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Henri Servaes, Professor of Finance
Corporate Finance Programmes
Apply now for April start. 5-day and evening programmes available.
Visit www.london.edu/cf/ | Email nance@london.edu | Call +44 (0)20 7000 7397 Leading Financial Thinking
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Leading Financial
Thinking
Comcast to
buy stake in
NBCUniversal
US CABLE provider Comcast is to
buy out General Electrics (GE)
entire 49 per cent stake in
NBCUniversal for $16.7bn
(10.7bn), taking full control of the
company behind CNBC and
Universal Studios.
The deal, which was announced
late last night, comes more than a
year ahead of the original date
that was agreed when GE and
Vivendi sold their majority stake
to Comcast in 2009.
The initial sale contract gave GE
the option to sell back as much as
all its remaining stake in
NBCUniversal by mid-2014.
Comcast said in a statement yes-
terday that NBCUniversal will also
buy the buildings it occupies at 30
Rockefeller Plaza in New York and
CNBCs headquarters in Englewood
Cliffs, New Jersey, for about $1.4bn.
The TV and film company owns
almost 100 US and international
cable channels including news
network MSNBC, as well as
entertainment channels E! and
Bravo.
It also owns the Universal
Studios theme parks and film
studios like Universal Pictures,
which made movies including
Jaws, ET and Jurassic Park.
Comcast said the deal will be
funded by $11.4bn of cash in
hand, $4bn of subsidiary senior
unsecured notes to be issued to
GE, $2bn of borrowings under
bank credit facilities and $725m
of subsidiary preferred stock
issued to GE.
The takeover must still be
approved by regulators and is
expected to be finalised by the
end of the first quarter.
INTERNATIONAL leaders yesterday
failed in their attempt to reassure
investors that a currency war would
not be allowed to escalate, after a joint-
statement failed to convince analysts
and prompted sharp fluctuations in
the foreign exchange markets.
Finance ministers of the Group of
Seven leading nations, known as the
G7, sought to reaffirm their commit-
ment to market determined exchange
rates in response to leaders in some
countries, such as Japan and France,
advocating policies that are designed
to weaken currencies.
But the statement also said that
excessive volatility and disorderly
movements in exchange rates can have
adverse implications. It was initially
read as a defence of the status quo,
forcing a G7 official to speak out and
say it had been misinterpreted.
The G7 is concerned about unilater-
al guidance on the yen. Japan will be
in the spotlight at the G20 in Moscow
this weekend, the official warned.
Having caused the yen to ease follow-
ing the publication of the first state-
ment, the officials words caused it to
spike against major currencies, gain-
ing nearly one per cent against the
euro and US dollar. The greenback
dived to below 93 during trading,
before recovering to hover around
93.5 last night.
As a member of the G7, Japan would
appear to support the statement. Its
finance minister, Taro Aso, has insisted
that the G7 has no problem with its
www.cityam.com FREE
ultra-loose monetary regime. New
Prime Minister Shinzo Abe is pursuing
an aggressive policy of easing.
European Central Bank chief Mario
Draghi attempted to play down talk of
a currency war yesterday, telling
reporters: I think the term currency
wars is way, way over done. We are not
witnessing anything like that.
Yet leading politicians continue to
contradict each other over the use of
currency manipulation ahead of the
G20 summit at the end of this week.
Incoming Bank of England governor
Mark Carney, speaking in Canada,
insisted that the G7 statement was a
pledge that monetary policy must
only be for domestic objectives. Its
important that we as a G7 go in united
and forcefully to the G20 to enlarge
that commitment as quickly as possi-
ble amongst the major emerging
economies in the G20, he said.
Some members of the G20, which
includes China, have a lot of work to
do when it comes to supporting flexi-
ble exchange rates, Carney admitted.
BY KASMIRA JEFFORD
FTSE 100 6,338.38 +61.32 DOW 14,018.70 +47.46 NASDAQM3,186.49 -5.51 /$ M1.56 -0.01 / 1.17 unc /$ 1.35 +0.01
BY JULIAN HARRIS
G7 FAILS TO HALT
CURRENCY WARS
JENKINS SHAKES
UP BARCLAYS
See Page 3 and The Forum, Page 20
Certified Distribution
from 31/12/12 to 27/01/13 is 127,008
WEVE NEVER BEEN STRONGER TIM COOK SAYS APPLE IS AT TOP OF ITS GAME
APPLE chief executive
Tim Cook sounded a
bullish note at a
Goldman Sachs event
yesterday, reassuring
investors that limit
was not a word in his
vocabulary, and that the
firm remained a centre
of innovation. Speaking
ahead of the banks
annual technology and
internet conference,
Cook acknowledged the
lawsuit brought against
the firm by David
Einhorns Greenlight
Capital last week, calling
it a silly sideshow but
saying the board was
carefully considering
Einhorns proposal that
Apple should return
preferred stock to
investors.
BUMI NEARS CRUCIAL
FINANCING DEAL
News, Page 5; Interview with Nick Von Schirnding, Page 17
ISSUE 1, 1,818 WEDNESDAY 13 FEBRUARY 2013
BUSINESS WITH PERSONALITY
allister.heath@cityam.com
Follow me on Twitter: @allisterheath
Retailer Republic poised
to fall into administration
REPUBLIC, the youth fashion retail-
er, is poised to become the latest
high street name to collapse into
administration, putting 1,000 jobs
and 121 stores at risk.
Ernst & Young has been lined up as
administrators and the appointment
is expected to be confirmed this
morning.
The groups demise marks the lat-
est in a string of casualties since the
start of the year after Jessops,
Blockbuster and HMV all entered
administration, with more than
10,000 staff made redundant.
The chain, which is owned by US
private equity giant TPG, has strug-
gled to stem falling sales amid a
weak consumer demand and a chal-
lenging economic environment, par-
ticularly in the North of England
where most of its stores are based.
Former Asda chief executive Andy
Bond stepped down as chairman at
the end of January and last week it
emerged that KPMG had been hired
to advise it on offloading the loss-
making stores in its 121-strong
estate.
The retailer, which is led by former
TK Maxx chief executive Paul
Sweetenham had been hoping to
move to monthly rents but it is
understood that talks with landlords
have been unsuccessful.
TPG bought the chain in 2010 for
THE DOW Jones industrial average
index is close to hitting an all-time
high, after edging up 0.34 per cent
to close at 14,018.70 last night.
The key New York index is
approaching the 14,164.53 mark
that it reached over half a decade
ago in October 2007.
Yet equities across the pond
could swing either way today,
depending on how investors react
to President Barack Obamas State
of the Union address, which was
made overnight.
The Standard & Poors 500 Index
closed up.16 per cent, at 1,519.43.
Dow Jones near
to all time high
Republic, which is headquartered in Leeds, runs 121 stores and employs 1,000 staff
2
NEWS
BY JULIAN HARRIS
BY KASMIRA JEFFORD
To contact the newsdesk email news@cityam.com
U
NEMPLOYMENT remains
obscenely high in todays
stagnant Britain, and far too
many people young and old
have been on the dole or on other out
of work benefits for far too long.
Anything that allows them to break
out of their present predicament
should be welcome.
The government should be able to
ask those on benefits to work for their
money or to attend training; when
handled sensibly, and with safeguards
to prevent this from turning into a
corporate subsidy, such measures will
help integrate people back into the
workforce. They should be welcomed
by all who want to help the poor.
There is, however, a view among
some activists that workfare pro-
grammes are tantamount to slavery:
they dont see that benefits are equiv-
alent to a wage. They also argue that
EDITORS
LETTER
ALLISTER HEATH
Work placements for the unemployed make a lot of sense
WEDNESDAY 13 FEBRUARY 2013
some workfare placements are
demeaning, or that claimants should
have the right to refuse placements
they dont like and continue to
receive benefits. Such arguments are
misguided; there is no slavery as
claimants can choose to take neither
job nor benefit, just like potential
employees can turn down a job and
therefore not get paid for it. These
sorts of analogies are in truth horri-
bly demeaning of genuine slavery.
Fortunately, yesterdays high court
ruling, which struck down the cur-
rent scheme on a technicality, made
it clear workfare wasnt forced labour
under the Human Rights Act. The gov-
ernment incompetently communicat-
ed requirements, provided wrong
information about penalties and
made other procedural blunders.
Once again, civil servants were slop-
py and failed to produce legislation or
implement the policy in a robust
manner. The rules are now being
tweaked to ensure the programmes
survival, but the government could
yet be forced to pay out millions. The
machinery of the British state is
becoming more shambolic by the day.
HOUSING BUBBLES (CONT.)
Two more pieces of evidence to cheer
those seeking to buy a house and
worry those who fear the coalitions
funding for lending programme and
This wont end well. The only sustain-
able solution is to tear up our archaic
planning rules and allow hundreds of
thousands more homes to be built.
DEALS ARE BACK
A healthier development is the return
of mergers and acquisitions, though
the trend remains far too American.
Last nights news that Comcast is pay-
ing General Electric $16.7bn for the
49 per cent stake in NBCUniversal it
didnt already own is a major move; it
follows the increasingly contested
multi-billion proposed buy-out of Dell
and the takeover of Virgin Media by
Liberty Global. For the sake of the
Citys underworked bankers and
lawyers, lets hope more UK compa-
nies soon start to splash out.
credit subsidies are fuelling another
bubble. The Council for Mortgage
Lenders revealed that 216,200 first-
time buyers became homeowners in
2012, the first time the annual total
has exceeded 200,000 since 2007 and
a year-on-year rise of 12 per cent. And
as noted by Ray Boulger of Charcoal,
the Marsden Building Society has
launched a 3.99 per cent fixed rate
loan to July 2015. While this only
allows buyers to borrow 250,000,
this is the first time for nearly 10
years that we see such a cheap fixed
rate mortgage available on a loan to
value of up to 90 per cent. Money is
returning to the housing market. The
problem is that house prices remain
around 25 per cent overvalued com-
pared to earnings, and even more so
in much of London. The surge in new
mortgages has also been accompa-
nied by a reduction in home-building.
300m with the aim of doubling the
size of the business to over 200 stores.
It hired Sweetenham a year ago to
spearhead a major investment pro-
gramme. Republics co-founder and
chief executive Tim Whitworth then
stepped back from the day-to-day run-
ning of the business.
TPG also invested more than 7m in
IT facilities to improve the chains
online presence and hired former
Mango buying director Melissa
McDermott to revive its womenswear
range.
But the latest accounts show sales
declined by 2.3 per cent to 177m in
the year to January 2012. Pre-tax profit
slumped from 27.3m to 3.2m.
A source familiar with the company
said Republics target market of 16 to
25 year olds has been particularly hit
by the recession while its loss-making
stores have also burdened the group.
Republic was founded by Whitworth
and Carl Brewins in 1986 in Leeds as
Best Company, selling denim and
mens jeans. It was eventually
renamed Republic in 1998.
Both Ernst & Young and TPG
declined to comment.
CARSTEN Kengeter, the former chief
executive of UBSs investment bank, is
leaving the group sooner than expect-
ed as part of a management shake-up.
Kengeter was recently moved from
being co-head of the investment bank
with Andrea Orcel, its current chief
executive, to head the winding down
of the groups fixed income business.
But last night the bank announced
that Kengeter was leaving the group
immediately and would provide advice
on a consultancy basis.
Sources said: Theres a point when
its just right to move on.
UBS is reducing its headcount by
10,000 across the world.
Sam Molinaro will become head of
the non-core and legacy portfolio, with
immediate effect, reporting directly to
Sergio Ermotti, the banks chief execu-
tive. Molinaro joined in March 2012 as
COO of the investment bank. The co-
head of UBSs financial institutions
group (FIG) in Europe, Edouard de
Vitry, is also leaving as part of changes
implemented by new investment
banking head Orcel. Javier
Oficialdegui, co-head of the FIG unit
who was brought in by Orcel, will be
sole leader of the advisory team.
Darryll Uden recently left as co-head of
equity capital markets (EMEA).
Separately, the bank was fined
9.45m by the FSA yesterday for
exposing customers to unacceptable
risk when it sold an AIG investment
fund.
Kengeter exits
UBS sooner
than expected
BY DAVID HELLIER
LABOUR yesterday accused the
government of failing to take
decisive action and build large-scale
projects that could help kickstart
the economy.
The partys analysis of the
governments national
infrastructure plan suggested only
seven out of the 576 major building
projects on the list have been
completed, while just only 18 per
cent are under construction.
A Treasury spokesman hit back:
Under Labour no national
infrastructure plan even existed.
Infrastructure
plan attacked
BY JAMES WATERSON
IT groups tax accounts face scrutiny
MPs are preparing to scrutinise the tax
affairs of IT companies that supply the
public sector before a crackdown on
aggressive avoidance by contractors that
receive billions from taxpayers. The public
accounts committee has confirmed that it
is considering calling in some of the IT
sectors biggest companies, as a Financial
Times investigation into nine government
suppliers shows they use a range of
methods to keep taxes low, including
recording UK sales in low-tax
jurisdictions.
Rush to invest in Yorkshire potash
The latest discovery under the countys
rich soil has sparked their biggest
investment frenzy since the rhubarb
boom of the interwar years. This time the
commodity is potash, a vital ingredient
for the fertiliser needed to feed the
worlds growing population.
CBI lowers growth forecast
A leading trade body for business has cut
its forecast for UK growth but expects
Britain to avoid a triple-dip recession. The
CBI said it expects the UK economy to
grow one per cent this year.
Bonus up for BPs chief executive
Bob Dudley has been awarded a bonus of
2.6 million in cash and shares, despite
presiding over a 20 per cent slump in
profits at BP last year.
Iberia to jettison 3,800 jobs
Iberia today announced a plan to cut
3,807 jobs as it attempts to stem losses
which have reached 850 million (731
million) over the past four years.
The job losses, which represent about 19
per cent of the workforce, were reduced
from an original figure of 4,500.
Rogue trader sues Societe Generale
French rogue trader Jerome Kerviel is
trying to render meaningless the 4.9bn
in damages he owes to Societe Generale
by seeking the same amount from the
bank in a labour court.
Economic hopes rise on oil demand
The outlook for the global economy
appeared to brighten as OPEC, the cartel
of oil-producing nations, predicted the
world will consume more oil this year than
previously thought.It cited better than
expected growth at the end of last year.
Intel to launch web TV service
Intel confirmed plans to offer a paid
Internet video service and accompanying
set-top box, an unusual gamble for a chip
maker that has rarely marketed directly to
consumers.
Lehman in $800m property deal
Lehman Brothers Holdings has agreed to
sell the Manhattan office tower at 237
Park Ave. to a venture of RXR Realty and
Walton Street Capital in what would be
one of the largest sales in Manhattan in
the past year.
WHAT THE OTHER PAPERS SAY THIS MORNING
Find your next step at
CITYAMCAREERS.com
BARCLAYS shares soared as the bank
announced a major cost-cutting plan
yesterday, shutting four business
units and shaking up another 32 of its
75 units to streamline the institution
and shore up profits in the face of a
weak economic outlook.
Chief executive Antony Jenkins
announced 3,700 job cuts well above
the 2,000 expected as part of a drive
to save 1.7bn per year. Most of those
will come in the weak European busi-
ness and Asian equities arm that the
bank is cutting back, though hun-
dreds of cuts could come in the UK.
And the bank cut its bonus pool by
14 per cent on the year to 1.85bn.
In a bid to improve Barclays public
image, he will be gradually shutting
down all activities designed purely to
cut customers tax bills, as well as agri-
cultural commodities trading, even
though these units bring in 500m of
revenue per year.
Jenkins pledged to increase return
on equity so that is it above the cost of
equity by 2015. Currently it stands at
7.2 per cent, well below the 11.5 per
Jenkins slashes
jobs and pay to
shore up profit
BY TIM WALLACE
cent cost. He expects much of that to
come from profitable and high
growth units including Barclaycard,
UK mortgages and African activities.
He also vowed to increase the com-
mon equity tier one ratio to 10.5 per
cent and raise dividends. The banks
full year results showed a 96 per cent
fall in pre-tax profits to 246m,
though an own credit charge of
4.58bn, PPI provisions of 1.6bn and
interest rate swap provisions of 850m
account for much of that drop. On an
underlying basis, unadjusted profits
rose 26 per cent to 7.05bn.
Shares jumped 8.57 per cent.
C
ONSIDERING the glee with
which investors reacted to
Antony Jenkins plans yesterday,
youd been forgiven for thinking
his cost cuts and clean-up had come
out of the blue.
But these changes were widely
trailed almost down to the letter so
why was an extra 26p added to the
banks share price yesterday, on top of
the 36 per cent that the stock has
climbed since he joined last August?
The answer seems to lie in Jenkins
ability to keep both shareholders and
banker bashers happy at the same
time. These cost savings arent only
headline grabbing theyre absolutely
necessary if the new boss is going to
deliver the return on equity of 11.5 per
cent that hes promised by 2015.
Its an ambitious figure that just
wouldnt materialise if Jenkins relied
on increasing revenues, particularly
not with a massive 2.7bn in restruc-
turing costs lurking on the horizon.
Investors and analysts positive reac-
tion proves that the mess Jenkins was
left with when he took over from Bob
Diamond last summer may actually
have been a blessing in disguise. With
fines piling up and executives falling
on their swords all over the place, the
retail man had a free pass to sweep
away the bad eggs racking up cost
cuts that could have otherwise been
met with a little more scepticism.
Its left him sitting pretty at the
helm of the UKs top performing bank
throughout the second half of 2012
and into the New Year but now the
hard work begins. Jenkins has spent a
long time explaining what he wants
the new-look Barclays to deliver and
now its time for his plan to be tested.
Investors shouldnt let him rest on his
laurels for long.
Elizabeth Fournier is news editor of
City A.M. @ej_fournier
BOTTOM
LINE
ELIZABETH FOURNIER
Antony Jenkins made some big promises as he announced planned cuts to jobs and bonuses yesterday
Barclays PLC
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12Feb
THE FORUM: Page 20

