albeit it a slower rate,down from eight per cent to three percent. That growth outstripped that oftheir countries economies, however,

which rose by an average of 1.7 percent in 2010 and 1.3 per cent in 2011.

BY FRANK DALLERES

SPORT BUSINESS

EURO FOOTBALL MONEY LEAGUE 2012POS TEAM REVPOS TEAM REV

REVENUE KEY

Commercial

Broadcast

Matchday

500m419m

400m335.5m

Real Madrid479.5m (433m)

FC Barcelona

450.7m (407m)

ManchesterUnited367m

(331.4m)

300m251.5m

200m167.7m

100m83.8m

mm

BayernMunich

321.4m(290.3m)

ARSENAL251.1m

(226.8m)

CHELSEA249.8m

(225.6m)

AC Milan235.1m

(212.3m)

Inter Milan211.4m (190.9m)

Liverpool203.3m(183.6m)

Schalke 04202.4m(182.8m)

Londons biggestclubs still trailSpains big two

01 Real Madrid 479.5m

02 FC Barcelona 450.7m

03 Man United 367m

04 Bayern Munich 321 .4m

05 ARSENAL 251.1m

06 CHELSEA 249.8m

07 AC Milan 235.1m

08 Internazionale 211 .4m

09 Liverpool 203.3m

10 Schalke 04 202.4m

11 TOTTENHAM 181m

12 Manch ester City 169.6m

13 Juventus 153.9m

14 Marseille 150.4m

15 AS Roma 143.5m

16 Borussia Dortmund 138.5m

17 Lyonnais 132.8m

18 Hamburger SV 128.8m

19 Valencia 116.8m

20 Napoli 114.9m

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Superdroop: hotfashion label hitby slowing sales

News10

SHARES in Dunelm rose almost fourper cent yesterday, after the Britishhomewares retailer said it grew like-for-like sales in the first half and gainedmarket share despite a tough economicenvironment.

The Leicester-based company report-ed a 1.1 per cent rise in like-for-likesales during the six months to 31December compared with a 1.2 percent decline the previous year.

Pre-tax profits leapt by 7.8 per cent to52.2m on revenues up 8.8 per cent to299.9m, boosted by the opening of 10

new stores in the period.Chief executive Nick Wharton said:

Dunelm has achieved robust tradingresults in a very demanding retail envi-ronment, and has continued to gainmarket share on a like for like basis.

The group now operates 123 stores,selling kitchenware, bedding and rugs,114 of which are out-of-town super-stores. Wharton said it was on track todeliver it ambitious target of opening150 to 200 stores.

The retailer, which floated in 2006,also announced the appointment ofoutgoing chief executive of Pets atHome Matt Davies as an independentnon-executive director.

BYKASMIRA JEFFORD

RETAIL

Robust sales helpDunelm beat gloom

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Supergroup shockswith profit warning

SUPERGROUP, the owner of fashionlabel Superdry, surprised the City

yesterday after it warned that aslowdown in sales meant full-yearprofits would be at the bottom endof expectations.

The retailer said that after a solidChristmas trading period, with like-for-like sales up 9.3 per cent inDecember, there has been a slow-down in the last three weeks of

January.Supergroup added it had seen

variable performance over thequarter, hit largely by aggressivediscounting among other highstreet shops.

It said it now expects profit before tax for the full-year to betowards the lower end of the range

of market expectations.This suggests profits will come in

below consensus forecasts of

52.6m. Analysts had been expect-ing profits of between 50m and54.1m after the group issued a pre-

vious profit warning in October. The news sent shares tumbling

more the 17 per cent, closing at579.5p last night. Supergroup wasone of 2010s most successful stockmarket flotations.

Listing at 500p, the shares rocket-ed to a high of 1,899p in Februarylast year before suffering a reversalof fortune last summer, when itreported problems with its ware-housing system.

The high street brand which boasts celebrity customers includ-ing David Beckham opened fournew stores in the quarter, and nowhas 76 shops and 74 concessions.

During the thirteen weeks to 29 January, retail sales increased by27.8 per cent to 78.5m compared

with the same period last year, withlike-for-like sales increasing 4.4 percent.

BYKASMIRA JEFFORDRETAIL

TROUBLED retailer Mothercare pinnedits hopes of a domestic turnaround onthe internet yesterday when it appoint-ed the head of Lovefilm Internationalas its new chief executive.

Simon Calver will join the motherand baby chain in April. He replacesBen Gordon, who quit in October aftera profit warning.

Calver (pictured), whose currentemployer was sold to Amazon a yearago, will be charged with rebuilding

Mothercare after its UK arm was hit bycompetition from supermarkets andonline retailers and the high streetdownturn. The group made a first-half loss but the overseas arm,

which contributes just under 50per cent of profits, is booming.

Alan Parker, who had beenrunning Mothercare on an inter-im basis, resumes the role ofnon-executive chairman.He said Calvers e-com-merce and brandexpertise will enableMothercare to acceler-

ate its development as a multi-channelretailer in the UK.

Analyst Andrew Wade at Numissaid: This looks to be a strongappointment, bringing consider-able new skills and experience tothe business, predominantlyfocusing around brand develop-

ment, online execution and inter-national progression.

Shares in Mothercare, which have more than

halved over the pastyear, bounced 7.69 percent to 217p.

BYPETER EDWARDS

RETAIL

ANALYST VIEWS: HAS THE PROFIT WARNINGAFFECTED YOUR OUTLOOK? By Kasmira Jefford

JOHN STEVENSON | PEEL HUNT

Retail sales were in line with forecasts and little changed from theChristmas interim management statement, with wholesale on track for secondhalf expectations. Given the relative unimportance of January trading and weakfourth quarter comparatives ahead, we were therefore surprised managementtook the opportunity to cut profit-before-tax guidance to the bottom of the 50m-54.5m range.

WAYNE BROWN | COLLINS STEWART

The trading update is disappointing across all areas...We reduce ourprofit-before-tax forecast from 51m to 49m. Supergroup remains committed toopening 20 UK stores and 50 international stores per annum. With any highgrowth business, execution risk is high and whilst the business should haveresolved its distribution issues, it is now suffering from an unprecedented level ofdiscounting across the UK high street.

