The document summarizes several news stories: 1) The UK Treasury plans to sell £1.5 billion of its stake in Royal Mail in chunks over several years to raise funds for privatization. 2) European courts ruled against the UK's reduced VAT rate for energy saving materials, putting the government's tax pledge in doubt. 3) Greek Prime Minister Tsipras faced pressure after Greece refused to pay €300 million owed to the IMF, planning to bundle payments at the end of the month. 4) Swiss prosecutors dropped a money laundering investigation against HSBC after the bank agreed to pay €28 million without admitting guilt.

1. THEWEEKEND
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FTSE 100▼ 6,859.24 -91.22 FTSE 250 ▼ 18,090.42 -173.04 DOW ▼ 17,905.58 -170.69 NASDAQ ▼ 5,059.13 -40.11 £/$ s 1.536 +0.002 £/€ s1.368 +0.008 €/$ ▼1.122 -0.005
BY JULIAN HARRIS
AND LAUREN FEDOR
BUSINESS WITH PERSONALITY
cityam.com FREEISSUE 2,390 FRIDAY 5 JUNE 2015
Bonds rocked again after Draghi’s volatility warning
BY CHRIS PAPADOPOULLOS
EUROPEAN traders faced
extraordinary levels of volatility
yesterday, just a day after European
Central Bank (ECB) chief Mario
Draghi’s warning that markets
should “get used to it”.
The volatility of the German
bund, an interest-paying IOU from
the German government, was the
biggest surprise, given that it is one
of the more stable bonds.
The interest on a 30-year German
bund soared to a 2015 high of 1.6
per cent yesterday, before falling to
1.43 per cent. The jolts came after
weeks of steep gains. Big swings
were also seen in the government
bonds of other major Eurozone
economies such as France, Spain
and Italy.
“Mario Draghi said it all when he
said to expect more volatility,”
David Owen, chief European
financial economist at investment
bank Jefferies, told City A.M.
“For a lot of players it hasn’t
been a very comfortable ride for
the last few weeks.”
On Wednesday, Draghi warned
that markets would have to get
used to volatility as the ECB would
look through it.
Owen points out that the UK saw
similar levels of government bond
chaos when it was beginning to
undertake its quantitative easing
programme – where the central
bank prints new money to buy
government debt.
The euro area kicked off its own
quantitative easing programme in
March, with each country’s central
bank undertaking purchases of its
own government’s debt.
In recent weeks, the German
central bank has bought debt with
a lower maturity (time until the
debt has to be repaid), while its
government has issued more debt
THE STANDOFF between Greece and
its creditors intensified last night
when the embattled Mediterranean
state refused to cough up €300m
(£218m) owed to the International
Monetary Fund (IMF).
The payment, due today, is one of
several instalments in June which
Athens now says it will bundle into
one transfer at the end of the month.
By 30 June the Greek government
will owe the IMF about €1.6bn (£1.2bn).
The drastic measure represents the
first time in history that a western
nation has resorted to bundling IMF
debt repayments.
The move is likely to dent relations
between Greece and its international
lenders even further, at a time when
leading politicians from all sides need
to build up trust and come to an
agreement that will save the Eurozone
member from bankruptcy.
Greek Prime Minister Alexis Tsipras
had suggested on Wednesday night
that today’s payment would be met.
“Don’t worry about that,” he told
reporters early yesterday morning,
when asked if his government could
afford to pay up.
But later IMF spokesman Gerry Rice
revealed that the payment was not
expected to be made, saying: “The
Greek authorities have informed the
Fund today that they plan to bundle
the country’s four June payments into
one, which is now due on 30 June.”
“Under an executive board decision
adopted in the late 1970s, country
members can ask to bundle together
multiple principal payments falling
due in a calendar month. The decision
was intended to address the adminis-
trative difficulty of making multiple
payments in a short period,” he added.
Tsipras emerged from Wednesday
night’s talks with European
Commission president Jean-Claude
Juncker and Eurogroup president
Jeroen Dijsselbloem in a confident
mood, insisting that an agreement
would be found in the coming days.