WEDNESDAY 13 FEBRUARY 2013
3
NEWS
cityam.com
Barclays new broom shows he can balance the books

There is no choice between doing well


nancially and behaving well. We will
not be able to generate sustainable
returns over the long term unless we
act at all times with good values.

We may sometimes fall short of the


high standards that we have set. But I
promise you it wont be for lack of
energy, effort or intent. Where we do
get it wrong, we will put things right.
GLEE & 2012-2013 Fox and its related entities. All rights reserved. The Following 2013 Warner Bros Entertainment Inc
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RYANAIRS latest attempt to take
over Irish rival Aer Lingus has been
scuppered by the European
Commission.
The budget airline said it will
appeal after the Commission
indicated during a state of play
meeting that it will prohibit the
694m (597m) takeover.
Ryanair had argued that its offer
to give 43 short-haul routes and
100m to regional carrier Flybe as
part of the takeover would ease
competition concerns. Shares in
Aer Lingus fell 4.3 per cent.
Europe blocks
Ryanairs bid
BY MARION DAKERS
MCGRAW-HILL, which is being sued
by the US government for bond
ratings issued by its Standard &
Poors unit, yesterday reported a
surge in quarterly adjusted profit
and said it does not believe the
government can prove its case.
The US financial services and
publishing firms profit from
continuing operations jumped 76
per cent on a surge in debt issuance.
Income from continuing
operations rose to $190m (121.2m)
in the fourth quarter from $113m in
the same period a year earlier.
Profit surges
at McGraw-Hill
BY CITY A.M. REPORTER
TROUBLED miner Bumi last night
moved a step closer to normalising
the company as it agreed the first
stage of the separation deal which
would see Indonesian arm Bumi
Resources sold off.
Bumi yesterday signed a heads of
terms agreement with the Bakrie
Group for the separation, in return
for a $50m (32m) deposit in a ring-
fenced account.
The agreement will remove the
Bakrie group and beleaguered
Indonesian division Bumi Resources
from the London outfit altogether.
But board opponent Nat Rothschild,
who has called an EGM and yesterday
announced that his supporters had
increased their stake further, said the
Bakries were putting up $50m in an
attempt to buy the EGM.
Under the agreement, the Bakrie
family will cancel their near 24 per
cent shareholding in Bumi, in
exchange for Bumi selling its stake in
Bumi Resources.
The London-listed miner will then
sell the Bakries the remaining near 19
Bumi agrees
crucial funding
for Bakrie split
BY CATHY ADAMS
per cent of the Indonesian arm for
$278m in cash, which they will place
in an escrow account within five days
of signing the agreement.
Separately, the miner reported good
production figures ahead of the key
vote next week.
Bumis main Indonesian asset Berau
Coal posted a 30 per cent year on year
jump in coal sales to 6.5m tonnes over
the fourth quarter.
In terms of production, Berau posted
a 15 per cent hike in coal output, sell-
ing 5.9m tonnes over the fourth quar-
ter, and hitting its full-year production
target of 21m tonnes.
Bumi PLC
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12Feb
HSBC will become the first major
bank to publish regional lending
data on a regular basis, City A.M.
has learned, after business
ministers called for the industry to
become more transparent over the
allocation of credit.
Despite several state schemes,
lending to businesses is falling so
ministers are trying to find new
ways to put pressure on the banks.
Ministers Vince Cable and
Michael Fallon last week demanded
weekly data be published on SME
and personal lending, and HSBC is
the first bank to respond.
HSBC to publish regional loan
data in new transparency drive
It will shortly publish mortgage
and SME data on a quarterly basis,
broken down by nine UK regions.
This is particularly big as HSBC is
the only major lender not taking
part in the Funding for Lending
Scheme under which banks publish
UK-wide lending data each quarter.
We understand the public
interest in lending figures, said
the bank. We are working with the
British Bankers Association to
provide SME lending data. In
principle, we see no reason why
that work could not be extended to
personal loans and mortgages. As
an interim step, we will publish
regional data on our website.
EXCLUSIVE
BY TIM WALLACE
INTERVIEW: Page 17

WEDNESDAY 13 FEBRUARY 2013
5
NEWS
cityam.com
HSBC chief Stuart Gulliver wants to clean up the banks image after a series of scandals
THE GOVERNMENTS back-to-work
programme was thrown into disarray
yesterday after a judge ruled that
many schemes that make the unem-
ployed work for free are unlawful.
Graduate Cait Reilly, 24, claimed vic-
tory after the Court of Appeal ruled
that a programme she took part in
which required her to undertake
work experience at Poundland or risk
losing her benefits could not be
enforced under existing legislation.
The department for work and pen-
sions (DWP) insisted it would seek per-
mission to take the case to the
Supreme Court, as well as putting
new legislation before parliament as
soon as possible so the schemes can
continue.
Three presiding judges dis-
missed Reillys claim that the
scheme broke the Human Rights
Act ban on forced labour.
However Reilly and
unemployed lorry driver
Jamie Wilson, 41, suc-
cessfully argued that the
DWP had exceeded its
legal powers by not pro-
viding enough informa-
tion about the schemes
in primary legislation
and failing to provide
enough detail to
claimants who took part.
I emphasise that this
BY JAMES WATERSON case is not about the social, economic,
political or other merits of the
Employment Skills and Enterprise
Scheme, said Sir Stanley Burton, one
of the judges responsible for yester-
days verdict.
He insisted that parliament is enti-
tled to encourage participation in
such schemes by imposing sanctions,
in terms of loss of jobseekers
allowance, on those who, without
good cause refuse to participate in a
suitable scheme, but said the existing
programmes went beyond what had
been agreed by MPs.
Lawyers for Reilly and Wilson said
benefits claimants can now leave such
schemes without suffering financial
penalties. However one of the so-
called workfare schemes,
Mandatory Work Activity, was
passed under specific legislation
and is unaffected by the ruling.
DWP minister Mark Hoban
said: The court has backed our
right to require people to
take part in programmes
which will help get them
into work. It is ridicu-
lous to say this is forced
labour. This ruling
ensures we can con-
tinue with these
i m p o r t a n t
schemes.
Iain Duncan Smith launched
the work programme
OUTSOURCING giant G4 has tried
to draw a line under its botched
Olympic security contract by taking
an 88m financial hit.
The firm, which admitted it
could not provide enough security
staff just two weeks before last
summers Olympic Games began,
said yesterday it will book a 70m
charge in its 2012 accounts, plus an
11m charitable donation and 7m
in marketing costs.
This is higher than the 50m loss
that G4S expected last year, but
BY MARION DAKERS
below some analyst forecasts of
more than 100m.
Locog said G4S has agreed to pay
around 48m to cover military,
police and other costs linked to its
failure to complete its contract,
and cut its own fee by 37m.
As a result, the FTSE 100 firm
was paid 171m for its security
work, some 85m lower than
agreed in the contract, Locog said.
G4S carried out just over 80 per
cent of the shifts that it had agreed
to cover during the Games. Several
directors left the firm following a
public outcry.
The UK government is an
important customer for the group
and we felt that it was in all of our
interests to bring this matter to a
close in an equitable and
professional manner without the
need for lengthy legal
proceedings, said G4S chief
executive Nick Buckles.
In our view this draws a line
under the Olympics situation and
will enable the company to win
more government outsourcing
contracts, said Cantor Fitzgerald
analyst Caroline de la Soujeole in a
note.
THE WEST End of London Property
Investment Company (Welpic) has
cancelled its IPO planned to take
place today after failing to gather
sufficient interest.
Welpic was intending to float on
the Alternative Investment Market
on 13 February, in a listing
expected to raise around 100m.
It hoped to provide investors
with access to office property in
Property fund Welpic cancels
flotation on the Aim market
BY KASMIRA JEFFORD
the West End and Midtown areas
by pouring cash into closed-end
unit trust Welput, which has
already built up a 873m portfolio
made up of 12 properties.
William Hill, Schroders head of
property and adviser to Welpic said
despite interest in Welputs
portfolio institutional investors
were concerned that the size of the
Aim-listing was too small as well as
the liquidity in the junior market.
WEDNESDAY 13 FEBRUARY 2013
6
NEWS
cityam.com
G4S takes 88m hit to put an
end to Olympic security fiasco
The proposed
buyout of
computer maker
Dell hit a
stumbling block
last night after the
companys third-
largest
shareholder,
money manager T.
Rowe Price Group,
joined a growing
number of
investors putting
pressure on
Michael Dell and
his partner Silver
Lake to sweeten
their $24.4bn
(15.6bn) offer to
buy out the
publicly owned
business.
DELL COMES UNDER PRESSURE TO SWEETEN DEAL
Back-to-work
scheme ruled
illegal by court
THE CONSERVATIVES last night pub-
lished a draft plan for press reform that
would see UK news websites regulated
for the first time.
David Cameron has rejected recom-
mendations contained in the Leveson
report and backed by Labour and the
Lib Dems to introduce new legislation
to control the media. Instead he wants
to introduce an independent panel,
backed by royal charter, to oversee a new
press regulator.
Culture secretary Maria Miller said the
proposed charter would see the tough-
est press regulation this country has
ever seen, without compromising press
freedom. Controversially the charter
proposes extending the remit of any
press regulator from printed newspa-
pers to websites targeted primarily at
Tories suggest
regulating UK
news websites
BY JAMES WATERSON
an audience in the United Kingdom.
Paul Staines, publisher of the Guido
Fawkes political blog, last night told City
A.M. that this would be impossible to
enforce even though the majority of his
readers are in Britain: It is my intention
to ignore it completely; my website
servers are in California and the publish-
er is a foreign corporation. I have no
bricks and mortar legal entity in the UK.
The charter is not going to work. The
reforms only benefit the rich and power-
ful, Staines added.
The leaders all of all three main politi-
cal parties, as well as two-thirds of parlia-
mentarians, would have to agree on any
changes to the royal charter.
David Cameron has chosen the arcane
royal charter device, used to set the remit
of organisations such as the BBC, the
Bank of England and universities.
THE FORUM: Page 21