FREDDIE GEORGE | SEYMOUR PIERCE

Following this update, we are reducing our full year 2012 pre-tax profitforecasts from 54m to 52m, which puts our forecast broadly in line with con-sensus, taking earnings per share down from 50.9p to 49.2p to reflect a more con-servative view of wholesaling revenues. As a consequence, we expect total salesto be lower than our forecast by around 10m to 327m. We, however, still expecta robust fourth quarter against relatively easy comparatives.

ADMINISTRATOR KPMG has receivedfour second-round bids to buy thecollapsed retailer Peacocks or partsof it out of administration, it isunderstood.

Edinburgh Woollen Mills isthought to be one of the bidders stillin the running, while Pakistani tex-tiles tycoon Alshair Fiyaz alsoemerged as a surprise bidder this

weekend.KPMG, however, is not expected to

reach a decision on a preferred bid-der until early next week, accordingto reports yesterday.

Four bidders inthe battle tosave Peacocks

RETAIL

AMAZON has joined forces withViacom to bring a range of TV showsto its customers, marking the latestadvancement in the internet giantsonline streaming battle with Netflix.

Amazon Prime members will beable to stream thousands of episodesfrom the American media conglomer-ate including MTVs Jersey Shore,Comedy Centrals Chappelles Show,and Nickelodeons SpongeBobSquarePants on over 300 devices.

The deal will bring the total number of Prime instant videos to over15,000.

Amazon libraryof TV grows onViacom venture

TECHNOLOGY

Mothercare aims forre-birth with Calver

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FIVE years after it was launched withan estimated 20m branding exercise,13 giant poster sites around Britainand a television ad campaign voiced byUma Thurman, Virgin Media hasswung into the black for the first time.

The cable operator posted netincome of 75.9m, its first annual prof-it since it was launched in 2007 as amerger between Virgin Mobile andNTL: Telewest.

It also beat fourth quarter expecta-

tions as customers snapped up thecombination of its new TV service andfast broadband offerings, part of itsstrategy to counter the economicslump by selling more products toexisting customers.

Neil Berkett, chief executive, said:Our strategy of focusing on cus-tomers who want more from the digi-tal world is paying off.

The number of people taking VirginMedias new TiVo TV service, whichoffers on-demand programming,

more than doubled in the fourth quar-ter with 273,000 net additions. It had435,000 TiVo customers at the end ofthe year, 12 per cent of the overall tele-

vision base. During the quarter133,000 new and existing customersmoved to its superfast broadband.

The firm, listed mainly in New Yorkbut also traded in London, said it willcreate 620 customer service jobs.

Revenue rose two per cent for thequarter to 1bn and the full-year fig-ure was up three per cent to 4bn.Operational cash flow rose five percent for the quarter and 5.3 per cent

over the year.

Virgin Mediaposts its firstannual profit BRITISH newspaper group DailyMail & General Trust (DMGT) said yesterday that overall revenue forthe quarter rose two per cent at

495m, boosted by reinforcementin its digital areas.

Although the company said itstrading was broadly in line withexpectations, it also said a declinein advertising revenues at itsnational titles accelerated to nineper cent, pushing its shares down bynearly four per cent yesterday.

Analysts attributed the shareprice drop to the stocks recentstrong run, while noting the weak-ness in January advertising.

The economic outlook is veryhard to read, DMGT chief executiveMartin Morgan said on a conferencecall yesterday.

Morgan also said the companywould continue to invest in its digi-tal businesses while cutting costselsewhere, which was proven by thenewspaper cutting down its staff bytwo per cent, but hiring more peo-ple for the fast-growing MailOnline.

The MailOnline revenues for thequarter were up 70 per cent higherthan last year, but the website is notexpected to be profitable this year.

Shares in DMGT closed down 3.91per cent yesterday at 444.3p.

DMGT revenueup despite adspend decline

1 billionviewings of TV

on Demand

Out of the red: howBranson brands stopped

the losses in 2011

435,000TiVo customersLaunched mid-year

3.8mTV customerssales

bn

4.8mcable

customers

Sir Richard Bransonand Dita von Teese atthe launch of VirginMedia in 2007

BY PETER EDWARDSMEDIA

MEDIA


ANALYSIS l Virgin Media

p


1,620

1,540

1,560

1,580

1,600

1,520

1,500

1,580.008 Feb

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BNY MELLONANNOUNCES

BOAT RACEMERGERCHANGE IS afoot for one of the UKs mosttraditional sporting fixtures, after Bankof New York Mellon yesterday stepped into sponsor The Boat Race.

For the first time from 2015, thewomens event, whose sponsorship by BNYMellon company Newton InvestmentManagement remains unchanged, willleave Henley to take place on the samestretch of London river as the mens race a move that is good for gender equality,says chairman Gerald L Hassell.

BNY Mellon will not disclose a figurefor its five-year deal from 1 May. But the

banks backing steers the regatta intocalmer waters, after the chief executive

of incumbent sponsor Xchanging, which bows out after this years BoatRace on 7 April, quit shortly before the2011 event, sending the share pricecrashing by almost 50 per cent.

Present at the Somerset House launch

desks were clapping along in unison.Somebody bring this wonderful RBS tra-

dition to the UK and fast. The Capitalistcan think of at least one top-level executiveat the bailed out bank, due to turn 52 on14 December, who could do with somecheering up

BREWERS DROOP THERE WAS a 10p rise in the SABMillershare price yesterday, no doubt linked tothe announcement that professor

Katherine Smart will take over asgroup chief brewer on 1 June.

Smart is clearly well-qualified she is a scientific adviser to severalglobal corporates and has edited a

number of books on brewing yeast but does she know what she has let her-self in for?

SABMiller has some potent brews in itsstable, after all Smart will be requiredto finesse the flavours of Perus very ses-sionable national ale Cristal; theChairmans Extra Strong Beer that ishugely popular in the DemocraticRepublic of Congo; and the premiumstrength Amsterdam Maximator, lastseen being exported by the truckload tothe discerning drinkers of Kazakhstan.

The sherry-like Maximator has afiery taste, notes SABMiller and a

blazing 11.6 per cent alcohol contentto match.