But the Syriza leader returned to
Greece yesterday to discover outrage
from sections of his ruling party over
Brussels’ ongoing demands. His
coalition government reassured the
public late last night that it will not
accept “extreme proposals” laid out in
the latest reform plans, while Tsipras
spoke with German Chancellor Angela
Merkel and French President Francois
Hollande via conference call.
According to a Greek government
official, Tsipras told Merkel and
Hollande that the lenders’ proposal
could not lead to a deal because it was
not taking into account the progress
made in Brussels. However, as is
becoming commonplace, the official
insisted there was optimism that a
deal could be reached soon.
INVESTECDERBY Findoutwhere:Page2
ThePunter:Pages31-32
PICKUPOURSPECIAL
EDITIONTOMORROW
with a longer maturity. These sorts
of imbalances add to swings in
interest rates.
Bond market experts believe the
volatility will continue, fuelled by
further imbalances between supply
and demand and by volatility itself.
However, they do not expect a
sustained sell-off, where interest
rates begin trending upwards from
near-record lows. According to
many analysts, the recent volatility
has not been accompanied by any
notable increase in market
expectations of inflation, or any
material change in the growth
outlook for the European economy.
GREECESHOCKSIMFBY
HOLDINGBACK€300MTsipras is facing
pressure from all sides
over Greece’s late
payments

2. FRIDAY 5 JUNE 2015
2
CITYA.M.
INVESTECDERBY
SPECIALEDITION
n WaterlooStation
n VictoriaStation
n EpsomStation
n TattenhamCornerStation
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n Euston
n ClaphamJunction
City A.M.,theofficial newspaperof
theInvestecDerby,willbepublishing
itsspecialSaturdayeditionfor
racegoerstomorrow.Readerscan
pickuptheircopiesatthesestations,
amongothers,from10am:
2 To contact the newsdesk email news@cityam.com
Treasurytosell£1.5bnofRoyalMail
CHANCELLOR of the exchequer
George Osborne announced plans
for a £13bn round of privatisations
yesterday, as he added the sale of
£1.5bn of Royal Mail to the £11.8bn
sale of Lloyds Bank currently under-
way.
And if he brings forward plans to
sell down the government’s holdings
in bailed-out bank RBS, he could add
tens of billions of pounds more to
that tally.
“Holding over £1bn of Royal Mail
shares in public hands is not a sensi-
ble use of taxpayers’ money,” the
chancellor told MPs yesterday,
announcing the sale of the govern-
ment’s 30 per cent stake.
Royal Mail floated on the stock
market in October 2013, and minis-
ters came under criticism at the
BY TIM WALLACE time as the share price rapidly rose
from 330p to over 600p. The current
share price is 523p.
The government’s advisor last time
around, Lazard, will not be working
on the next sale. Instead, Rothschild,
a veteran of previous pri-
vatisations, has been
hired.
Investment banks
who could run the
book on the sales will
need to start putting
forward pitches.
The sale is expected to
begin this year, with
the whole stake
sold in chunks
LOW INTEREST rates look set to
stay for the rest of the year, with
the growth outlook for the UK
worsening and a major
international organisation urging
the US not to hike rates this year.
The UK economy may only grow
by 2.3 per cent this year, the
British Chambers of Commerce,
which represents over 90,000
businesses, said today.
It marks a downgrade from its
earlier forecast of 2.7 per cent. It
BY CHRIS PAPADOPOULLOS follows a sharp slowdown in the
growth of the UK’s dominant
service sector, implied by a survey
earlier this week.
The Bank of England’s monetary
policy committee (MPC) yesterday
decided to keep its headline
interest rate at 0.5 per cent.
“‘Noflation’, sterling’s recent
strength and evidence of
weakness in some of the UK’s
major export markets still point
to the majority of the MPC seeing
little need to raise the Bank Rate
this year,” said Martin Beck,
senior economic adviser to the EY
Item Club.