WEDNESDAY 13 FEBRUARY 2013
7
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Regulators look into sale of
shares by BlackRock in Saipem
INVESTIGATORS are looking into
whether there was any market
abuse surrounding a controversial
share sale by the institutional fund
manager BlackRock last month.
Both the Italian financial regula-
tor Consob and the FSA are looking
into the circumstances behind the
share sale in the Italian oil services
group Saipem and a subsequent
profits warning less than 24 hours
later that wiped a third from the
companys market capitalisation.
BY DAVID HELLIER
Consob said yesterday: There is
an investigation going on which is
going to look into every detail
surrounding this transaction. But
we can not make any further
comment since a market abuse
investigation must be conducted in
private.
Bank of America Merrill Lynch
sold a 2.3 per cent stake, or around
315m of shares, in Saipem on
28 January.
Massachusetts Financial
Services, a US investment fund,
bought a two per cent stake in the
company at around the same time,
according to documents.
Yesterday Ian Mackenzie, the
groups managing director for
European Relationship
Management, said: This stock is
one that we are looking at quite
hard but I am not prepared to
make any public comment on it at
this stage.
Investigators want to know
whether anybody was made aware
of the imminent profits warning
and whether that prompted the
share sale.
T
HREE weeks ago I wrote in
this column that Tesco had
suffered an immediate image
impact after the revelations
over horsemeat in burgers but
that the supermarket giant was
already starting to recover and the
story could prove to be a storm in
a teacup.
Our measurement of brand
perception called the Index
score, a composite of six key image
measures on YouGovs
BrandIndex shows that this may
well have turned out to be the case
had the story not had another
twist. And twist it has.
The unfortunate thing for Tesco
is that the story did not even
require their involvement to drag
them back down, but rather it was
news that frozen food maker
Findus was peddling lasagne
containing horsemeat.
The reach of Tesco on Twitter
(the proportion of UK twitter users
exposed to comments about Tesco)
had been hovering around the 10
per cent mark on any given day,
but rose to 31 per cent on Friday
with the top two words associated
with Tesco being horse and
Findus. This latest story might
have been about Findus, but Tesco
suffered a knock-on effect and got
dragged back down by association.
The Index chart shows how the
supermarket had essentially
recovered its perception level by
mid last week, but that it also took
an immediate hit sitting at +9 on
Monday (compared to a crisis low
of +8 and a 2013 high of +24).
And looking again at our social
media analysis known as SoMA
we can see that on Monday Tesco
was in the news again, this time
with horsemeat found in its
spaghetti bolognese.
This reached 46 per cent of UK
Twitter users and Id expect it to
have a further adverse effect on
Tescos BrandIndex scores.
Tesco responded quickly to the
first crisis and looked like it would
shore-up perceptions of the brand.
However, the past few days have
shown that Tesco is becoming the
face of the horsemeat scandal and
they need to react just as fast to
deal with that perception, even if
it is one that they have gained
somewhat unfairly.
Stephan Shakespeare is the chief
executive of YouGov
BRAND
INDEX
STEPHAN SHAKESPEARE
POLICE yesterday raided an abattoir
in West Yorkshire and a meat
supplier in Aberystwyth as the
scandal over the mislabelling of
meat products continued to spread.
Officials from the Food Standards
Agency (FSA) closed down the two
sites following allegations that horse
carcasses from the Yorkshire site
were sold on to the Welsh company
for use in kebabs and burgers.
Meanwhile supermarket chain
Waitrose was forced to withdraw its
own-brand British frozen beef
meatballs after traces of pork were
found in some batches.
Environment secretary Owen
Paterson last night said allegations
that unlabelled horsemeat was being
produced by UK business was
absolutely shocking.
Police raid Yorkshire abattoir
over horsemeat kebab fears
BY JAMES WATERSON
Its totally unacceptable if any
business in the UK is defrauding the
public by passing off horsemeat as
beef. I expect the full force of the
law to be brought down on anyone
involved in this kind of activity, he
added.
Paterson will today travel to
Brussels and meet with fellow
European ministers to discuss their
response to the scandal.
The FSA has ordered all businesses
involved in the sale of processed beef
products to conduct tests for horse
meat, with the first results due to be
published this Friday.
Shadow environment secretary
Mary Creagh yesterday accused the
coalition government of
undermining the UKs food testing
programme by reducing the number
of FSA officials responsible for
labelling since 2010.
WEDNESDAY 13 FEBRUARY 2013
9
NEWS
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C
I
T
Y
A
M
C
A
R
E
E
R
S
.
c
o
m
Tesco must rein in the runaway horse lasagne scandal
SoMA % of Twitter users exposed to Tesco
02/02/13 03/02/13 04/02/13 05/02/13 06/02/13 07/02/13 08/02/13 09/02/13 10/02/13 11/02/13
10
5
0
30
35
40
15
20
25
45
50
10
12 12
11 11
20
%
31
15
9
46
Index Chart
1 Nov2012 7Feb2013 20Dec2012
5
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10
15
20
25
30
Tesco
HEATHROW yesterday defended its
plan to hike passenger charges from
next year to pay for its upgrade
work.
The airport said it wants to spend
3bn between 2014 and 2019 to com-
plete the revamp of terminal two,
install more self-service check-in
desks and improve punctuality.
The plans, which must be approved
by the Civil Aviation Authority, will
mean passenger charges will rise
from 19.33 this year to 27.30 by
the end of the period.
Heathrow blamed the
price hike on passenger
numbers that have fallen
10 per cent behind the
CAAs forecasts as the
economy stuttered, leav-
Heathrow boss
defends plans
to hike charges
BY MARION DAKERS
ing investors with an unsustainably
low return, according to chief exec-
utive Colin Matthews.
British Airways, Heathrows biggest
airline, said that fees have already
trebled over the past 11 years.
The charges must be reduced sig-
nificantly over the coming years,
especially when the airport is cutting
investment by around 25 per cent
from next year onwards, said a
spokesperson.
Virgin Atlantic argued that
the airport can improve its
facilities without a repeat of
the incredibly steep price rises
we have seen in airport
charges in the last few
years.
WHERE SHOULD LONDONS NEXT
AIRPORT OR RUNWAYS BE BUILT?
Interviews by Amy-Jo Crowley
Given the residential area surrounding
Heathrow, wouldnt it be a better idea to put
expansion out of the way from where people live?
These views are those of the individuals above andnot necessarily those of their company
KEITH BUROWES
BANK OF ENGLAND

Living out in the east would make it more con-


venient for me. Theyre looking to fund
improvements for Heathrow through its passengers and I
think thats wrong.
PAUL RILEY
RR DONNELLEY
Heathrow is at bursting point. When you look
at the impact of local population, it seems that
Boriss idea is strategically a better option in terms of
balance, but cost is always an issue.
SIMON NEVILLE
AAG

L
A
U
R
A

L
E
A
N
/
C
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A
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M
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CITYVIEWS
Boris Johnson, who opened the London Stock Exchange yesterday, wants a new airport
Colin Matthews said the
investment was needed
WEDNESDAY 13 FEBRUARY 2013
10
NEWS
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Find your
next step at
C
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Y
A
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C
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E
E
R
S
.
c
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LONDON Capital Group saw its
shares leap 23 per cent yesterday
after the spread betting firm
confirmed it is in takeover talks
with a number of bidders.
The owner of Capital Spreads
said it has received preliminary
takeover approaches from Cantor
Fitzgerald, GAIN Capital and City
Index although it said there was no
certainty of an offer being made.
London Capital
in buyout talks
BY KASMIRA JEFFORD
MARSH & McLennans said yesterday
its fourth-quarter profit rose two per
cent, helped by growth in its core
insurance business.
The insurance broker reported a
profit of $259m (165.4m), or 47
cents per share, up from $256m, or
46 cents per share, a year earlier.
Revenue at Marsh, the companys
main insurance business, grew four
per cent to $1.42bn.
Profits up on
Marshs sales
BY CITY A.M. REPORTER
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HOUSE prices chugged upwards
steadily during last year, according
to official statistics out yesterday.
The average UK home was worth
3.3 per cent more at the end of 2012
than at end of 2011, the Office for
National Statistics (ONS) said in its
house price index, up from the 2.2
per cent annual growth seen in
November.
As has been typical since the
recession, the expansion was driven
by a buoyant London market, where
prices grew some 6.4 per cent over
the year. But the rest of the UK was
moving in the same direction
albeit more slowly with 1.9 per
cent annual growth according to the
ONSs numbers.
And separate data from the
Council of Mortgage Lenders
confirmed this upbeat picture of the
UKs market for houses.
Mortgage loans to first-time
buyers rocketed up 12 per cent
between 2011 and 2012 to reach
216,000 the highest annual total
since 2007. Overall, home loans were
up 6.2 per cent on the year, bringing
them to reach 540,200.
House prices
climb steadily
through 2012
BY BEN SOUTHWOOD
THE EUROPEAN Central Bank (ECB) will only step into
the Spanish bond market and use its bond buying
scheme if it was having major problems trying to
carry out monetary policy, its boss said yesterday.
ECB boss Draghi also said the rate-setters would not
use the outright monetary transactions (OMT) bond-
buying programme unless Spain had already been
bailed out by the European Stability Mechanism
(ESM) aid fund.
The ECB can only consider OMTs if there are major
problems in the transmission of monetary policy and
if there is a strict and effective conditionality
attached to an appropriate ESM programme, Draghi
told Spanish politicians.
Analysts said these comments meant the scheme
was really being relegated to a minor role for use only
in extreme circumstances. I think Draghis speech in
Madrid makes really clear that the OMT is only a
panic-prevention tool, said Berenberg Banks
Christian Schulz. Its a backstop against destructive
speculation, not a subsidy to government financing.
Draghi had come to Spain in order to hit back at
German critics of his flagship OMT policy which
include the Bundesbank.
But Spanish Prime Minister Mariano Rajoy said he
had no plans to request the bailout necessary to
trigger bond-buying from the ECB. His position has
been made much easier by the steady easing in
Spanish bond yields, which sees
them close to 5.5 per cent, from
nearly seven per cent last
September, before the OMT
programme was announced.
This came as a poll revealed
Rajoys centre-right Peoples Party
(PP) had less popular support
than at any time in the past
20 years. The Sigma Dos poll
in El Mundo newspaper gave
PP just 33.5 per cent of the
vote down from the 44.6
per cent they garnered in
the November 2011
election that saw Rajoy
take power. However PP
still enjoyed a substantial
lead over the main
opposition party, the
Socialists, who polled just
28.2 per cent.
Draghi in no rush to
buy up Spains bonds
BY BEN SOUTHWOOD
CONSUMER prices grew faster than
the Bank of Englands target rate for
the 38th straight month over the year
to January, data revealed yesterday.
The consumer prices index (CPI)
grew 2.7 per cent between January
2012 and January 2013, the Office for
National Statistics (ONS) said, the
same rate as recorded in October,
November and December. According
to the ONS, the CPI has never before
grown at a constant rate for four
months in a row.
A jump of 8.5 per cent in alcohol
and tobacco prices would have added
0.12 percentage points to the rate, the
ONS said, but it was balanced out by
downward contributions from cloth-
ing, footwear, housing and recreation
and culture.
The retail prices index (RPI), which is
Inflation stuck
above target
for 38th month
BY BEN SOUTHWOOD linked to business rates, student loans,
some tax thresholds, and some gilts,
ticked up to 3.3 per cent, from 3.1 per
cent in December.
The tax and prices index essentially
a modified RPI that takes into account
the burden of tax also climbed, from
2.7 per cent to 2.8 per cent.
But ongoing above-target inflation
will not spur the Bank into tightening
action, according to Nida Ali at the
Item Club.
There are no implications for mone-
tary policy, Ali said. High inflation
continues to be a result of external
supply shocks, which the Bank has
consistently ignored.
She went on to predict that while
todays inflation report would forecast
further above-target price growth,
there would still be no Bank move,
while the economy remains in such a
gloomy state.
WEDNESDAY 13 FEBRUARY 2013
12
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INFLATION FLAT AT 2.7 PER CENT FOR RECORD FOURTH SUCCESSIVE MONTH
9.3%
TOBACCO
1.9%
EDUCATION
19.7%
S
o
u
r
c
e
: O
f
c
e
f
o
r
N
a
t
io
n
a
l S
t
a
t
is
t
ic
s
*All rates of change are between January 2012 and January 2013
7.1%
BEER
OILS & FATS
0.7%
f
o
r
N
a
t
io
n
a
l S
t
a
t
is
t
ic
s
INSURANCE
GAS
5.2%
0.5%
HOUSEHOLD
APPLIANCES
POSTAL SERVICES
23.3%
Spanish PM Rajoys party is
at its lowest ebb in 20 years
COMMODITIES trader Glencore and
Xstrata, in the final stages of a 56bn
mega-merger, yesterday posted a
drop in combined output across key
metals including copper.
The two companies combined
production figures, released by
Glencore yesterday, show a nine per
cent annual drop in copper output
in 2012, and a one per cent fall in
zinc production over the year.
Nickel output from its own feed was
up three per cent, while total gold
output fell eight per cent.
Coal production was a bright spot
though, rising 26 per cent for the
two companies combined over the
year.
Separately, Xstrata, the worlds
fourth-largest copper miner, said
that mined production of the red
metal hit 747,000 tonnes in 2012.
The figures were in line with
market forecasts, but down 16 per
cent on 2011 as the company
replaces ageing operations such as
the Ernest Henry open pit in
Australia and moves to new projects
and expansions.
Glencore did not provide any
details of its trading activities,
which is a key driver of its earnings.
The commodities giant is still
waiting for regulatory approval
from China for its merger with
Xstrata, but the deal is expected to
officially complete next month.
Glencore and
Xstrata post
output drop
BY CATHY ADAMS
BRITISH investment giant 3i yester-
day sold its plastic equipment busi-
ness Mold-Masters to US rival
Milacron for C$975m (615m),
pleasing investors who want the
business to pay down its debt pile.
Proceeds from the deal will be
around 219m 2.6 times the ini-
tial 84m investment 3i made in
October 2007. The company said
there had been a highly competi-
tive process with interest from a
wide range of private equity and
strategic buyers.
The sale is part of 3is new strate-
gy, adopted last year, to boost its
share price through a series of dis-
posals. Chief executive Simon
Borrows, brought in 18 months ago
to oversee the turnaround process,
has already cut a substantial num-
ber of jobs and yesterday told
investors to expect further sell-offs
over the next eighteen month.
This transaction is yet further
evidence of the strong and measur-
able progress that we are making
against our strategic agenda,
Borrows said.
3i targets more
sell-offs after
615m disposal
BY JAMES WATERSON Since announcing the new strate-
gy for 3i in June last year, we have
wasted no time in implementing
the restructuring of 3i and deliver-
ing against the immediate priorities
and targets that we set out.
The sale of Canada-based Mold-
Masters will help 3i meet its target
of reducing gross debt, which stood
at 1.2bn at the end of 2012, to
below 1bn by June.
Last month the company revealed
that activist investor Edward
Bramsons Sherborne Investors has
been buying shares in the company,
although 3i insists there has not
been any direct communication
between the two parties.
3i turned to international nancial services
group Robert W. Baird to advise on the sale
of Mold-Masters, employing the services of
managing directors Chris McMahon and
Trish Hansen.
McMahon has been with Baird for 11 years
and currently leads the companys global
M&A activities, as well as being co-head of
the Chicago ofce. His 25 years of invest-
ment banking experience includes stints at
Credit Suisse First Boston and ABN Amro.
Hansen works in Bairds consumer and
industrial group, having joined the business
in 2000 after six years with consultancy
group Arthur Anderson.
Further advice was provided by Houlihan
Lokeys Jim Lavelle, co-head of the busi-
nesss industrials group. Lavelle previously
founded and managed M&A advisory rm
Nassau Group for 12 years. Before that he
spent ve years working for Baring
Brothers in both New York and London.
Morgan Stanleys Lawrence Steyn was also
involved in the deal.
Legal advice was provided by Chris
Torrente, a corporate partner at Kirkland &
Elliss New York ofce, who has also
worked with Boeing and Bain Capital.
3i began planning the sale of Mold-Masters
in summer 2012, with an auction following
in the autumn. The deal is expected to
close by April 2013.
ADVISERS
ROBERT W.BAIRD
CHRIS MCMAHON
TRISH HANSEN
Simon Borrows joined 3i in 2011 from investment bank Greenhill & Co.
3i Group PLC
12Feb 6Feb 7Feb 8Feb 11 Feb
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275
280
285
290
295 p
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WEDNESDAY 13 FEBRUARY 2013
13
NEWS
cityam.com
lombard.co.uk
At Lombard weve been working hard to raise
awareness of the many benefits of asset finance
and to highlight just how accessible this form of
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TWO ex-bankers turned bespoke City
tailors have found themselves playing
host to a group of their former con-
temporaries not for suit fittings
but a series of rather unorthodox
Skype conferences.
Ian Meiers and James Sleater, co-
founders of City tailor Cad & the
Dandy, are sponsoring the self-
defence seminars given by macho-
man Tim Larkin. Larkin used to offer
rather more hands-on training to
bankers in London
and New York, but
was banned by the
Home Secretary
last year
THE CAPITALIST recently reported
that ex-Deutsche chief Graham
Hodgkin had taken on the job of
Londons Air Ambulance CEO
and he is wasting no time putting
his stamp on the charity. The
rescue chopper has had a
makeover and returned from its
annual service with emergency
codes emblazoned on the tail.
Hodgkin explained: Our aircraft
provides the opportunity to deliver
messages to potential donors,
hence the strategic new look.
The Capitalist can also reveal
that Aberdeen Asset boss Martin
Gilbert has become a Patron of the
charity: It deserves the backing of
everyone who lives, works and
travels in London, said Gilbert.
The newly designed Air Ambulance helicopter and Aberdeen Asset boss Martin Gilbert
Aberdeen boss gets helicopter
ambulance off to a flying start
15
cityam.com
WEDNESDAY 13 FEBRUARY 2013
cityam.com/the-capitalist
THECAPITALIST
EDITED BY CALLY SQUIRES
Got A Story? Email
thecapitalist@cityam.com
Time for an inspirational story to
warm the cockles. The Capitalist
hears that Londoner Kofi Owusu-Ansah
(pictured) has managed to teach
himself the syllabus for the
accountancy ACCA qualification, while
at the same time studying for a degree
in physics and working part-time as a
cleaner in the City to fund his studies.
Despite not having any financial
support, Owusu-Ansah has now passed
18 fundamental and professional
qualification papers, all
on the first attempt.
He is now pursuing a
career in accountancy
and tells The
Capitalist he has got
through the first
recruitment
round at PwC.
Before it melts away, Broadgate
Ice Rink is having one last hurrah
tonight, hosting a singles speed skating
evening with Lovestruck.com. The
Capitalist isnt sure if falling into an icy
puddle is the best icebreaker for our
City singles. Unfortunately the cocktails
provided by Square Mile watering hole
Corney & Barrow are strictly non-
alcoholic, so no chance of numbing the
inevitable fall. However good news if
your Valentine is from UBS, Icap, or
RBS, as The Capitalist is told speed
skaters from all three are set to appear.
There is capacity for 300, so be sure to
get your skates on.
L to R: Ian
Meiers,
Tim Larkin
and James
Sleater
from entering the UK.
A Home Office spokesperson told The
Capitalist: We are concerned that the
type of self defence training promoted
by Mr Larkin may encourage excessive
violence and vigilante type behaviour.
Larkin is appealing the decision but
in the meantime is confined to teach-
ing via Skype. One Barclays trader who
attended an session last month didnt
seem too bothered about the exclu-
sion order placed on Larkin, telling The
Capitalist the training would be partic-
ularly useful for City boys heading off
to seek out investment
opportunities in less-
than salubrious des-
tinations. Gives a
whole new
meaning to
the phrase
b a n k e r -
bashing.
Fight club finds
a new home at
City tailor shop
IN BRIEF
Galliford Try seals 60m contracts
nHousebuilder Galliford Try was
yesterday named as the preferred
bidder for contracts worth up to 60m
to build affordable housing across
London and the Midlands. Galliford Try
was selected as preferred bidder for
the 15.6m contract for Hampstead
Reach in north London, a 15.5m deal
to build 137 homes and commercial
units at Blackwall Lane, and a further
8.1m contract at Neptune Wharf
project, also in east London.
Mondi sees trading improve
nPaper manufacturer Mondi said
yesterday its fourth quarter trading was
ahead of both the previous quarter and
the same period last year, but that the
recent strong performance could not
offset weaker trading earlier in the
year. It also warned that its underlying
operating profit for the full 2012 year
was expected to be below 2011, when it
made 622m (533.6m). Mondi said it
expects basic underlying earnings per
share of 0.67 to 0.71.
Year-end boost at Just Retirement
nAnnuity provider Just Retirement
yesterday announced a 64.3 per cent
spike in revenue for the final quarter
of last year. The company recorded
412.5m in annuity sales for the
period, while equity release sales also
grew although more modestly up
8.3 per cent to 78.6m in the fourth
quarter of 2012. Yet CEO Rodney Cook
warned that one-off factors played a
part: We expect volumes in the next
quarter will be significantly lower than
these exceptional market levels.
YELLOW Pages publisher Hibu, which
is grappling with a heavy debt load,
said yesterday it expects to reach a
deal with its lenders on restructuring
its debt in the near future.
Hibu said in October that it would
suspend debt repayments and that
it planned to present a restructur-
ing proposal to lenders by January
to clean up its balance sheet by the
first half of 2013.
Hibus net debt fell 83m to just
over 2bn in the quarter to the end
of December. It built up the debt
pile in a series of acquisitions
including a 3.3bn (2.83bn) deal to
buy a Spanish directories business
in 2006.
Like other directories publishers,
Hibu has been struggling to cope
with a slide in its print businesses as
more people turn to the internet for
local listings.
The company said revenue fell 14
per cent to 314m in the quarter
ended 31 December. Revenue at its
print and other directory businesses
fell 22 per cent.
Hibu lost a fifth of its Yellow Pages
Hibu heralds a
looming deal
with lenders
BY HARRY BANKS
advertisers to 189,000, with each
spending 933, or 5.3 per cent less.
However, revenue at its digital serv-
ices business rose 31 per cent to
45m and customer numbers rose 10
per cent to 391,000.
Digital revenue now makes up 36
per cent of overall revenue, up from
30 per cent last year.
Our new strategic products are
progressing well from development
to market readiness, said chief exec-
utive Mike Pocock.
Community magazines are being
sold into more than 600 markets
and generating orders of more than
half a million pounds a week.
Hibu PLC
12Feb 6Feb 7Feb 8Feb 11 Feb
0.38
0.40
0.42
0.32
0.34
0.36
0.44
0.46 p
0.38
12Feb
The cash conversion ratio is an impressive 107 per cent, and bolsters our
view that the company will be able to make another generous capital return in
two-three years time, of perhaps 80m-90m, following 65.8m
returned last November.
ANALYST VIEWS