Left: The 2011 OxfordCambridge Boat RacePicture: GETTY

Right: SABMillers newgroup chief brewerKatherine Smart

The Capitalist14 CITYA.M. 9 FEBRUARY 2012

EDITED BY

HARRIET DENNYSGot A Story? [email protected] The Capitaliston Twitter: @citycapitalist

were Newton CEO Helena Morrissey, BNYMellons vice chairman Curtis Arledgeand EMEA chairman Michael Cole-Fontayn, and Robert Gillespie, the direc-tor general of the Takeover Panel andchairman of The Boat Race Company, whodeclared: In BNY Mellon we have a spon-sor who values the heritage of the race.

So possibly not the best time for one

source to remind Cole-Fontayn that thelate Paul Mellon, a scion of the banksfounders, was a renowned horse-racingenthusiast, but he did anyway. Well,the Boat Race is a one-off, like theDerby, came Cole-Fontayns reply.

RBS PLAYS CHICKENNO DANGER of birthday blues for tradersat the RBS HQ in Stamford, Connecticut the bank lays on a dance by a man dressedin a dirty yellow chicken suit.

The ungrateful could describe the birth-day bonus as chicken feed but reportsof the sightings, the most recent of which

was last Friday, suggest real value.

I wish you had been here to witness theperson in a chicken suit leading half thetrading floor in the chicken dance, sup-plies a mole from US blog Dealbreaker. Ionly caught the tail end (pun intended),

but a good chunk of the surrounding

8/3/2019 Cityam 2012-02-09

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THOMAS COOK said yesterday it hasmanaged to hold onto market share

with winter and summer bookingsbroadly stable, despite reporting

widening losses as it struggles to reinin its financial woes.

The holiday firm, which was res-cued by its banks after a cash crisislate last year, said underlying operat-

ing losses had more than doubled to91m compared with the same quar-ter last year, as it continued to beimpacted by political unrest in theMiddle East and economic uncertain-ty in Europe.

But interim chief executive Sam Weihagen said the company wasfighting back and called the one percent rise in summer bookings partic-ularly encouraging, against anindustry decline of 14 per cent.

Thomas Cook has also put itsIndian business up for sale as part ofits attempt to pay down its 890mdebt-pile. It holds a 77.1 per cent stakein the Bombay-listed business, whichhas a market cap of around $225m.

At its annual meeting yesterday, asmaller investor spoke out against the1.17m pay-off awarded to former

boss Manny Fontenla-Novoa last year,but overall only nine per cent votedagainst the remuneration report.

Thomas Cook puts Indiaarm on sale as losses rise

Interim chief exec Sam Weihagen said losses had doubled compared to last year

BYKASMIRA JEFFORDLEISURE


Tristan Lovegrove, director at CreditSuisses investment banking division, hasbeen a longstanding adviser to Thomas

Cook, first acting for the travel operatorwhen it merged with MyTravel in 2007.Lovegrove also worked alongsideJames Leigh-Pemberton on Rio Tintos$15bn rights issue in 2009 the fifthbiggest on record at the time. The dealmarked a bonanza for the bank, which

was reportedly paid a 2.75 per cent fee.Last year, he advised John Wood groupon the $2.8bn sale of its wells supportdivision to General Electric.

MEET THE ADVISERS

TRISTAN

LOVEGROVE

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Email: [email protected] war of words with majorshareholder Sir Stelios Haji-Ioannoushows no signs of a cease-fire as theno-frills airline approaches its share-holder meeting later this month.

The carrier yesterday welcomed sup-port from the Association of BritishInsurers and investor group ISS for itsexecutive pay package.

Advice from these influentialgroups gives easyJet a better chance ofpassing resolutions at the firms AGMon 23 February.

But Stelios yesterday claimed amoral victory after ISS lent its sup-

port to altering easyJets way of calcu-lating bonuses, which he has longslammed as a gravy train.

EasyJet said yesterday it would takeindependent advice on its methods.

The support from ISS and the ABIcomes as a boost for easyJet manage-ment in a week when another proxyadviser, Glass Lewis, said it would rec-ommend voting against the remuner-ation report.

Stelios said in a statement yester-day: Investors cannot simply rely on a

vague promise by anonymous direc-tors. Until the changes are in effect, Iam urging other well-meaning share-holders to vote against the remunera-tion report or withhold their vote as aprotest.

BYMARION DAKERS

TRANSPORT

News16

SALES SOAR ACROSS RALPH LAUREN BRANDS

DESIGNER Ralph Lauren reported better-than-expected results for the holiday quarter yester-day, helped by double-digit sales growth at its own stores as well as increased sales todepartment stores. Ralph Lauren, with brands ranging from mid-tier basics to high-end lux-

ury labels such as Polo, Club Monaco and Chaps, said revenue rose 17.2 per cent in its fiscalthird quarter to 31 December, to $1.81bn (1.14bn). Picture: GETTY

EasyJet winsbonus support

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BRITISH consumer goods groupReckitt Benckiser is to launch a majorsales push into fast-growing emergingmarkets, with a focus on health andhygiene brands like Nurofen andDettol, to offset sluggish Europeanand North American markets.

New chief executive Rakesh Kapoor, who took over last September afterBart Bechts shock decision to retire,said yesterday the group would raisemarketing spend as it aims to get halfof its core sales from emerging mar-kets by 2016.

As part of this new strategy, thegroup is reorganising its reporting toinclude two clusters of emerging mar-kets, while it will merge its Europeanand North American regions whichwill save costs and lead to unspecifiedjob losses.

We should be investing more inthese markets as this is where there isthe opportunity for growth. We are

shaping our business for tomorrow,he said, after the company beat fore-casts with an eight per cent rise infourth-quarter earnings.

Reckitt, which also makes CillitBang cleaners and Air Wick air fresh-eners, reported fourth-quarter earn-ings rising to 74.2p a share comparedwith a company-compiled forecast of71.3p.

For 2011, Reckitt reported a 13 percent rise in net revenue and an 11 percent rise in net income, just above itstarget for 12 and 10 per cent rises.

Reckitt looks

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Rakesh Kapoor said Reckitt will raise its marketing spend


ANALYSIS l Reckitt Benckiser

p


3,525

3,425

3,450

3,475

3,500

3,400

3,479.008 Feb

Emerging markets push comes too late WHEN times get tough, brandedproducts are the first things to go.British consumers know there is lit-tle difference between Fairy and asupermarkets own-label washingup liquid.