Meanwhile, International
Monetary Fund (IMF) chief
Christine Lagarde said that before
hiking interest rates the US
central bank, the Federal Reserve,
should wait for “more tangible
signs of wage or price inflation
than is currently evident. In other
words, we believe a rate hike
would be better in 2016.”
The IMF slashed its 2015 growth
forecast for the US to 2.5 per cent
from 3.1 per cent.
TODAY’SCOMMENT:UScorporatedebtmarketsmayboilover,whylawfirmsshouldfloatSeeTheForumpages24-25
NEWS
Easymoneyto last untilat least
2016 as growth prospects wane
City suits could rub shoulders, but perhaps not kick the tyres, in Dunster Court last night.
Celebrations of the 92nd Anniversary of the Le Mans 24-hour race brought racing legends
David Richards CBE, Ross Brawn OBE and John Surtees OBE for a French-inspired charity
dinner and reception, where guests got up close with some of the famous Le Mans cars.
CLASSIC RACING CARS GRACE THE CITY STREETS
public firm should end up in as
many hands as possible.
Laith Khalaf from Hargreaves
Lansdown, which had a role distrib-
uting the shares in the initial public
offering (IPO), argued that a bigger
role for small shareholders will
make for a more stable investor base.
“There is this cock-eyed view that
institutions are long-term investors
while retail buyers aren’t, but the
opposite is true,” Khalaf told City A.M.
“Retail investors tend to buy and
hold shares, they tend not to be day-
traders. This stock is a potential
income-producer, so a good way to
steady the boat is to have a lot of
retail investors, putting money into
ISAs and pensions.”
Royal Mail shares fell by nearly five
per cent on yesterday’s announce-
ment, closing the session at 523p per
share.
over a time period spanning as many
as five years.
The government is considering
options on the sale, but is less likely
to pick a retail offering this time
around.
“In the first stage, it is important to
make a conscious effort to reach
out to as many people as possible.
But that is not necessarily true in
this case,” a government source
told City A.M.
“With the final stake, the impor-
tant thing is to get the best possi-
ble return for the
taxpayer,” the source
added.
Retail stock bro-
kers called for
small investors
to get a look in,
arguing the
shares from a
Vince Cable came
under fire after
Royal Mail’s IPO
EuropeancourtrulesagainstlowVAT
The government’s “tax lock commitment” was
put in doubt yesterday after Europe’s highest
court ruled that its reduced value added tax rate
on energy-saving materials flouted EU rules.
The Treasury is expected to be forced to raise the
VAT rate on insulation, solar panels and other
energy saving equipment from five per cent to
20 per cent, in spite of plans in last week’s
Queen’s Speech to legislate against VAT rises.
SECsuesBulgariantraderoverAvon
The US Securities and Exchange Commission has
sued PTG Capital, the possibly fake company that
made a bogus bid for Avon in May, causing an
almost 20 per cent surge in the cosmetics
company’s share price. Bulgarian resident Nedko
Nedev and other entities tied to Bulgaria, are
also accused of submitting fake bids for
insurance company Tower Group International
and Rocky Mountain Chocolate Factory, according
to the SEC lawsuit filed on Thursday in a US
district court.
Cisco’stopfemaleengineerleaves
Padmasree Warrior, one of Silicon Valley’s most
senior female engineers, is to step down as the
chief technology officer of Cisco Systems amid a
leadership overhaul at the US networking
equipment firm. Her departure, next month, is
part of a shake-up by Chuck Robbins, who will
take over from John Chambers to become the
company’s first new chief executive in 20 years.
PremierLeaguehasrecordrevenue
Premier League clubs earned record profits in the
first year of a new television deal that has seen
average spending on wages drop to 58 per cent
of income. Twelve months ago analysts at
Deloitte, who have published their annual review
of football finances for the 2013/14 season,
warned against “reckless” spending as the
wages-to-revenue ratio topped 70 per cent.
Greencarsalesshiftupagear
Plug-in hybrids such as the Mitsubishi Outlander
and electric cars like the Nissan Leaf are helping
British car sales to grow despite the slowest
month for new registrations in three years.