We also see the development of multi-channel as a signicant growth


opportunity. As Dunelm continues to expand, the web is now the national shop
window and has now become the largest store with customers on aver-
age spending twice as much online compared to in store

The company has a clear niche in a category, where competition is frag-


mented and has, we believe, also a great opportunity to improve gross margins
(currently around 50 per cent) by growing own label, direct sourcing and
developing a multi-channel platform.

WHAT DO YOU SEE IN THE


FUTURE FOR DUNELM?
Interviews by Elizabeth Fournier
JEAN ROCHE PANMURE GORDON

MARK PHOTIADES N+1 SINGER

FREDDIE GEORGE CANTOR FITZGERALD


DUNELM, the homewares retailer,
said it plans to step up the
expansion of its online business
this year as it posted a strong rise
in sales and profits in the first half
of the year.
The Leicester-based group,
which trades as Dunelm Mill, said
it plans to open a new warehouse
for online orders, which now
account for around four per cent
Dunelm plans to step up online
growth as half-year profits rise
BY KASMIRA JEFFORD
of revenues. Profit before tax
increased 14.6 per cent to 59.8m
in the six months to 29 December
compared with 52.2m the
previous year. Revenues rose by 13
per cent while sales at stores open
at least a year rose by 2.2 per cent.
The group,which began as a
market stall business in 1979
selling ready-made curtains, has
133 stores after opening 10 new
superstores in the period, with a
further six sites committed.
WEDNESDAY 13 FEBRUARY 2013
16
NEWS
cityam.com
B
UMIS under-fire chief executive
Nick von Schirnding was last
night celebrating the most
significant piece of good news
since taking over the troubled mining
outfit at the end of last year, adding to
mounting confidence ahead of the
crunch vote next Thursday.
Coal miner Bumi confirmed yester-
day that the Bakrie family has commit-
ted $50m (32m) to a ring-fenced
account to act as a break fee for their
buy-back of Bumis Indonesian division
Bumi Resources, in the clearest sign yet
that the intended divorce between
both sides will go ahead and the
months of bitter infighting can finally
come to an end.
The former communications man,
appointed to head up the struggling
miner in December, has been thrown
into one of the biggest challenges of his
life at Bumi.
Amid battling to
save the reputation
of the company and
the ailing share
price it closed up
yesterday at 404p,
compared to its
2011 peak of 14
he has endured
shareholder and co-
founder Nat Rothschild challenging
his CV, claiming the chief executive
fudged some of his qualifications.
Bumi was quick to denounce the accu-
sations as false, adding that the for-
mer Anglo American exec was hired
for his experience and competence.
The accusations that his CV qualifica-
tions are inaccurate are just complete
nonsense, von Schirnding tells
City A.M. He is clearly livid about such
personal attacks.
Im happy with my qualifications,
and my reputation speaks for itself.
The important thing is that people
who know me do not believe that, they
can see it for what it is, he adds.
Attacked from several angles, he is a
man in an incredibly difficult position,
but remains determined to pull the
company out of one of the biggest scan-
dals the City has ever seen.
The future of the beleaguered coal
miner will be decided next Thursday,
when the Bumi board and Rothschild
meet in a bitter battle to decide who
will take ultimate control of the
company.
Rothschild wants to overthrow 12 of
the current 14 board members
including the new chief executive and
chairman Samin Tan and replace
them with a new board, with the fin-
ancier parachuted back into an execu-
tive role.
Both sides have been hastily canvass-
ing shareholder support in the run-up
to 21 February, which will ultimately
decide the future direction of the
company.
Rothschild has garnered some pow-
erful supporters in the form of institu-
tional shareholders Schroders and
Taube Hodson Stonex, and John Dodd
at Artemis came out last night to voice
his backing for Rothschilds board
changes.
Supporters for
the Bumi board
have been less
f o r t h c o mi n g ,
although New York-
based hedge fund
Route One has pub-
licly given its back-
ing.
The EGM is a
waste of time and shareholder funds,
says von Schirnding. Our solution is
very clear to affect a separation from
the Bakries, and allow Bumi to be in
control of its own destiny.
But, it all hinges on whether the
Bakrie family can pull together the
$278m needed to buy themselves out
of London-listed Bumi.
The funding is crucial. The escrow
account with funds keeps the Bakries
on the hook, says von Schirnding.
If investors see a key way to separate
the two, that key point will swing the
vote. Otherwise its cheap talk.
Separately, spokesman Chris Fong
reassured City A.M. earlier this week
that the Bakries could raise the neces-
sary funding, although he declined to
say where the funds would come from.
Critically, Rothschilds proposals halt
the separation of Bumi and Indonesian
Bumi Resources, as the Bakries will
enforce the relationship agreement
Nick von Schirnding, appointed in December, has many obstacles to jump before the coal companys share price ticks up again
L
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WEDNESDAY 13 FEBRUARY 2013
17
NEWS
cityam.com
Coca-Cola revenue misses
Street view as Europe drags
Coca-Cola yesterday reported fourth-
quarter revenue slightly below analysts
estimates, hurt by a weaker-than-expected
performance in Europe. The worlds largest
soft drink maker, said revenue rose four per
cent to $11.46bn (7.32bn). Worldwide sales
volume climbed three per cent, but volume
in Europe fell five per cent. JP Morgan
analyst John Faucher, for example, was
expecting volume to rise 3.5 per cent, with a
decline of just one per cent in Europe. Coca-
Cola does not give financial forecasts but
said that for the full year 2013 it expects
$100m in increased commodity costs related
to sweeteners, juices, metals and plastic.
Coke said fourth-quarter net income was
$1.87bn, or 41 cents per share, up from
$1.66bn, or 36 cents per share, a year earlier.
Excluding one-time items, earnings were 45
cents per share.
US CORPORATE RESULTS
ROUND UP
Fossil expects Asia and Tory
Burch deal to drive growth
Accessory maker and retailer Fossil posted
strong revenue growth on its success with
marketing affordable luxury and signed a
deal with fashion brand Tory Burch that
could replicate its success selling Michael
Kors watches. Asia-Pacific wholesale sales
grew 19 per cent to $102.8m in the fourth
quarter ended 29 December The region
contributed about 11 per cent of total sales in
the period. Fourth-quarter earnings rose to
$151.1m, or $2.51 per share, from $117.9m, or
$1.87 per share, a year earlier.
On an adjusted basis, Fossil earned $2.27 per
share, beating analysts expectations of
$2.26 per share. Revenue rose 14 per cent to
$947.7m driven primarily by a double-digit
growth in its global watch portfolio and
came in above analysts' view of $930.4m.
The company also forecast full-year earnings
of between $5.85 and $6.15 per share.
Avons business improves
but losses keep growing
Avon Products business showed signs of
life in the last three months of 2012 as the
struggling beauty company sold more
items, attracted more sales representatives
and cut marketing and personnel costs.
Avon yesterday said it sold two per cent
more items in the quarter that ended
31 December, and that the number of sales
representatives increased one per cent,
halting at least for a now a shrinking of the
direct sellers salesforce. Chief executive
Sheri McCoy, who took the reins last April,
called those numbers early signs of
stabilisation and said she expects
progress to continue this year. Avon
reported a net quarterly loss of $162.2m, or
37 cents per share, compared with a loss of
$400,000, or nil per share a year ago, and
said revenue fell one per cent to $3bn a
year earlier.
Michael Kors hits record
high as holiday sales grow
Fashion company Michael Kors Holdings
raised its full-year forecast after strong sales
of its luxury items such as handbags and
watches over the holiday period helped to
win market share from rival Coach, sending
its shares to a record high. Michael Kors
raised $944m in its initial public offering just
over a year ago, one of the biggest ever
listings by a US fashion company. The
company now has a market capitalisation of
$12.6bn. Michael Kors said it expected a low-
to mid-20s percentage increase in same-
store sales in the current quarter. Net income
rose fourfold to $130.0m, or 64 cents per
share, from $32.0m, or 20 cents per share, a
year earlier. Analysts had expected 41 cents
per share. Revenue jumped 70 per cent to
$636.8m in the quarter ended December,
compared with $540.3m forecast by
analysts.
Funding for Bakrie buyout comes as a
ray of hope for embattled Bumi boss
With the crunch vote over the beleaguered
miners future looming, its chief executive
tells Cathy Adams why hes quietly confident
which allows them to appoint a chief
executive and chairman to remain
on the board.
Giving Nat Rothschild a second
chance at being chief executive again is
a recipe for continued strife and fur-
ther value destruction, as the Bakries
will remain on the board. To go back to
Nat is very high risk, says von
Schirnding.
The alternative to our proposal
would be utter chaos mired in litiga-
tion with the Bakries.
Although the future of the company
centres on how investors vote at the
EGM next Thursday, von Schirnding is
confident, almost bullish, on the com-
panys outlook if Rothschilds proposal
is rejected.
We will separate from the Bakries,
remove the management and share-
holder structure and introduce totally
independent management, he says.
We have a very clear way forward.
We need to get rid of the troubled asset
to maximise value for shareholders.
Even without the Indonesian arm
Bumi Resources, Bumi will hold
world-class coal assets in majority-
owned subsidiary Berau, demonstrat-
ed by a strong trading update posted by
Bumi yesterday. Coal sales at Berau
leapt 30 per cent year on year in the
fourth quarter, and operational man-
agement has been strengthened with
the appointment of Eko Budianto as
chief executive and von Schirndings
former Anglo colleague Tony Redman
as technical adviser.
The Bumi scandal hasnt dented Von
Schirndings belief in the London mar-
ket, or operating successfully in for-
eign markets, though. Its quite simple
what went wrong, according to him:
Rothschild brought a flawed model to
the London market, and gave control
of both entities to the Bakries.
Bumi has just been a bad experience
of Indonesia.
As for the outcome of next
Thursdays meeting, von Schirnding is
quietly upbeat, and says he has been
making progress with shareholders.
He needs at least 50 per cent of voting
shareholders to flatten the counter
proposals, and told City A.M. that he
was confident he could win.
Our solution is very
clear, to separate from
the Bakries and allow
Bumi to be in control