The trend is more pronouncedamong younger consumers, who will protect luxuries such as theiriPhone and designer clothes by buy-ing staples from the supermarketeconomy ranges. Thats bad news forfast-moving consumer goods (FMCG)companies such as Reckitt Benckiserand Unilever.

Hence the search for growth inemerging markets, where the name

of a product still matters. The mid-dle classes in places like Brazil andIndia like to differentiate themselvesby buying aspirational brands; if theproduct has some link to the old world, even better. India counts

Proctor & Gambles Head &Shoulders as its favourite shampooand Surf and Ariel among its most-loved detergents. It is the secondlargest market for GlaxoSmith-Klines bedtime drink Horlicks.

Reckitts decision to overhaul itsinternational structure is a tacitadmission that it has failed to capi-talise on fast growing developingmarkets, which accounted for less

than a quarter (24 per cent) of itsrevenues in 2011. Conversely, fel-low FMCG giant Unilever generated54 per cent of its sales in emergingmarkets last year.

The emerging markets push is

undoubtedly the right strategy,although it has come far too late.Not only does Reckitt have to com-pete with other Western FMCGs, butdomestic rivals are also growing instature. It has a lot of catching up todo. [email protected]

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BOB EATON | NEWHAM BOROUGH

Absolutely none. He isnt the only one who took risks that didnt workout but he should definitely take some blame. They have crippledthe public sector.

JOHN CLINCH | HAYES ASSOCIATES LTD

I have no sympathy for Hester; he is partially responsible for somefailures at the bank. He never should have been offered the 1mbonus in the first place.

JOHN ISLEY | ICS CONSULTING

I do have some sympathy for him he seems to be the focus ofpeoples anger and to some degree a scapegoat. Overall though hewas right not to accept the bonus.

* These views are those of the individuals below and not necessarily those of their company

CITY VIEWS: DO YOU HAVE ANY SYMPATHY WITHRBS BOSS STEPHEN HESTER? Interviews by Phoebe Torrance

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CONSTRUCTION activity stagnated inthe final quarter of 2011, the RoyalInstitute for Chartered Surveyors(RICS) revealed yesterday, with firmsexpressing doubts that the govern-ments plans to boost private invest-ment in infrastructure will work.

The construction market surveyshowed a net balance of seven per centof firms facing falling workloads, com-pared with one per cent previously.

For public housing and works thepicture is even gloomier a net bal-ance of 22 per cent reported fallingworkloads, from 17 per cent recordedin the third quarter.

In his Autumn Statement chancel-lor George Osborne pledged toincrease investment in infrastructure,in part by harnessing private funds including a proposed 20bn from pen-sion funds.

However, only 14 per cent of survey-ors expect the government to be suc-cessful in fulfilling the pledge and

generating sufficient finding forplanned infrastructure projects.

A spokesman from the NationalAssociation of Pension Funds, which isinvolved in negotiations, said suchconcerns are unfounded.

We are in on-going talks with the Treasury and the Pension ProtectionFund to develop a new platform toencourage investment in infrastruc-ture, he told City A.M.

Pension funds are looking for infla-tion-linked, long-term investmentsand infrastructure projects could be agood fit.

FORMER Bank of England deputy gov-ernor Rachel Lomax hit out at quanti-tative easing (QE) and the Vickersbanking reforms yesterday, calling theasset purchase programme a stealthtax on savers.

Speaking at Fathom Consultingsmonetary policy forum, Lomax was joined by another ex-policy maker Andrew Sentance, who warned per-sistently above-target inflation riskeddestroying the MPCs reputation.

He also urged the government to

boost economic growth by cutting redtape and reforming taxes and the

labour market.Lomax said QE punishes savers by

pushing down interest rates in a waythat is convenient for politiciansbut opaque and undemocratic.

She also argued that cleaning upbanks balance sheets is a major stepwhich would take the UK economy back toward prosperity. She saidbanks are weighed down by impaireddebts whatever Vince Cable, GeorgeOsborne or Adam Posen say [aboutother barriers to lending].

The Vickers report and proposedreforms will impose costs on banksthat did not fail, and not sort out

those that did, she said a critiquethe Treasury rejected, claiming

instead that the governments plansgive the UK a more stable bankingsystem that removes the implicit tax-payer subsidy and avoid harmingthe ability of UK banks to lend, investand compete.

Meanwhile Sentance pointed toraised inflation expectations identi-fied by Bank of England surveys, argu-ing that the Banks credibility risksbeing undermined by consistent fail-ure to keep inflation on target credibility which could be hard tore-establish if it has been eroded.

Insurer Saga joined the assault onQE, saying it does dreadful damage

to the incomes of anyone coming upto 65 years old and buying an annuity.

Former Bank official blasts QE as anundemocratic and unfair tax on savers

Building firms

stall on publicwork worriesBY TIMWALLACE

UK ECONOMY

BY TIMWALLACE

UK ECONOMY


FACT CHECKER |WITH JAMES WATERSON

HAS BORIS JOHNSON CUT 1,700 LONDON POLICEMEN?BORIS Johnson has admitted cut-ting 1,700 police officers. If I amelected, I will reverse his cuts,pledges Labours mayoral candidateKen Livingstone.

Crime is a key issue for swing vot-

ers and Kens team hope to portrayBoris as weak on policing. But howwould Ken fund the extra police? Andwhere does the figure come from?

The source turns out to be Borishimself. In a typically bumblinginterview on LBC radio the mayor was asked to confirm that policestaffing levels had dropped by 1,700.

Johnson responded: Yes, but asIve said to you many times now wewill have more police on the beat at

the end of this four year term thanthere were at the beginning.

Kens campaign took this as confir-mation that 1,700 police officers hadbeen cut. This doesnt add up.

According to figures from the

Metropolitan Police Authority therewere 31,398 police officers in Londonat the end of March 2008, just beforeBoris took control.

The latest figures fromDecember 2011 show there are31,427 officers in the capital, anincrease of 29 policemen during thecourse of Boris mayoralty.

The confusion results from fluctu-ations during the mayors term inoffice. Police numbers peaked at

32,543 in March 2009 before drop-ping back.

Even so, how would Ken presumeto fund an additional 1,700 officers?