Cameronwarnedcabinetovercharity
David Cameron warned his Cabinet ministers not
to publicly say that they would give a proposed
pay rise to charity just hours before Cabinet split
over the issue. The Prime Minister earlier this
week used a cabinet meeting to set out the
Government’s position on a planned 10 per cent
pay rise which will take MPs’ salaries to £74,000.
StarbucksslamsUSgovernment
Howard Schultz, chief executive of Starbucks,
yesterday claimed that the coffee giant has been
forced to undertake a vital societal role in the US
because of the failings of the American
government.
DishNetworkintalkswithT-Mobile
Dish Network is in talks to merge with T-Mobile
US, people familiar with the matter said, a deal
that would accelerate a wave of consolidation
across the US media and communications
industries.
USsuspectshackersbasedinChina
The Federal Bureau of Investigation is probing an
apparently far-reaching penetration of data held
by the Office of Personnel Management, in which
the records of approximately 4m individuals were
compromised, according to people familiar with
the matter.
WHAT THE OTHER PAPERS SAY THIS MORNING

3. FRIDAY 5 JUNE 2015
3NEWS
PLUS500’s top shareholder Odey
Asset Management yesterday
rebuked a £460m deal for the
company from Teddy Sagi’s
Playtech and said it would welcome
offers from rival bidders.
Odey, which was founded by
hedge fund investor Crispin Odey,
has amassed a 25 per cent stake in
the troubled spreadbetting
company alongside JP Morgan,
which owns 8.5 per cent.
Playtech, 33 per cent owned by
Sagi, on Monday unveiled a 400p a
share offer for the company,
recommended by Plus500’s
management, but Odey said the
price “materially undervalues” it.
Before that, Plus500 shares
Odey invites rivals to gatecrash
Playtech’s takeover of Plus500
BY MICHAEL BOW crashed by nearly 70 per cent last
month after it emerged the City
watchdog had launched a probe
into the company’s anti-money
laundering procedures. due to
concerns it was failing to comply
with the rules.
The Israeli spreadbetting
company has seen shares fall from
a high of 781p in April to a low of
265p. It closed at 371p last night.
“We believe 400p per Plus500
share in cash to be an
opportunistic bid exploiting
current regulatory issues and
risks,” Odey said in a statement.
“In our view 400p materially
undervalues Plus500 and we do not
intend to vote in favour of the cash
acquisition of Plus500 at this
price.”
SWISS prosecutors have dropped their
investigation into HSBC’s private bank
operations, after the company agreed
to pay the authorities in Geneva 40m
Swiss francs (£28m) yesterday.
The authorities had long been look-
ing into allegations of money launder-
ing at the firm’s Swiss private bank.
Earlier this year, Geneva’s public pros-
ecutor searched HSBC’s offices as part
of the probe.
Europe’s largest lender did not
admit guilt or wrongdoing as part of
the settlement, but said in a statement
yesterday that the 40m Swiss franc
payment was to compensate for its
past organisational failings.
HSBC said it “acknowledged that the
compliance culture and standards of
due diligence in place in the bank in
the past were not as robust as they are
today.”
The bank also said it has since
Swissprobe
endsasHSBC
paysout£28mBY LAUREN FEDOR improved practices to keep clients
from using the bank “to evade taxes or
launder money,” and, in doing so, has
drastically reduced the number of pri-
vate Swiss accounts, from 30,000 to
10,000.
The Geneva prosecutor said that no
criminal charges would be filed, and
that the settlement “avoids the uncer-
tainties of a long and complex legal
case.”
Scrutiny of HSBC’s Swiss unit stretch-
es back nearly seven years to 2008,
when one of the bank’s former IT
employees, Herve Falciani, fled Geneva
with files which were alleged to show
evidence of tax evasion by its clients.
Falciani turned the files in to French
authorities, who in turn shared them
with other countries, including
Switzerland.
HSBC is still being investigated in a
number of territories over allegations
of tax evasion, including in the US,
France, Belgium and Argentina.