IN BRIEF
Gloomy outlook from Thyssen
nThyssenKrupp, Germanys biggest
steelmaker, warned yesterday that it saw
no global economic recovery this year
after a slump in steel prices and weak car
markets caused a 38 per cent drop in its
quarterly core profit. In ThyssenKrupp's
fiscal first quarter through December,
adjusted earnings before interest and
tax declined to 229m (196.6m),
weighed down by a 71 per cent drop in
profit at its European steel business. Net
profit was down 29 per cent at 29m.
Rolls-Royce wins second US deal
nBritish engine maker Rolls-Royce
yesterday notched up its second major
US contract in as many days, winning
a deal worth $83.7m (53.6m) with
the US Marines and Air Force. The
contract involves the firm powering 38
of its engines for 19 of the US Marines
and Air Forces V-22 aircraft. The deal
comes a day after the company won a
63m contract to provide engine
support for the US Air Forces C-130J
fleet.
Anglo iron ore unit in profit drop
nMiner Anglo American said
yesterday it hopes iron ore prices will
be stronger this year after its Kumba
subsidiary in South Africa posted a 28
per cent fall in full-year profits.
Headline earnings fell to 12.2bn rand
(875m) from 17bn rand a year earlier,
while production rose four per cent to
a record 43.1 metric tonnes. The miner
put the loss down to a 23 per cent fall
in iron ore export prices, as well as
higher production costs after a strike.
ITALIAN police yesterday arrested the
head of defence group Finmeccanica
over bribery allegations, adding to a
series of corporate scandals shaking
Italy less than two weeks before a gen-
eral election.
Finmeccanica chief executive and
chairman Giuseppe Orsi was arrested
over bribes allegedly paid to secure
the sale of 12 helicopters to India,
when he was head of the groups
AgustaWestland unit, a judicial
source with direct knowledge of
the situation said.
Police were searching Orsis
home and the offices of
AgustaWestland close to
Milan, a source close to Orsis
lawyer said. The Milan offices
of state-owned Finmeccanica,
Italys second-biggest
corporate employer
after Fiat Spa, were
also searched, the
judi-
Italian police
arrest boss of
Finmeccanica
BY HARRY BANKS
cial source said.
An Indian defence ministry source
said kickbacks worth 40m rupees
allegedly paid to Indian officials to
grease contracts for Finmeccanica
were being probed and that Delhi was
considering the deferral of the
Finmeccanica helicopter deal, worth
560m (481m).
Orsi, a long-serving defence industry
executive, has always denied any
wrongdoing with regard to the cor-
ruption probe, which has been going
on for a year. In a brief statement,
Finmeccanica expressed its support
for Orsi and said it hoped his legal
position could be clarified as soon
as possible. Its business was operat-
ing as normal in the meantime,
the company added.
The companys board could
broaden the powers of
finance boss Alessandro
Pansa to help manage the
company, sources said.
TomTom sounds profit warning
on weak European car market
TOMTOM, Europes largest maker of
navigation devices and among the
three biggest digital map-makers in
the world, said yesterday that earn-
ings would halve this year because of
weak car sales and competition from
providers of free maps.
The firms share price plunged 10
per cent on the warning, hitting the
lowest level since the end of August,
2012.
TomTom is trying to increase sales
of its navigation gadgets and services
to car makers to offset the declining
popularity of personal sat-navs.
BY CITY A.M. REPORTER
But its fortunes are closely tied to
those of customers such as Peugeot
Citroen, Renault, and Fiat, which have
been hit by weak consumer demand.
It (2012) was a disastrous year for
European car makers, chief executive
Harold Goddijn, said: 2013 wont be
easy but I don't think it will be as bad.
TomTom forecast earnings per share
(EPS) adjusted for impairment, acqui-
sition-related amortisation and
restructuring charges of about 0.20
in 2013, down 50 per cent from the
2012 EPS of 0.40 and the lowest since
its listing in 2005.
It also said 2013 revenue would be in
the range of 900m (774m) to 950m,
down from 1.06bn in 2012.
It reported quarterly net profit of
99m lifted by a tax gain of about
80m, on revenue of 289m.
Giuseppe Orsi has
denied wrongdoing
WEDNESDAY 13 FEBRUARY 2013
18
NEWS
cityam.com
FRENCH luxury group Hermes has posted a 16.4 per cent rise in 2012 sales at constant
exchange rates, beating its own forecast and predicting a slight rise in its operating margin
for the year. Known for its Birkin handbags, the firm said quarterly growth was strongest in
Asia, excluding Japan, at 30 per cent. Revenue was 3.48bn (2.99bn) last year, a rise of
22.6 per cent at current exchange rates.
HERMES SALES GROWTH STORMS AHEAD
MICHELIN, the worlds second-
largest tyremaker, raised its
dividend yesterday after price
increases boosted 2012 profit,
pledging to hold onto gains this
year even as sales volumes remain
flat.
Net income rose 7.5 per cent to
1.57bn last year as revenue
increased 3.6 per cent to 21.47bn,
the company said.
The French company, whose
tyres equip vehicles ranging from
bicycles to airliners, said truck and
specialty tyres for farming and
mining equipment largely drove
the earnings gain.
Michelin is seeking to cut 1bn in
Tyremaker Michelin hikes its
dividend as earnings get a lift
BY CITY A.M. REPORTER
operating costs by 2015 while
adding the equivalent of a new
overseas plant each year to harness
emerging-market growth.
Operating income rose 25 per
cent to 2.42bn, excluding one-time
gains or losses, raising the
operating margin to 11.3 per cent
from 9.4 per cent, Michelin said.
The company forecast stable
operating income for 2013 and
broadly flat sales volumes.
Pricing remained strong, it said,
also forecasting a first-half gain of
350m-400m from ongoing price
declines for its rubber, steel and oil-
derived manufacturing inputs.
Michelin reiterated its medium-
term operating profit goal of
2.9bn for 2015.
TomTom NV
12Feb 6Feb 7Feb 8Feb 11 Feb
3.50
3.40
3.60
3.70
3.80
3.90
3.57
12Feb
RBS
The bank has announced the
appointment of Jonathan
Barrow as regional director
for the east of England in its
corporate and institutional
banking coverage team.
Barrow joined RBS 17 years
ago, and has worked in
various regional corporate
locations in the UK, as well as
at RBSs New York office.
Smith and Williamson
The accountancy and investment management firm
has appointed Guy Swarbreck as partner in its
assurance and business services division. Swarbreck,
who has experience providing audit and regulatory
compliance consultancy to brokers and fund
managers, was previously at UHY Hacker Young for 12
years, including two years as a partner. His key areas
of specialism are financial services and natural
resources.
JP Morgan Asset Management
Ashley Potter will join the firms infrastructure debt
group as an executive director. Potter has over 20
years experience in the wider infrastructure sector.
He was most recently a senior financial adviser to
Ofgem, having previously held the position of
executive director within BNP Paribas UK energy and
infrastructure team.
London Wall Partners
The financial advisory and wealth management firm
has announced the appointment of David Lovell as
partner. Lovell has over 22 years industry experience,
and was most recently a director at the independent
financial advisory firm Saunderson House.
Banque Havilland
The private bank has announced the appointment of
James Powell as director of private banking. Powell
will be reporting directly to chief executive of private
banking Nicholas Parker. He has 18 years industry
experience and joins from Barclays Wealth. Prior to
this, he worked at Citi Private Bank, where he was an
ultra high net worth private banker.
Misys
Himanshu Raja will join the financial software firm as
chief financial officer. Until recently, Raja was chief
financial officer for Logica, where he led the sale
process that resulted in the firm being acquired by
CGI. Before Logica, Raja worked at BT for more than
nine years in a number of divisional finance roles,
including chief financial officer of BT Global Services.
Ballintrae
Ashley Francis will join the specialist consultancy firm
as sales and marketing director. Francis has worked in
the City for over 25 years. He previously held senior
positions at CSC, and spent seven years at ING as
head of IT trading floor support and technology.
WHOS SWITCHING JOBS Edited by Annabel Palmer
+44 (0)20 7092 0053
morganmckinley.com
SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT
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LONDONREPORT
A
SURGE in Barclays' shares led
the FTSE 100 past the
psychologically important
6,300 level yesterday, as the
blue chip banks planned overhaul
raised hopes for the troubled sectors
revival.
Barclays gained 8.4 per cent, leading
FTSE 100 gainers and adding over 12
points to the index alone, after unveil-
ing plans to slash annual costs by up
to 2bn.
The bank plans to prune its invest-
ment bank and axe at least 3,700 jobs.
It also raised its dividend and report-
ed a 26 per cent rise in adjusted pre-
tax profit for 2012.
Theyre not going to change things
overnight its a huge overhaul. But
they are taking things on board and
pushing them in the right direction,
said Richard Curr, head of dealing at
Prime Markets, adding that technical
factors supported Barclays surge.
We were looking for a firm break of
the (January) high at 307p, and once it
got up to 310p by mid-morning, it was
clear that it was breaking out.
The stock hit 325p for the first time
since February 2011, and was the
most heavily traded stock in the
index, trading over three times its 90-
day average volume.
Lloyds and Royal Bank of Scotland
were the second and third biggest
gainers, rising 5.1 per cent and 4.1 per
cent respectively, with traders citing
the implications of the Barclays news
for a sector seeking to reassure
investors after years of crisis.
The FTSE 100 closed up 61.32 points,
or one per cent higher, at 6,338.38
points, with banks alone adding over
27 points to the index.
The day was the indexs best session
since the start of the month, with
banks helping it return to 6,300 for
the first time this week.
The index rose around eight per
cent in January to reach a 2013 peak
of 6,354.46 points, before slipping
back over the course of February to
trade below 6,300.
The main trend is up despite the
corrective break last week. Typically,
buyers look for value during a correc-
tion since they are confident in trad-
ing the trend, James Hyerczyk,
technical analyst at Autochartist, said
in a trading note.
While 6,300 acted as a support for
the index during January, it had put a
cap on the market during February
until now. The rally was broad-based,
with every sector bar materials con-
tributing to the rally, including stocks
that are usually less sensitive to
swings in economic optimism.
Supporting the days gains was a
late surge by pharmaceutical compa-
ny Reckitt Benckiser, up three per
cent after striking a deal to sell Bristol-
Myers Squibb drugs in Latin America.
The stock was rampant all of last
year, and the market obviously likes
this deal, Curr said.
Barclays leads
FTSE to top day
of month so far
CITY
YOUR ONE-
STOP SHOP
BROKER VIEWS AND
MARKET REPORTS
FTSE
12 Feb 6 Feb 7 Feb 8 Feb 11 Feb
6,220
6,240
6,260
6,280
6,300
6,320
6,340
6,338.38
12 Feb
DASHBOARD
Dow heads to
highs ahead of
key speech
U
S STOCKS closed modestly
higher yesterday, putting the
Dow within striking distance
of an all-time high, as
investors looked ahead to President
Barack Obamas State of the Union
address.
Investors will be listening to
Obamas speech for any clues on a
deal with Republicans to avert auto-
matic spending cuts due to take effect
on 1 March.
The tone of the speech will also be
scrutinised, with any sign of compro-
mise likely to be warmly received.
About 5.73bn shares changed hands
on the New York Stock Exchange, the
Nasdaq and NYSE MKT yesterday,
below the daily average so far this
year of about 6.48bn shares.
The White House has signalled
Obama will urge investment in infra-
structure and clean energy, suggest-
ing companies in those sectors may be
volatile in today's session.
The Dow Jones industrial average
was up 47.46 points, or 0.34 per cent,
at 14,018.70. The Standard & Poors
500 Index was up 2.42 points, or 0.16
per cent, at 1,519.43. The Nasdaq
Composite Index was down 5.51
points, or 0.17 per cent, at 3,186.49.
Housing shares were among the
strongest of the day, led by a 12.5 per
cent jump in Masco to $20.02 after
the home improvement product
maker said it expects new home con-
struction to show strong growth in
2013. The PHLX housing sector index
rose 3.7 per cent.
Avon Products surged 20 per cent
to $20.79 as the S&P 500s top percent-
age gainer after the cosmetics compa-
ny reversed sales declines and cut
costs.
On the downside, Coca-Cola fell 2.7
per cent to $37.56 and was the biggest
drag on the Dow after reporting rev-
enue below estimates, hurt by a weak-
er-than-expected performance in
Europe.
BESTof theBROKERS NEW YORK
REPORT
HEINEKEN
UBS has cut its rating on the drinks firm from neutral to sell and hiked its target
price from 43.50 to 50. The broker expects Heinekens results for 2012 to be in
line with forecasts, but that the firm will be more cautious about the coming year as
the European consumer outlook deteriorates. UBS cannot see catalysts for further
share price rises after a spell of strong performance.
Heineken NV
6Feb 7Feb 8Feb 11Feb 12Feb
54.50
54.00
53.50
52.50
52.00
53.00
51.95
12 Feb
MICRO FOCUS INTERNATIONAL
N+1 Singer has lowered its rating on the software maker from buy to hold while
raising its target by 10p to 655p. The broker is taking a pause for breath following a
share price rise of almost 50 per cent in the last year, and is looking for organic top
line growth to reappear. In the mean time, Singer sees earnings growth from bolt-on
acquisitions.
Micro Focus International PLC
6Feb 7Feb 8Feb 11Feb 12Feb
p 645
640
635
625
620
630
643.00
12 Feb
SMITH & NEPHEW
Jefferies rates the medical products company a buy and has raised its target from
740p to 800p following fourth quarter results last week. The analyst reckons 2013
will be a year of transition for Smith & Nephew, but that the long-term opportunity
remains compelling. A strong balance sheet also leaves room to return cash to
shareholders, Jefferies adds.
Smith & Nephew PLC
6Feb 7Feb 8Feb 11Feb 12Feb
p 720
715
710
700
705
707.50
12 Feb
p
To appear in Best of the Brokers, email your research to notes@cityam.com
P
ETER Mandelson famously
said that he was intensely
relaxed about people getting
filthy rich. As with many
aspects of New Labour, he was
working firmly in the Leninist
intellectual tradition. Some 20 years
earlier, the then leader of the Chinese
Communist Party Deng Xiaoping
stated that to get rich is glorious.
The Chinese have certainly put the
philosophy into practice. At the end
of last year, an intriguing article in
the Wall Street Journal described the
deep intermingling of Chinas richest
men with the Communist Party.
Liang Wengen, for example, who
owns a major construction
equipment firm, and whose personal
wealth is estimated at $7.3bn (4.6bn),
F
INANCIAL regulation is often
defended on the grounds that
financial products are complex
and consumers do not
understand them properly. But
that is nothing special in itself. I know
little about car repair. When I take my
car to the garage, the mechanics start
talking Esperanto to me about their
plans, followed by OK? We have been
reminded recently that almost none of
us knows anything material about how
processed meat gets to be in our pies.
Where products create safety con-
cerns, some regulation can be justified
to protect consumers from scoundrels.
If your pie poisons you, or your car
wheel falls off, regulators (perhaps even
the police) will search out those respon-
sible. Fraud is also illegal if your pie
says its chicken, it oughtnt to be pork.
But we dont think its the job of regu-
lation to insist that, absent deception,
pie-sellers or car workshops give us what
is in our best interests. At the supermar-
ket checkout, they arent required to ask
Do you really need a pie, sir? Mightnt a
lasagne be better?
Yet in financial services regulation,
cityam.com/forum
Bankers arent more
wicked than anyone
else they respond to
the systems incentives
THEFORUM
Twitter: @cityamforum on the web: cityam.com/forum or by email: theforum@cityam.com
Agree? Disagree? Got a sharp comment?
The Forumwants you to join the debate.
Top responses will be reprinted in The Forum.