His answer involves chargingTransport for London an additional

20m for policing services a chal-lenge, given his pledge to cut fares.

THE VERDICT | NO

CONFUSED MAYOR TO BLAMEThe number of officers in the MetPolice has fluctuated around the32,000 mark for the last four years.Kens plan to fund increased policestaffing levels from TfL contributionslooks fanciful.

ALLISTER HEATH | CITY A.M.Hold rates and QE the economy has shown some signs of beginning to recover and manipulating aggregate

demand further won't work. However it is important to watch the money supply, which slowed sharply last quarter.

SIMON WARD | HENDERSONStop QE. The economy is lifting and inflation is unlikely to return to target this year. Address any monetaryweakness by easing pressure on banks to deleverage rather than forcing more cash into overvalued gilts.

GEORGE BUCKLEY | DEUTSCHE BANKI vote to hold rates and boost QE by 50bn. Business surveys have been stronger of late but with output stillwell below its pre-recession peak, the risks to inflation going forward remain to the downside.

TREVOR WILLIAMS | LLOYDSWe should hold rates the economy is struggling as the sharp fall in M4 shows. QE should be extended by75bn and we should be prepared to do more in the event of more serious fallout from the Eurozone crisis.

VICKY REDWOOD | CAPITAL ECONOMICSIt is time to increase QE again. Despite the stronger tone of the economic data of late, I think that another75bn is required the most the Committee thinks is possible without distorting the markets.

GRAEME LEACH | IODAgain we need to vote for more quantitative easing the only question is 50bn or 75bn. My hunch is thatwith the money supply so weak, we should vote for 75bn.

HOLGER SCHMIEDING | BERENBERG BANKI vote for 50bn more QE over six months, with a review after three months. Leading indicators have started torecover, but the economy remains fragile and sluggish demand points to slower inflation, warranting more QE.

VICKY PRYCE | FTI CONSULTINGHold rates and consider more QE. Despite some recent signs from domestic survey data, there is a sense we maynear crunch point on the euro, so the monetary stance needs to stay accommodating to sustain confidence.

ROSS WALKER | RBS50bn more QE. Although there has been some improvement, the risks for the economy remain skewed to thedownside. Further loosening is safest. A stronger-than-expected recovery would be a nice problem to have."

CITY A.M. | SHADOW MPC SPLIT ON QE VOTE

ANALYSIS l Change in public non-housing/infrastructure workloads

% Public non-housing

Infastructure

2000 2002 2004 2006 2008 2010

40

30

20

-10

-20

10

0

-30

-40

-50

German exports slumpas French services slow

GERMAN exports fell at their fastestpace for three years in December,data from the German FederalStatistics Office showed yesterday after foreign sales hit a record highin 2011.

French industrial confidence stag-nated in January, according to theBank of France, and Spanish indus-trial output contracted for thefourth consecutive month.

German exports fell at a seasonal-ly adjusted 4.3 per cent, well aboveeconomists forecasts and denting

GDP figures which initial estimatessuggested contracted slightly in the

quarter.Imports also declined, falling 3.9

per cent. The trade surplus overallnarrowed from 14.9bn (12.5bn) inNovember to 13.9bn.

Meanwhile French services slowedto an index reading of 93, its 10thconsecutive decline, to its lowestlevel since March 2011.

The overall index hovered at 96,up from 95 in December and indi-cating GDP was flat in the finalquarter of 2011.

Spains recession deepened fur-ther with a 3.7 per cent fall in facto-ry output. However, the pace of

decline slowed from Novembersseven per cent drop.

EUROZONE

Ken and Boris are going to war over key issues such as policing Picture: GETTY

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SHARES in power generation com-pany International Power slumpedalmost three per cent yesterday,despite reporting a higher full-yearprofit helped by continuedstrength in its international mar-kets.

The company also said yesterdaycontributions from new plants that

became operational late last year,together with new capacity expect-ed to come on line during 2012,

would drive growth this year.However, it warned that its target

of delivering core earnings of1bn(834m) from projects under con-struction in 2013 could prove chal-lenging without a recovery inprices for hydro generation inBrazil.

For 2011 the company, 70 per centowned by French utility GDF Suez,said adjusted current operatingincome rose nine per cent to 3.1bn.

Underlying earnings per sharerose 11 per cent to 27.6 cents, aheadof consensus estimates of 27.2cents, according to a company sup-plied poll of 14 analysts.

Operating income in Latin

America rose 18 per cent to 1.3bn,while in North America it rose 45per cent to 575m, helping offset

weakness in Europe and Britain.The group has recently opened a

new hydro-electric power plant inEstreito, Brazil, as well as new proj-ects in Chile and Panama.

A new plant opening in Turkeyalso provided a boost to Middle Eastoperations, where income grewseven per cent.

International Power was bought by GDF Suez to create the worldslargest independent power produc-er. The deal, announced in 2010,

was completed last February.Shares in International Power

closed at 333p yesterday, valuingthe business at about 17.5bn.

STRUGGLING Finnish phone makerNokia plans to cut 4,000 more jobs atits plants in Finland, Hungary andMexico as it seeks to cut costs by mov-ing phone assembly work to Asia.

The cuts of eight per cent of the workforce bring total planned jobcuts at the group since Stephen Eloptook over as chief executive in

September 2010 to more than 30,000.Nokia said in a statement the job

cuts would take place in phasesthrough this year. It has been review-ing the operations since unveilingthe closure of its Romania plant lastSeptember.

Nokias recent business resultshave underscored the need for dras-tic cuts. Late last month it reported a73 per cent fall in quarterly earningsas sales of new Windows Phonesfailed to dent the dominance of

Apples iPhone or compensate for div-

ing sales of its own old smartphones.Its fourth quarter smartphone

sales shrank 31 per cent from a yearago and the business made a steeploss for the quarter.

Nokia said it would cut 2,300 jobsin Hungary, where it is a majorexporter, some 1,000 in Finland and700 in Mexico.

Its Finnish factory in Salo, whichwas the cornerstone for its success in1990s, has been the last remainingmajor phone assembly plant in the

Western Europe for some time. Most

rivals have moved their productionto Asia.

Nokia slashes 4,000 jobs as it shiftsall assembly lines to Asia to cut costs

SCANDINAVIAN airline SAS hasreported a fourth consecutive annualloss in 2011 and said it would acceler-ate a 5bn Swedish crown (473.3m)plan to cut costs and boost revenue.

The group, half-owned by Sweden,Norway and Denmark, has faced com-petitive pressure in its home Nordicmarkets from Norwegian Air Shuttleand Ryanair. A buoyant Norwegian

recently placed a big aircraft order.SAS chief executive Rickard

Gustafson said the macro-economicoutlook for the airline businessremained tough.

We foresee a continued weak eco-nomic development in Europe andthat what we are seeing in the fourthquarter of 2011 will be what we canexpect for 2012, he said yesterday.

Gustafson said the airlines latestrestructuring plan, called4Excellence, which aims to reduceunit costs by three to five per cent,

would be accelerated this year andnext.

SAS braces for annual lossamid tough competitionAVIATION

FRENCH drugmaker Sanofi said yester-day that its earnings could drop by upto 15 per cent this year as top-sellingdrugs previously protected by patentsare hit by competition from generics.

Sanofi expects to return to growthin subsequent years, driven by emerg-ing markets, diabetes, vaccines, itstakeover of biotechnology companyGenzyme and new products.

The chapter on blockbusters closes,but we are in good shape coming out

of the patent cliff this year, chiefexecutive Chris Viehbacher said.

The Paris-based company reported a13 per cent increase in fourth-quarterprofits and fine-tuned the expectedearnings dip in 2012 as blood-thinnerPlavix, the worlds second-best sellingmedicine, and blood pressure drug

Avapro shortly face competition fromgeneric copies in the US.

Fourth-quarter business net incomerose to 2.08bn (1.74bn), in line withanalysts average forecast of2.07bn.Sales rose 8.8 per cent to 8.51bn.

Sanofi admits that salescould drop as patents endPHARMA

BRITISH home insurance firmHomeServe said a prolonged market-ing delay prompted by concerns itmay be mis-selling products wouldhit customer numbers and renewalrevenues harder than expected.

The group said yesterday total cus-tomer numbers could fall eight percent in 2012, worse than its previousestimate of a five per cent decrease.

This means renewal revenue in2013 will be around 10m lower thanexpectations. However, adjusted pre-tax profit for the year ending inMarch will still meet market expecta-tions of 127m.

HomeServe also announced it willsack 200 UK staff after suspending itstelesales operations in October.

The firm is reviewing marketingtechniques, retraining sales staff andhas reopened thousands of customercomplaints.

The one-off cost of the restructur-ing, which also includes outsourcingits customer complaints division to athird party, are now expected to costaround 20m this year, compared tothe 10m the firm estimated inNovember.

The groups telephone sales unit, which will retain 100 staff, remainsclosed without a restart date.

Shares in the FTSE 250 firm whichhave dropped 42 per cent since it sus-pended its UK sales activities slippeda further 12 per cent yesterday to240p.

HomeServeinsurance

income dipsINSURANCE

CHIEF executive Mike Lawries deci-sion to leave Misys at the end of

March has reduced the chance of arival bid derailing the softwaremakers takeover of Swiss rival

Temenos, a deal seen by some ana-lysts as a quick but poor fix totackle weak demand.

Lawrie is taking the top post at US- based tech services companyComputer Sciences Corp after five

years at the British company.Misys yesterday named Tom

Kilroy, its general counsel, as acting

chief executive to lead the negotia-tions with Temenos.

Misys and Temenos, which com-pete in banking software, laid outmore terms of their proposed all-

share merger, which was flagged onFriday, after market close onTuesday, with investors in the Britishcompany owning 53.9 per cent.

Analysts said that with the depar-ture of Lawrie, who has a reputationas a dealmaker, the chance of anoth-er bidder had receded.

Jefferies analyst Milan Radia said atransaction between Misys and

Temenos was now the most likelyoutcome.

Shareholders have been hopeful ofM&A activity that could boost bothcompanies prospects against a back-drop of weak demand from banksstill reeling after the f inancial crisis.

The lacklustre reaction frominvestors yesterday, however, raisedquestions as to whether the compa-nies falling into each others arms

was the best solution, despite bothhighlighting increased revenueopportunities and cost savings.

Misys shares, which rose to a five-month high of 353p on 31 January,closed down 8.5 per cent at 298p yes-terday, valuing the firm at almost1.1bn.

Misys boss to move to the USBYHARRY BANKS

M&A

International

Power falls onweak outlookBYHARRY BANKS

ENERGY

BYHARRY BANKS

TECHNOLOGY


TAKINGS TUMBLE AT STAGECOACH ARTS

PERFORMING arts school company Stagecoach said yesterday its profits before tax in2011 were 650,000, a 10.5 per cent fall from the previous years figure of 727,000. Thegroup which runs 684 schools worldwide said the drop in profitability was expected,after a significant investment in marketing and advertising. Network fees over the yearedged up slightly, totalling 29.3m compared to 29.2m a year ago.

ANALYSIS l International Power

p


340

345

350

335

330

333.008 Feb

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MINING giant Rio Tinto yesterdayhelped to give a boost to the miningsector as it announced a $3.4bn(2.1bn) expansion in its iron ore oper-ations in Australia.

The FTSE 100 companys move isaimed at stepping up production bymore than 50 per cent in anticipationof growing demand from China.

Rio, the worlds second largest ironore producer, said it expects to boostoutput from its mines in Western Australias Pilbara iron belt to 283mtonnes a year by the second half of2013, up from the current 225m.

That would represent about a fifthof current world trade in the key steelmaking ingredient.

By the end of March, Rio said itexpects to lift its operating capacity to230m tonnes per year. Only BrazilsVale mines produces more iron ore.

The programme remains on trackand we are bringing new iron ore pro-duction on stream at a time whendemand from Asian markets is fore-cast to grow strongly, while industrysupply growth remains constrained,Rio Tintos iron ore division chief SamWalsh said in a statement.

Rio said its longer-term plan calledfor a capacity increase to 353m tonnesa year by the end of 2015.

The companys share of theincreased investment will be $2.9bn, with minority partners shoulderingthe remaining $500m.

The scale of the expansion means it will not be complete until 2015 andsome environmental permits are stillrequired.