20
WEDNESDAY 13 FEBRUARY 2013
ANDREW LILICO
Tighter regulations wont restore
the Citys reputation for integrity
the notion of consumer protection has
gone so far that the government
requires banks to only sell products to
consumers that are in their best inter-
ests. The government not only takes
responsibility for customers purchasing
products from banks, but also for the
main capital-providers the depositors.
Government involvement is not simply
information provision or fraud preven-
tion, but active protection.
Because governments protect (even
nationalise) financial services compa-
nies, they enormously distort the inter-
nal workings of those companies. In an
ordinary business a scandal could seri-
ously undermine confidence, meaning
customers would go elsewhere. But half
the time it seems bank scandals are
not scandals at all simply govern-
ments ensuring customers against
downside risk (like with endowment
policies), so customers are unmoved.
Many other scandals, such as Libor rig-
ging, though they badly damage inter-
national confidence in the City, are seen
by retail customers as part of the inter-
nal workings of the bank without real
consequence because of government
protection, and so irrelevant. The more
governments have involved themselves,
the more they have destroyed the web
of incentives that motivates ethical con-
duct in other businesses.
This has other consequences. In any
normal business, creditors the bank
or the bondholders would take a dim
view of excessive risk-taking or risk-
based remuneration for executives. But
from the mid-1980s on, governments
promised to bail out bondholders, so
such disciplines disappeared.
With retail customers unconcerned
about scandal, and creditors (depositors
and bondholders) guaranteed by the
state, almost all natural market control
mechanisms on the activities of banks
vanished. The game was then played
out between the bankers and the regu-
lators who could catch whom out? If
the regulators didnt say they bothered
about it, and no customer or creditor
would be hurt by it, and the sharehold-
ers gained from it, why not do it?
This culture of dissolution was the
product of government intervention.
The solution is not more government
intervention. Neither is it codes of con-
duct for bankers. Bankers arent more
wicked than anyone else. They just
respond to the incentives the system
creates for them. By itself, unless the
fundamental incentives change, cul-
tural change of the sort Barclayss chief
executive Antony Jenkins wishes to
achieve cannot hope to be adequate.
What we need is to sweep away the
whole failed concept. Instead, cus-
tomers must take responsibility if you
take out a pension with a company and
that company goes bust, you lose your
money. Tough. If you deposit money in
a bank and the bank goes bust, you
should lose your money. Bad luck. It
shouldnt be the banks job to work out
whats good for you (unless you pay
specifically for the service of being told
whats good for you), and it shouldnt be
the states job to bail out the bank to
make sure you dont suffer. It should be
for creditors and shareholders to disci-
pline risk-taking and excessive remuner-
ation, not regulators.
Could such a system restore the Citys
reputation? Not for a long time.
Londons reputation for integrity and
fair dealing was built up over centuries
of disciplined non-intervention by regu-
lators, a solid application of the rule of
law, respect for property rights, and the
ethical my-word-is-my-bond reaction of
workers to the incentives the system
provided. Ruined in a two-decade orgy
of self-destruction, that reputation will
now take many decades to restore.
Andrew Lilico is chairman of Europe
Economics.
is a member of the key political body,
the Communist Party Congress.
Overall, Chinas elite political
institutions have no fewer than 160
individual billionaires as members.
The super-rich are not shy about
lobbying. They routinely negotiate
their companies tax bills with the
authorities. Zhou Haijiang, head of a
massive clothing business, boasts that
every time he meets the Party
leadership, he exhorts them to
reduce taxes.
American politicians are frequently
accused of being rich elitists out of
touch with ordinary people. But
compared to the Chinese, they are
paupers. Estimates of the total
personal wealth of all 535 members
of Congress vary. But it is at the very
most no more than the $7.3bn
fortune of Liang Wengen alone.
They may castigate their
politicians, but Americans remain
intensely relaxed about individuals
acquiring stupendous amounts of
money through legitimate business
activity. Eric Schmidt, executive
chairman of Google, has just
announced a plan to sell off less than
half his shares for some $1.6bn. The
wealth of Facebook founder Mark
Zuckerberg varies from day to day,
but is of the order of $10bn. And Bill
Gatess charitable donations alone
dwarf this figure.
It is no accident, as the Soviets used
to say, that massive personal fortunes
can be built from start-up businesses
in both America and China. These are
the two dynamic drivers of the world
economy. Both their cultures, in their
different ways, admire and reward
entrepreneurship.
The contrast with Europe is stark,
and events in France have brought
this into focus. Francois Hollandes
proposed 75 per cent tax rate
admittedly only applies to incomes of
more than 1m a year, but it is
symbolic. The very French pop star
Johnny Hallyday has castigated his
own country, claiming that it breeds
mediocrity.
As in many things, we in the UK sit
uneasily between America and the
rest of Europe. We have, for example,
a fantastic example of innovation in
Silicon Roundabout. But we need a
culture that encourages these
entrepreneurs to build vast fortunes,
without the risk of being hauled
before the tricoteuse of the Public
Accounts Committee, Margaret
Hodge, and castigated for their
efforts.
Paul Ormerod is an economist at
Volterra Partners, a director of the think-
tank Synthesis and author of Positive
Linking: How Networks Can Revolutionise
the World.
AGAINST
THE GRAIN
PAUL ORMEROD
Europe needs to be more relaxed about entrepreneurs getting filthy rich
In association with
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From London City Airport Amsterdam 139rtn Rotterd
21
WEDNESDAY 13 FEBRUARY 2013
EU food testing
[Re: Horse row no laughing matter but
NHS scandal even worse, yesterday]
On the subject of Britains food chain,
this article completely misses the point
along with most of the media. Food
testing is an EU competence as part of
the Single Market. All the faults,
therefore, lie with the system that the EU
has created. During a meat products
passage through the various production
stages, the only thing that is checked is
the paperwork accompanying the meat
nobody looks at the meat itself. Everyone
passes it on, having checked that the
paperwork is in order. If the meat has
originated within the Single Market as
is the case in the current horse meat
scandal the UK authorities have no
power to check any further if the
paperwork is correct. To do so would
breech EU rules. Only once an issue has
been raised just like faulty breast
implants or hip joints are the UK
authorities allowed to carry out any
checks. As far as the supermarkets go,
they are no doubt happy to accept
supplies based on the paperwork being
correct. To do otherwise would incur
further costs and would be seen as
questioning the EUs system. Owen
Patterson tried to explain how this all
works at the weekend, but the media
turned EU competence into EU
incompetence begging the question
who is the most incompetent?
Gerry Lightfoot
I
N THE past, Britain was
frequently ripped apart by the
question: Should the press be
free or regulated? Writers
squared up to censorious Kings
and demanded, in the words of
seventeenth century poet John
Milton, the liberty to utter. In
return, Kings threw disobedient
hacks in the Tower. In 1792, Thomas
Paine was sentenced to death in
absentia for writing the
revolutionary Rights of Man, leading
him to insist on the right of ordinary
folk to read or hear any idea on earth.
But whats the burning question
being fought over today? It isnt
whether the press should be free or
unfree, but: whats the best way to
shackle those pesky papers?
Theres now a choking consensus
that the press must be regulated by
its mysterious betters, and the only
debate is over how this might be
achieved. The publication of the
Tories royal charter on press regula-
tion yesterday was a sad day for press
freedom. It confirmed that, even in
this land of Milton and Paine, theres
now hardly anyone making the case
for the unfettered liberty to publish
and be damned.
Instead, we have the Tories on one
side, insisting that Lord Levesons pro-
posals for tighter regulation of the
press be implemented through royal
charter, and the censorious celebs of
Hacked Off on the other, demanding
they be implemented through
statute.
When Leveson first published his
proposals last year, David Cameron
posed as a lover of liberty who would
refuse to pass the proposed law to set
up a regulator of the press. Now he
has achieved the remarkable feat of
doing something worse: seeking to
set up a toothy independent regula-
tor of the press through the royal pre-
rogative, nodded through by the
Will North Koreas third nuclear test lead
to increased instability in the Asia-Pacific?
YES
Following North Koreas third nuclear test, South Korea, Japan, and
China will be compelled to match their verbal condemnations with
action. Several responses could further provoke Pyongyang, causing
it to lash out again, and destabilise the region. Should Beijing decide
to punish North Korea over its latest provocation by supporting an
extension and practical implementation of the relevant UN Security
Council sanctions list, for instance Pyongyang may feel forcefully
backed into a corner by its only major ally. This could spark fresh
belligerence from the North, eager to demonstrate it cannot be
externally constrained. Beijings cooperation is essential in denying
Pyongyang the ability to proliferate weapons technology to others.
Similarly, if South Korea and Japan partner more closely with the US
on ballistic missile defence, regional security dynamics may become
further strained.
Andrea Berger is research fellow at the Royal United Services Institute.
Andrea Berger
NO
Francois Godemont
The third nuclear test by North Korea will not destabilise the region:
Pyongyang had promised to respond to toughened UN sanctions
triggered by its earlier ballistic missile launch back in December.
North Korea believes it can only survive by showing strength.
However, the apparent low yield of the test, suggesting a partial
fizzle, makes it unlikely that we will see North Korean bombs fitted
on missiles anytime soon. And North Koreas new leader, Kim Jong-
Un, has refrained from criticising South Korea, as he seeks better
relations with the US in order to achieve full diplomatic recognition.
China and South Korea are now in a dilemma over how to respond:
Chinas immediate response, beyond strong words of displeasure,
urged calm, while inviting responses to the six-party talks which
havent taken place in four years.
Francois Godemont is China and Asia programme director at the
European Council on Foreign Relations.
Press freedom has
been relegated to
historys scrapheap
archaic, unaccountable Privy
Council.
Using royal authority to create a
watcher of the press reverses all the
hard work of Milton & Co., who
fought precisely to weaken monarchi-
cal power over public debate, over
that battle between Truth and
Falsehood.
The tabloid-haters of Hacked Off
accuse Cameron of acting undemoc-
ratically. True, but thats rich coming
from a group that is all about har-
nessing the power of modern-day roy-
alty celebrities in its snobbish war
on raucous redtops. And in cynically
pushing forward victims of press
intrusion, Hacked Off is circumvent-
ing rational debate, and using emo-
tional blackmail to force the public
and politicians to accept its agenda.
Hacked Offs use of a kind of victims
prerogative isnt much better than
Camerons royal prerogative.
Both sides in this clash agree the
press is too unregulated. But that
isnt true. Through chilling libel laws,
human rights legislation that guards
privacy rights, and laws limiting
how journalists may spy on people in
power, the press is subjected to too
much regulation, not too little.
We should reject both sides pro-
posed methods for beefing up regula-
tion of the press, and instead look to
America. That countrys constitution,
inspired by great Britons like Milton
and Paine, forbids officialdom from
making any law whatsoever that
abridges press freedom.
Brendan ONeill is editor of spiked online.
BRENDAN ONEILL
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E DUTCH
visit cityjet.com am 99rtn
North Koreas nuclear test threatens security
and breaches UN resolutions. Britain will be
consulting partners on a collective response.
@WilliamJHague
Far more concerning than third test is that
North Korean explicitly says a nuclear test
isnt an enough of a response to sanctions.
@ianbremmer
Antony Jenkins tells staff to sign up to an
ethical charter, then makes 3,700 redundant
to improve Barclayss share price.
@JohnPudney
Barclays to uphold 53 per cent of future PPI
complaints. Financial ombudsman upheld 93
per cent of complaints to Barclays in 2012.
@DominicLindley
BEST OF TWITTER
LETTERSto the editor
WE WANT TO HEAR YOUR VIEWS
E: theforum@cityam.com | Comment: cityam.com/forum | @cityamforum
WEDNESDAY 13 FEBRUARY 2013
23
cityam.com
PERSONAL FINANCE MANAGEMENT WEALTH
I
T IS a well-known story. Emerging
markets are playing a more
significant role in global economic
growth. Recent research from PwC
has highlighted that emerging market
GDP will exceed that of developed
markets, in terms of purchasing
power parity (which adjusts for
differences in exchange rates), for the
first time in 2013.
Since 2002, the FTSE emerging index
has risen by 380 per cent, compared to
the FTSE developed indexs 120 per
cent. And data from the Investment
Management Association shows that
2012 was a record year for emerging
market investment, as UK retail
investors poured in 1.6bn.
The advantages are clear. But given
the myriad ways to invest, investors
must make important choices about
the most appropriate way to add expo-
sure to their portfolios.
MANAGE YOUR EXPECTATIONS
One problem is that the term emerg-
ing markets is vague, covering
economies like the BRICs (Brazil,
Russia, India, China), all the way to
some Latin American and European
nations (like Poland and Hungary). So
the tough decisions like choosing a
country, region or index to invest in
remain important.
Emerging markets also do not insu-
late you from shocks in the developed
world; correlations between the two
are converging. And despite strong
growth, they are not get-rich-quick
schemes. Jeff Molitor of Vanguard sug-
gests that all equity investments
should have a five to 10 year invest-
ment horizon: Making short-term
bets is dangerous.
Developing markets can also be
opaque, and plagued by lax corporate
governance. Unstable government pol-
icy may add to this uncertainty. So
inexperienced investors should seek
financial advice before investing.
HOW TO GAIN EXPOSURE
In addition, the popularity of emerg-
ing markets has begotten a range of
different investment vehicles and
strategies. For most, the choice should
boil down to how actively you prefer
your investments to be managed.
A passive investor can choose to
invest in an index at the country,
regional, or sector level. There are
numerous tracker funds on offer, like
Vanguards emerging market index
fund, which tracks the MSCI emerging
markets index. The funds diversifica-
tion helps to ride out volatility in indi-
vidual countries or equities. It is also
low-cost, with an initial charge of 0.25
per cent of assets under management
(AUM), and an annual expense ratio of
only 0.55 per cent.
Recently, investors have flocked to
exchange-traded funds (ETFs) a secu-
rity that tracks the performance of an
index, or other type of asset. Unlike
open-ended investment companies
and unit trusts, ETFs are listed on a
stock exchange. This can offer better
liquidity, and also give more trans-
parency, helping you to fully under-
stand the constitution of the fund.
The iShares BRIC 50 ETF, for example,
tracks the performance of the 50
largest BRIC-based companies. It does
not charge an entry or exit fee (brokers
do levy around 10 per transaction),
but has a 0.74 per cent annual charge
of AUM.
There are different types of ETFs.
Vanilla ETFs physically invest in securi-
ties; synthetic ETFs use derivatives to