Analysts at Numis said: The majorexpansion continues as Rio keeps itsnose well in front for iron ore growth.Rival BHP Billiton yesterday reported ahalf year profit drop as it warned thatthe Eurozone debt crisis could hamperits growth.

Rio is due to release its full yearresults today.

NISSAN is on track to be the mostprofitable of Japans three big car-makers this year, after record carsales last year and improved marketshare in every major region pushedup quarterly operating profit.

Nissan kept its net profit forecastat 290bn (2.37bn) for the year toend of March, ahead of Hondas fore-

cast for 215bn and Toyotas 200bn.It looks like the company is doing

pretty well compared to Toyota andHonda, said Hiroyuki Fukunaga,chief executive of Investrust, notingNissans nine-month operatingprofit now totalled 84 percent of its annual target.

These were positiveresults, the upward[forecast] revision fromToyota led to hopes forthe next financial year,but Nissan seems like its

going at cruising speed, headded.

Nissan also kept its forecast forfull-year operating profit of 510bnwhich is below analysts forecasts.

Nissan reports under Japanese accounting stan-

dards, with earnings fromChina included in oper-

ating income, while itstwo main rivals reportunder US accountingrules, with their earn-

ings from China included

in their net income fig-ures.

Nissan driving towards victory againstToyota and Honda in race for earnings

EUROPEAN Goldfields merger withEldorado Gold was given the greenlight by companies representing insti-tutional investors yesterday.

Institutional Shareholder Servicesand Glass Lewis & Co recommendedthe deal ahead of a shareholders voteon 21 February.

Eldorado in December announced afriendly takeover bid for EuropeanGoldfields valued at the time at $2.5bn(1.6bn).

European Goldfields president andexecutive chairman, Martyn Konig,

said: The positive recommendationsof ISS and GL strengthen our beliefthat the consideration shareholderswill receive is fair, and that it is in their best interests to vote for the merger with Eldorado. The companies alsosaid that regulatory hurdles to thedeal had been cleared.

Eldorado has operations in Brazil,China and Europe, while EuropeanGoldfields owns 95 per cent of a lead,zinc and silver mine in Greece.

European Goldfields getsnod for Eldorado mergerMINING

RUSSIAN gold and silver minerPolymetal yesterday bought out

AngloGold Ashanti from a joint ven-ture in Siberia for $20m (12.6m).FTSE 100-listed Polymetal acquired

the 50 per cent it did not already ownof the Veduga deposit in RussiasKrasnoyarsk region.

The companies worked on the proj-ect together from 2008 but Polymetalhas found new partners. AngloGoldAshanti is a miner with headquartersin South Africa.

Polymetal said in a statement that

$20m had been paid in cash and thatthe joint venture had now been ter-minated.

We are satisfied with consolidationof ownership of Veduga, said Vitaly

Nesis, chief executive of Polymetal.We believe this is the first steptowards acceleration of developmentof this highly promising asset.

Vedugas expected reserves wereestimated in 2010 at 2.8m ounces ofgold with a metal content of 2.54-11.37grams per tonne of ore. Polymetalshares received a boost last monthafter speculation that it could merge with Russian rival Polyus. However,Polymetal denied the rumours.

The company acquired a premiumLondon listing last year and enteredthe blue-chip FTSE 100 index inDecember.

Its latest results saw sales revenue

jump 45 per cent in the year ended 31December, buoyed by 57 per centgrowth in the final three months ofthe year.

Sales totalled $1,339m in 2011, upfrom $924m the year before, with themajority of that growth owing to thestrong rise in copper prices.

However, Polymetal, the fourth-largest gold producer in Russia, admit-ted that annual gold production wasflat.

Polymetal buys out AshantiBY JOHN DUNNE

MINING

Rio Tinto to

pump $3.4bninto iron oreBY JOHN DUNNE

MINING

BYHARRY BANKS

AUTOMOTIVE


NEWS | IN BRIEF

Airbus to check all plane wingsEuropean air safety officials extendedchecks for Airbus A380 wing cracks tothe entire superjumbo fleet yesterday andsaid the widespread defects could pose a

safety risk if left unremedied. The move toinspect all 68 A380s in service came asQantas Airways grounded one of itsplanes for up to a week following the dis-covery of 36 separate cracks in wingparts. The new measures by the EuropeanAir Safety Agency (EASA) reflect theresults of a first round of checks, whichfound cracks in almost all of the planesinspected, spokesman Dominique Foudasaid.

Grainger still selling propertiesProperty investor Grainger said UK houseprices had proved surprisingly resilientand that it continued to sell off propertiesas it cuts debt and braces for what CEOAndrew Cunningham believes will be anorderly breakup of the Eurozone. The 100year old company said in a trading state-ment yesterday that gross rents rose 22per cent to 30.4m in the four months tothe end of January as acquisitions helpedoffset a drop in rental income in Germany.The company said it was continuing to seegrowth in rental income and that vacantUK properties disposed of during the peri-od had, on average, sold for 5.8 per centmore than their valuations in September2011.

CVS Caremark raises its forecastsCVS Caremark has raised its full-yearprofit forecast as it wins over formerpatrons of Walgreen who fill prescriptionswith pharmacy benefits manager ExpressScripts. CVS also posted a fourth-quarterprofit in line with analysts expectations,helped by better-than-expected revenue.CVS added three cents per share to itsfirst-quarter and full-year adjusted earn-ings forecasts. It now expects to earn 61cents to 63 cents per share this quarterand $3.18 to $3.28 per share this year.

MORE NEWSONLINEwww.cityam.com

ANALYSIS l Rio Tinto

p


3,950

4,000

4,050

3,900

3,850

3,873.508 Feb

NORWAYS Statoil yesterday reporteda 34 per cent jump in net profit in thefourth quarter.

The countrys largest oil and gascompany saw net profit reachNKr14.5bn (1.5bn), triggered by high-er oil prices.

Statoil delivered record financialresults, further improved safety andmade important strategic progress in

2011, said Helge Lund, Statoils chiefexecutive.

He said the company had a goodyear for exploration in 2011, with dis-coveries in the North Sea and theBarents Sea that helped to add morethan 1bn barrels to Statoils resourcebase.

The company said it was planningcapital expenditure of $17bn this yearcompared with $16bn in 2011. Oil pro-duction was 1.975m barrels of oilequivalent for the quarter.

Statoil profits up thanksto increases in oil prices

Statoil enjoyed a strong fourth quarter Picture: GETTY

BYHARRY BANKS

ENERGY

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The Riverside CompanyThe global private equity firm hasexpanded its UK team by appointingMartin JJ Scott as a partner in its

London office. Scott, who was previ-ously transactions services partner atKPMG, will work as a member ofRiversides new London office, joining

existing partner Trey Vincent.

King.comKing.com, the fourth-largest gamescompany on Facebook that is backedby Index Partners and Apax Partners,has hired Emma Vaz, formerly of

Oberon Media, as vice president forbusiness development and partner-ships for the EMEA region.

Per Ardua AssociatesThe financial services recruitment andadvisory firm has appointed CharlesHarvey to lead the firms asset man-agement recruitment practice. Harvey

joins from Hammond Partners, wherehe was co-head of asset management

sector recruitment.

Towergate InsuranceScott Egan has been appointed asgroup finance director at Towergate,subject to FSA approval, to replaceformer group chief finance officer Ian

Patrick. Egan will move from BritInsurance Holdings, where he hasbeen group chief financial officersince January 2011.

Jones Lang LaSalleAngus Wade has joined Jones LangLaSalles global hotels team as executivevice president for central and easternEurope, based in London. Wade mostrecently ran the JLL capital markets

team in Prague, after setting up theSlovak office of King Sturge.

Doyle CollectionThe luxury hotel group has promotedPat King to chief executive. King joinedparent company Jurys Doyle Hotel

Group in 1990 and was appointed aschief financial officer in 2006.

Berwin Leighton PaisnerSteve Clark, an expert in cross-borderreal estate finance in the bankingteam at Dechert, is joining the firm asa partner. Clark qualified withClifford Chance and spent eight yearsin its banking department beforemoving to Addleshaws.

CITY MOVES | WHOS SWITCHING JOBS Edited by Harriet Dennys

+44 (0)20 7092 0053morganmckinley.com

To appear in CITYMOVESplease email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

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Delays in Eurozonekeep markets flat

US stocks closed flat in anotherthinly traded session yesterdayas Greece remained in a stand-still over accepting tough

reforms in exchange for a bailout criti-cal to avoiding a chaotic default.

Underlying confidence kept theDow near an almost four-year highnotched on Tuesday, though tradinghas been quiet since last weeks stellaremployment report. The S&P andNasdaq are both up 0.3 per cent so farthis week while the Dow is essentiallyunchanged.

Randy Frederick, director of tradingfor Charles Schwab in Austin, Texas,said he would use any pullback onGreece as a buying opportunity. Andif the situation there gets resolved,well move higher even faster.

Greek party leaders gathered yester-day to agree reforms demanded by theEuropean Union and the InternationalMonetary Fund after delays.

European Central Bank policymak-ers were still divided on what contribu-tion the bank could make to arestructuring of Greeces sovereigndebt, sources said. The ECB has ruled

out joining private creditors in volun-tarily accepting a reduction in the

value of the Greek bonds it holds.We would take a hit if Greece is

unable to come to a deal, but latelyweve been decoupling from Europe asmarkets catch up to how strong theeconomy appears to be, saidFrederick.

Dow component Walt Disney rose0.7 per cent to $41.27 a day after itreported quarterly profit that toppedexpectations.

Of the 315 companies in the S&P 500that have reported earnings to date, 61per cent have come in above analysts

expectations, a rate below that of pre-vious quarters. The Dow Jones industrial average

was up 5.75 points, or 0.04 per cent, at12,883.95. The Standard & Poors 500Index was up 2.91 points, or 0.22 percent, at 1,349.96. The NasdaqComposite Index was up 11.78 points,or 0.41 per cent, at 2,915.86.

The Dow on Tuesday marked itshighest close since May 2008; stockshave rallied from late last year on cen-tral bank action and signs of animproving economy.Polo Ralph Lauren surged 9.2 percent to $171.49 after the clothingmaker reported better-than-expectedresults for the holiday quarter andraised its margin forecast.

Energy shares were the biggestdecliners, as Brent and US crude oilfutures pared gains after a reportshowed a build-up in US crude invento-

ries. The S&P energy index fell 0.5 percent.

BRITAINS blue chips closed atouch lower yesterday asinvestors awaited more clarityon a Greek debt deal.

Greek party leaders gathered toagree reforms needed to secure anew EU/IMF rescue package neces-

sary to avoid a chaotic default that would aggravate Europes financialcrisis.

Rating agency Standard & Poorsadded pressure on negotiations between Greece and private bondholders by stating Athens will likelynot achieve sustainable debt levelswith a 70 per cent reduction in the value of bonds held by its privatecreditors.

Uncertainty over Greeces future weighed on Britains blue chipindex, which closed 14.33 pointslower, or 0.2 per cent, at 5,875.93points, having traded 92 per cent ofan already anaemic 90-day volumeaverage and after hitting a six-monthhigh of 5,916.20 in intra-day trade.

My central case is that they willvote to do the cuts and they will tryabove everything to stay in the euro,said Jane Coffey of Royal London

Asset Management.There has to be a 20 per cent risk

that this is not possible and this iswhy I dont want to be completely onthat bet.

Some banking shares such asLloyds Banking Group extendedgains, boosted by positive brokercomments as Citigroup suggestedthe recent rally had still some roomto run.

Share observation of previousfinancial crises suggests that bankshare prices usually trough only 1-2years after the peak in loans and 3-5 years before the de-leveraging

process completes. UK bank lendingpeaked in December 2009, AndrewCoombs, analyst at Citi said.

Societe Generale, meanwhile,highlighted RBS, HSBC and StandardChartered among those best posi-tioned to navigate the current inter-bank lending drought.Barclays, however, closed down 1.3per cent while Royal Bank ofScotland lost 0.1 per cent.

Also strong was Reckitt Benckiser,which topped the FTSE 100 with a 2.9per cent rise, as the consumer goodsgroups full-year results beat marketexpectations.BHP Billitonwas among the worstperformers, falling 2.3 per cent asthe world's biggest miner reported arare fall in earnings.

March futures on the FTSE 100,which settled at 5,828, indicated themarket had entered into a consolida-

tion

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