mirror an indexs performance, and do
not invest in the underlying assets.
This makes them cheaper, but also
more risky: Stephen Cohen of iShares
notes that investors are specifically
more concerned about counterparty
risks associated with using derivatives,
and this has dampened the appeal of
synthetic ETFs of late.
If you are considering a synthetic
ETF, Cohen suggests that you find out
how the fund is collateralised, who the
counterparties are, and how liquid
these instruments are. Drill in to
understand how they work. Not all
How to gain emerging market exposure
ETFs are the same. Also, check how
successful the fund manager is at
tracking the benchmark index.
AN ACTIVE APPROACH
The advantage of an actively-managed
fund is that an expert fund manager
will pick equities they believe will out-
perform the market. Sam Mahtani of
F&C, for instance, uses a top-down
approach to identify these companies.
Inevitably you pay more for these
funds. The F&C emerging markets
fund charges a 1.5 per cent annual
management fee, and an initial charge
of 5 per cent (although some brokers
may waive this). But sometimes active
management is worth the cost;
Mahtanis fund outperformed his
peers by around 5 per cent in 2012.
Active managers also have the flexibil-
ity to adjust weightings according to
their view of the macro environment,
Yogesh Chandarana looks at different ways to
play the growth story in developing markets
whereas ETFs and trackers mirror the
weighting of their benchmark index.
Fund managers have different invest-
ment criteria, so look for those with a
strong track record. Molitor says the
active approach is good when you have
talented managers, and reasonable
costs. High administrative charges can
make it difficult, even for the best
managers, to deliver value to investors.
FIVE-STEP APPROACH
Mahtani uses a five-step approach,
looking at a companys business
model, management, corporate gover-
nance, its medium-term outlook, and
the macro risks.
More confident retail investors may
opt to identify opportunities them-
selves. And they could look closer to
home; there are plenty of equities list-
ed in developed markets that are
exposed to emerging markets, perhaps
offering a safer way to invest.
In the UK, the likes of Diageo (which
earns 26 per cent of its revenues from
emerging markets), SABMiller (53 per
cent) and British American Tobacco (43
per cent), are all plugged in to the
macro trends. But the DIY approach is
risky. Even large investors have been
caught out. Hedge fund manager John
Paulsons investment in the China-
based, Canadian-listed company Sino
Forrest is a notorious example. Paulson
eventually lost $720m (460m).
But in spite of this, the investment
adage that the more risk you take, the
higher reward you should expect,
rings true. So investors should consid-
er having an emerging market alloca-
tion. Just remember to approach the
proposition in a diversified way, with a
sensible portfolio weighting. There will
be plenty more Paulsons in the future;
dont be one of them.
the attraction becomes more
obvious. With most interest-
bearing returns standing around
0.5 per cent, the loss on holding the
yellow metal is minimal. Again, you
would expect that the fall to
virtually zero rates since 2009-10,
and the knowledge that this will
probably last for years to come,
would have had a positive price
effect.
And finally, dramatic times
generally cause investors to look to
safety. The gyrations of the
European Union, on-going concern
over the fiscal cliff in the US,
general worries about growth, the
fear that fiscal printing will lead
to inflation (the classic gold bugs
palliative), and the reputedly vast
future capital requirements needed
to keep economic momentum
going, would all normally be
considered to be gold-constructive.
Not only this, but it is very rare
that I ever see anything other than
A
FTER reaching a peak of
$1,922 per troy ounce in
September 2011, gold has
struggled to break new
ground, with every rally since then
failing to match the previous.
Indeed, after the price
performances of 2003 to 2011, the
last 18 months have been
constrained. And for quite a few
reasons this is surprising.
One of golds main attractions
has always been that it has a
fundamental valuation and that, no
matter what, there is a generally
finite amount of it (rather like the
argument over land prices in the
UK). The same cannot be said for
paper currencies, whose availability
tends to increase in line with
whatever the government of the
day (and/or central bank) feels it can
get away with. Over the last two
years, central banks across the
globe have been printing money as
if it was going out of fashion
(quantitative easing to give it its
euphemistic nomenclature). You
would think that this would have
had a correspondingly positive
effect on precious metal prices.
While the money supply in the UK
has been negative recently (for all
the easing), the same cannot be said
for the US, where the rate of
increase has gone up.
Added to this, for the vast
majority of investors gold is a zero
yield asset in that it gives no
dividend or interest rate return.
When interest rates are high, this
makes holding gold an expensive
proposition. But when they are low,
analysts telling me that $2,000 is
the next target on the way to
$2,500. And our own clients (who
probably reflect the retail position
the world over) have been buying
on any weakness.
So why are we stuck in the mid
$1,600s, rather than somewhere
nearer to $1,800 or $1,900 (or
higher)? The fear for the bulls is
that we now know all the good
reasons for buying and they do not
seem (at the moment) to be enough.
The major exchange-traded funds,
the hedge funds and even retail
clients are all sitting on large long
positions. Who is left to buy?
No doubt there will be crises
along the way, which will have their
own particular effect on the
precious metals price. And the fact
is that the total liquidity in the
market is not actually that great,
and the product (unlike oil or
wheat) is not consumable, so big
buyers can have an impact beyond
Golds surprising stability deserves some closer attention
that of other commodity markets.
The forecast for the surge higher
is still there. But the wait for the
rally seems to be getting eternal.
Simon Denham is chief executive of
Capital Spreads. You can follow him on
Twitter @DenhamSimon
While Capital Spreads attempts to
ensure that the information herein is
accurate at the date the information was
produced, however, Capital Spreads does
not guarantee the accuracy, timeliness,
completeness, performance or fitness for a
particular purpose of any of the
information provided herein and under no
circumstances are they to be considered an
offer, solicitation to invest or be construed
as giving investment advice.
CAPITAL
COMMENT
SIMON DENHAM
In association with
Size of economies as a proportion of global GDP
2000 2017* 2013* 2009 2005
10
20
0
30
40
50
60
70 %
Advancedeconomies
Projection
Emergingmarketand
developingeconomies
S
o
u
r
c
e
s
: P
w
C
, IM
F
Emerging markets versus developed markets
2004 2012 2010 2008 2006
-40
-20
-60
20
0
40
60
80
100 %Performance
FTSEdevelopedindex
FTSEemergingindex
EMrelative
outperformance
S
o
u
r
c
e
s
: F
T
S
E
Kuala Lumpur, a bright light in the emerging world
LIFE&STYLE
WEDNESDAY 13 FEBRUARY 2013
24
cityam.com
FOOD & DRINK
STRAIGHT
UP
PHILIP SALTER
City A.M.s cocktail expert
Boisdale of Canary Wharf,
cabot place,
canary wharf,
london E14 4QT
EMAIL NOW!
LIVEMUSIC@BOISDALE.CO.UK
QUOTE TOO MUCH FUN
IN THE SUBJECT LINE
winning email to be drawn at
noon on Monday 18th february
win two free vip tickets
including champage, fine wine & gourmet
dinner on a table next to the stage to see
Jools Holland
Host & star in the launch of
the festival of boogie woogie,
stride & blues
19 Feb - 2 March*
with special guests axel zwingberger & ben waters
LAUNCH NIGHT ON
THE 19TH FEBRUARY
TERMS AND CONDITIONS Boisdale is the promoter of this competition and entrants must be over the age of 18 with one entry per reader and must live within the UK. Entrants must
be available on evening of Tuesday 19th February 2012. Prizes are non transferable, no cash alternatives will be offered, the prize is two free VIP tickets including champagne,
fine wine & gourmet dinner on table next to the stage to see Jools Holland.The closing date for the draw is Sunday 17th February 2013 at 11.59pm with the winners drawn
randomly. By entering the competition you agree to receive further information from Boisdale, if you don't wish to receive any further communication please add "No" in your email.
*for more details visit www.boisdale.co.uk
C
ALL ME a cynic, but there is only one
thing worse than being single on
Valentines Day and that is being
forced to sit with your significant
other in a bar or restaurant, spending hand
over fist in a vain attempt to quantify your
affections. And every year the expectations
for Valentines are further inflated. Soon the
day will take on stag and hen night
proportions, which have morphed from local
evenings on the town into grotesque binge
drinking tours of the more penurious parts
of this continent.
Valentines day forces people out of their
comfort zone, and you or your other half
may be tempted to migrate away from the
familiar wine list to the unfamiliar territory of
the cocktail menu. For many, it may as well
be written in Swahili, full, as it is, with
descriptions of unrecognisable spirits and
the indecipherable things that the bartender
wishes to do with them.
And so, for those poor souls kept prisoner
in an atmosphere so saccharine it could be
melted with a blow torch, I offer some
simple advice. Dont be disoriented by any
offers of a special Valentines Day cocktail,
especially if it contains chocolate, cream,
and out of season strawberries instead,
keep it simple. Order a champagne cocktail,
which is simply the combination of one
sugar cube, a few drops of angostura bitters,
20ml of cognac and champagne, garnished
with an orange twist. Every bar and
restaurant worthy of the name will be able to
make one. It is difficult to get wrong and it
will likely be the only vestige of dignity that
you will salvage from the evening.
However, anyone brave enough to commit
the modern social faux pas of not wanting to
share their love of another human in the
glare of strangers, circumventing the
rigmarole of bars and restaurants in favour
of the more respectable surroundings of the
home, may need to make a more elaborate
cocktail to atone for the sin. Ryu Okada of
Kampai Cocktails a specialist mobile
cocktail bar company has just the drink for
the occasion: the Chaste Kiss.
Okada explains that the Japanese plum
wine brings acidity and sweetness; Noilly
Prat adds dryness with a herbal note; Fino
sherry brings a hint of nuttiness; elderflower
liqueur brings sweetness and a hint of
spiciness; while vodka forms the body of the
drink. All in all, it is perfectly balanced.
CHASTE KISS
n25ml Japanese plum wine
n20ml Noilly Prat
n15ml Fino sherry
n15ml Elderflower liqueur
n20ml vodka
Method
lStir over ice
l Serve in a martini glass
l garnish with a mascherano cherry
A cynics solution to not loving Valentines day
Follow me on Twitter: @philip_salter
The future looks cloudy
for this Sauvignon Blanc
Once the wine of choice, Cloudy Bay now has some real competition
W
HATEVER HAPPENED to
Cloudy Bay? A few years
ago the release of the new
Cloudy Bay Sauvignon
vintage was greeted with excitement
amongst wine lovers. After all, this
was a wine to celebrate a taut yet
ripe Sauvignon Blanc with real
power and none of the austerity that
Sancerre can often display. It put
New Zealand and the Marlborough
region on the international wine
map. And it was often so hard to
find that every bottle felt extra
special 750ml of alcoholic
bragging rights around the dinner
table.
In the past couple of years though,
the excitement has drained. It is a sign
of its decline that I barely noticed the
release of the 2012 Sauvignon Blanc
before Christmas. More tellingly, it is
now a wine you can buy at Tesco but
not at Berry Bros & Rudd; at Majestic,
but not its upmarket alter-ego Lay &
Wheeler, despite the 20 a bottle price
tag.
Cloudy Bay Vineyards was estab-
lished in 1985 by David Hohnen and
burst onto the wine scene to huge
appreciation. I remember my first bot-
tle in the late 90s when it was already
well established. Initially I was scepti-
cal of any wine with a screw top but as
soon as I had tasted it, I was bowled
over and have not had a duff bottle
since.
Perhaps the writing was on the wall,
though, 10 years ago when, to every-
ones surprise, Cloudy Bay was
acquired by luxury French group,
LVMH. Instantly, Cloudy Bay ceased to
be a wine; it had become a brand.
LVMH is renowned for buying and
building world famous luxury brands
it trawls the world looking for them
like a neurotic stamp collector before
sticking them in its corporate album.
But originality and flair often have lit-
tle room to flourish in its corporate
portfolio one taste of its flagship
Mo t & Chandon champagne will tell
you that.
Around the same time, the winery
began to grow and by 2009 the pro-
duction of its flagship Sauvignon
Blanc reached around 100,000 cases.
From being sought after, Cloudy Bay
was suddenly hard to avoid and served
as the favoured tipple at more than a
few corporate dos. Around the same
time Kevin Judd, the founding wine-
maker, left to create his own winery,
Greywacke.
I am sure that Cloudy Bay makes a
great deal of money for its corporate
owners, but there are signs it knows
its pushed things too far: the produc-
tion of the 2012 vintage is apparently
25 per cent lower than the ubiquitous
2011.
The winerys problem now is that
there is a great deal more competition
nearby. Marlborough has spawned
dozens of wineries and many of them
have the verve and youthfulness
Cloudy Bay now lacks. Greywackes
wines are receiving rave reviews, too,
and one of my favourites, Mike
Paterons Lay of the Land Sauvignon,
has all the body of Cloudy Bay at half
the price.
Brands are important, but in the
world of wine they will only carry you
so far for so long.
The Cloudy Bay vineyard in New Zealand
THE BOTTLE
OPENER
NEIL BENNETT
bottle.opener@cityam.com
THREE TO FOLLOW
One for the weekend
Lay of the Land Sauvignon Blanc 2012 (Naked
Wines 9.49)
The 2012 has just come out and is
wonderful drinking
One to impress the neighbours
Greywacke Sauvignon 2011 (Majestic 15.99)
Show off your knowledge of New
Zealand wineries by serving this and
drop Kevin Judd's name
One to tuck away
Cloudy Bay 2012 (31Dover 18.99)
Well, if you must. It is still an
impressive wine and 31Dover seems
to be undercutting the market a little
25
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Wildlife SOS
Fill the grid so that each
block adds up to the total
in the box above or to the
left of it.
You can only use the
digits1-9 and you must not
use the same digit twice in
a block. The same digit may
occur more than once in a
row or column, but it must
be in a separate block.
COFFEE BREAK
Using only the letters in the Wordwheel, you have
ten minutes to nd as many words as possible,
none of which may be plurals, foreign words or
proper nouns. Each word must be of three letters
or more, all must contain the central letter and
letters can only be used once in every word. There
is at least one nine-letter word in the wheel.
Place the numbers from 1 to 9 in each empty cell so that
each row, each column and each 3x3 block contains all the
numbers from 1 to 9 to solve this tricky Sudoku puzzle.
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk
KAKURO
QUICK CROSSWORD
LAST ISSUES
SOLUTIONS
KAKURO
WORDWHEEL
SUDOKU
SUDOKU
QUICK CROSSWORD
WORDWHEEL
1 2 3 4 5 6
7 8
9
10 11
12 13 14 15
16 17
18 19
20
21 22
10 19
22 33
38 5
3 19
12 18
5 9 6
32 22
7 13
9 22
35 11
17 20
24
6
23
15
28
16
7
9
6
39
18
17
8
36
14
4
3
20
29
21
20
14
10
ACROSS
1 Fools (5)
4 Expel air from the
lungs with a sudden
sharp sound (5)
7 Branch that ows into
the main stream (9)
9 Lay to rest (5)
10 Pungent spice, popular
in apple pies (5)
12 Movable barrier in a
fence or wall (4)
14 Fine grit (4)
16 Dress or groom with
elaborate care (5)
18 Native of Des Moines,
for example (5)
20 Mark (the scale of
an instrument) in the
desired units (9)
21 Part of the face
below the eye (5)
22 Long-legged
water bird (5)
DOWN
1 Audacious (6)
2 Try to hit a golf
ball into a hole
by striking it
gently (4)
3 Eddy (5)
5 Immediately,
without delay
(2,3,4)
6 Native of Berlin,
for example (6)
8 Open to
arguments, ideas,
or change (9)
11 Judo belt (3)
13 Fix together (6)
15 Performer
who moves
to music (6)
17 Sound made
by a cat (5)
19 Unwanted
plant (4)
H
N
I
T
G L
Y
P
A

4
4
4


4


B L U S H O M A H A
I U P R C
P E N N S C A R C E
O D O E A T
K E P I U I N K Y
E L A N D I N G L
R E A L O C E D E
F T N I L N
A G E N C Y U R G E
C A M D E
E Q U I P B E L L E
8 6 9 9 8 3 9
2 3 4 5 7 1 1 7
3 1 2 1 1 2 3
4 6 9 9 7 4 8
3 2 7 8 9 6 4
1 9 1 5 3 4 3
4 6 8 5 1 3 2
1 5 2 4 4 7 5
7 8 9 1 7 1 8
3 7 7 3 8 5 6 9
2 9 8 4 1 2 4
4
4
4
4
4
4
4
4
4
The nine-letter word was
FORMALISE
T
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R
E
S
T
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S
A
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L
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I
T
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&
C
A
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BBC1 BBC2 ITV1 CHANNEL4 CHANNEL5
WEDNESDAY 13 FEBRUARY 2013
DIY SOS: THE BIG BUILD
BBC1, 9PM
Nick Knowles heads to Worksop,
where he and the team enlist the help
of tradesmen to complete an extension
for a couple whose child is autistic.
FROMTHE HEART
ITV, 9PM
Dermot OLeary hosts an entertain-
ment special, in which famous faces
gather to pledge their support and
raise awareness of organ donation.
OBSESSIVE COMPULSIVE
CLEANERS CHANNEL4, 8PM
New series. Documentary following
the work of a cleaning agency tackling
homes around Britain in dire need of
attention.
TVPICK
MANCHESTER United manager Sir
Alex Ferguson has promised goals in
a fixture fit for the final when his
side lock horns with Real Madrid in
the Champions League tonight.
Eight previous meetings between
the two giants of European football
have produced 31 goals, and
Ferguson expects that pattern to
continue against Jose Mourinhos
team in their highly anticipated
last 16, first leg tie in Spain.
It wont be 0-0, I can assure
you of that, said the 71-year-
old. History always plays a
part in these kinds of matches.
Its unfortunate the teams
are meeting as early as this. Id
have preferred it to be
Wembley [in the final]. When
I started as a coach many
years ago I dreamt Id be
playing against these
teams as a manager.
Veteran midfielder Paul
Scholes, who featured last
time the sides met at Old
Trafford in 2003, is
Uniteds only absentee
with a knee injury, while
Madrid will be missing
goalkeeper Iker Casillas,
who has a broken hand.
The spotlight will
undoubtedly be on
former United star
Cristiano Ronaldo who,
since swapping
Manchester for Madrid
in a world record 80m
WEDNESDAY 13 FEBRUARY 2013
26
SPORT
cityam.com/sport
BY JOSH RICHARDS
Robin van Persie will be
key for United in Madrid
@cityam_sport
You and a companion could win tickets to the match and view
it from the players bench You choose which side!
BRITISH & IRISH
vs FRENCH
THE STOOP, TWICKENHAM
FRIDAY 22ND FEBRUARY 2013 Kick Off 19:45pm
www.justretirement.com/legends
Twitter: @JR_Legends Facebook: www.facebook.com/JRLegends
The British & Irish Rugby Legends face the French Legends at Twickenham Stoop on the 22nd February, as they put their boots back on for charity. Title sponsor
Just Retirement, are championing the idea of Legends, in all walks of life, which is reected in their brand statement everyone deserves a Just Retirement.
All you have to do is email Win@cityam.com with the Legend bench youd like to sit on French or British & Irish, along with your mobile number.
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Closing date is Friday 15th February 2013 at 11.59pm. Prizes are non transferable, no cash alternatives will be offered, the prize is a pair of complimentary tickets to the Twickenham Stoop to see
British & Irish v French Legends, seated on the players bench, of the team chosen through entry process. All expenses incurred outside of the above must be paid for by the winner and guest.
W
I
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BENCH SEATS!
JOSE: ENGLAND NEXT
FORMER Chelsea boss Jose Mourinho
has opened the door for a possible
return to Stamford Bridge, after
admitting his future lies in England.
Mourinho is expected to leave Real
Madrid in the summer and said: I love
everything [about England]. England
will be my next step.
Fergie guarantees goals
as Reds get set for Real
transfer in 2009, has graduated into
one of the finest players the game
has ever seen.
With 32 goals from 30 club games
this season Ferguson insists his
former protege is better than ever,
but believes in Robin van Persie he
has his own superstar.
Hes [Van Persie] now
approaching that [Lionel Messis]
level, added the United boss, who
has won the competition twice.
Hes been sensational, a good
coach to my young players.
Ferguson knows his toughest
opponent tonight will be in the
home dugout, as he looks to get the
better of Mourinho over 90 minutes
for only the third time in the 15th
battle of wits between the pair.
But should Mourinho come out
on top against his old adversary over
two legs, he hopes a record 10th
Champions League trophy for
Madrid will follow.
Real Madrid want to win a 10th
European Cup and I want to win my
third, said the Portuguese coach.
I will keep fighting until I do it. I
have confidence in my work.
27
IN BRIEF
Three Lions rely on Aussie favour
nCRICKET: Englands women bid to
reach the World Cup final today, but
need a little help from Australia to get
there. England must beat New
Zealand and overturn an inferior run-
rate to the West Indies, who earlier
play the Aussies.
Jones gets Six Nations call-up
nRUGBY UNION: Lock Alun Wyn
Jones has been added to the Wales
RBS Six Nations squad for their final
three matches of the championship.
Wrestling has been axed as an Olympic
sport from 2020. Squash and baseball or
softball are tipped to replace it later this year
cityam.com
WEDNESDAY 13 FEBRUARY 2013
Results
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NGLAND captain Stuart Broad
was quick to blame yesterdays
series-levelling 55-run defeat in
the second Twenty20 match in
New Zealand on his decision to put
the hosts into bat.
Yet if England had just bowled a
bit better they might have won. As
good as the tourists were in
Saturdays romp to victory in
Auckland, they were poor in all
departments in Hamilton.
Their fundamental mistake was
failing to adapt to the conditions in
front of them, and they need to be
far more savvy in Fridays decider.
Yesterday there was a little bounce
in the pitch, and the boundaries
were short, so it was vital that
bowlers prevented batsmen from
getting under the ball, especially as
even an edge from a modern bat
travels so far.
IMPETUS
That means bowling full deliveries
and bowling straight, but instead
England produced too many balls
that were either short or length, and
those inevitably tended to be hit for
fours or sixes.
Brendon McCullum took his time
at first but we all know he is a very
CRICKET
COMMENT
ANDY LLOYD
Broads England need to be
more savvy in series decider
talented player, so it should be no
great surprise that he took
advantage to hit 74 off 38 balls and
help New Zealand add 46 in the last
three overs.
The format of T20 ensures
matches are generally tight affairs,
so if one team has a guy who takes
2-9, as Ian Butler did, and someone
who hits 74, then they are probably
going to win.
If there was a positive for England
to take from the match it was Jos
Buttlers 54. Joe Root was the
discovery of the first leg of winter,
and Buttler looks like being the find
of the second leg.
I still fancy England to bounce
back in the final match. I dont think
confidence will have suffered too
much and man for man, the tourists
are the better team.
The importance of the contest
shouldnt be underestimated,
however, as winning the series will
give one team extra impetus for the
one-day and Test matches to come.
Andy Lloyd is a former England Test
cricketer. He has also been captain and
chairman of Warwickshire.
England T20 captain Broad saw his men thrashed by 55 runs yesterday in New Zealand
CELTIC manager Neil Lennon
admits his teams Champions
League adventure is all but over
after ruthless Juventus
plundered a commanding first-
leg lead last night.
The Scots bombarded Juve
nicknamed the Old Lady
throughout the last 16 clash but
defensive lapses let in
Alessandro Matri, Claudio
Marchisio and Mirko Vucinic.
Lennon also insisted Celtic
should have been awarded two
penalties for holding by Juve
defenders, notably Stephan
Lichsteiner, at set pieces.
We need a miracle but thats
the harsh reality of Champions
League football, he said.
Every time our player was
trying to lose his man he was
getting fouled. He [the referee]
should have given a penalty on
at least two occasions.
Wily Old Lady
outwits Bhoys
CELTIC......................................0
JUVENTUS...............................3
BY FRANK DALLERES
CHAMPIONS LEAGUE
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