Prime Minister David Cameron and mayor of London Boris Johnson were on hand in their
high-vis suits yesterday for a Crossrail “break through” ceremony under Farringdon
station. The ceremony marked the end of a three-year effort to dig tunnels for London’s
forthcoming new Crossrail system. Johnson called the completion “a landmark event”.
CAMERONINHIGH-VISATCROSSRAILCEREMONY
Wages in London grow faster
than in the rest of the country
WAGES in the capital are increasing
faster than they have in nearly a year,
according to a new survey out today.
The survey, carried out by the
Recruitment & Employment
Confederation and KPMG, found that
wages for permanent employees in
London increased for the twenty-
fourth successive month in May,
marking an uninterrupted, two-year
trend of successive growth. The rate
BY LAUREN FEDOR of salary growth for Londoners also
hit a 10-month high, and was above
the UK-wide trend for the first time
since January, according to the
survey. The steady uptick in wages
has been widely welcomed after
nearly eight years of earnings in the
UK failing to outpace inflation.
The new promising figures also
come the same week as a City of
London Corporation study which
predicted that a boom in finance and
technology hiring will help create
145,000 new jobs in central London
over the course of the next decade.
The City of London Corporation said
39,000 of those new jobs would
appear in the Square Mile.
Responding to the results, Ingrid
Waterfield, director of KPMG's people
powered performance practice, said:
“Permanent placements in London
continued to increase during May,
which demonstrates a strong
underlying business sentiment in the
City.”Wages are rising for workers acorss the capital, according to a new survey from KPMG
DECEMBER2008
PoliceinSwitzerlanddetainformerHSBC
IT employeeHerveFalcianiinGeneva.
WhistleblowerFalcianifleestoFrance.
EARLY2010
ThenFrenchfinanceministerChristine
LagardebeginssharingFalciani’sfiles
withothercountries,includingGreece.
FEBRUARY2015
Mediaoutletspublishexcerptsfromthe
leakedfiles,leadingthebanktoapolo-
giseforwrongdoing.
JUNE2015
HSBCsettleswithSwissauthorities,pay-
inga£28mfee.Probesremainongoingin
theUS,France, BelgiumandArgentina.
KEY DATES IN THE HSBC TAX AVOIDANCE SCANDAL
TWO UK-based music platforms said
they were teaming up yesterday, as
concert app Songkick and ticket
sales website Crowdsurge
announced a 50/50 merger.
In an announcement on its
website, Songkick said that the
combined company would keep the
name Songkick and become the
“largest artist-ticketing service in
the world.” According to Songkick,
the company aims to sell the
reported 50 per cent of concert
tickets that go unsold. Songkick’s
app catalogues concerts and sends
users personalised alerts when their
favourite artists announce shows.
The company also announced a
$16m (£10.4m) funding round from
venture capital firms Index
Ventures, Sequoia Capital and
Access Ventures.
MergerforUK
musicstartups
BY LAUREN FEDOR
THE OWNERS of payments processing
company Worldpay are getting ready
for a £6bn stock market listing, hiring
six banks to lead the initial public
offering (IPO).
Sky News first reported that
Worldpay’s owners, Advent
International and Bain Capital, are
close to appointing Bank of America
Merrill Lynch, Goldman Sachs and
Morgan Stanley as global co-
ordinators for the share sale.
Barclays, Credit Suisse and UBS have
also been chosen to act as
bookrunners on the deal, according
to the Sky report.
Worldpay’s IPO will come nearly
five years after the company was sold
by RBS in a deal worth close to £2bn.
Worldpay is
set to float
BY LAUREN FEDOR

4. FRIDAY 5 JUNE 2015
4 NEWS cityam.com
FIRMS connected with the so-called
Gatwick gusher are expected to update
the market with new information
about the Surrey oil well as early as
today, after suspending shares yester-
day.
UK Oil & Gas Investments (UKOG), as
well as Solo Oil, Alba Minerals, Stellar
Resources and Doriemus, all suspended
trading on the junior market pending
an announcement about the Horse
Hill-1 Well.
The suspension is not expected to last
long, however it could last until early
next week.
Investor speculation had pointed to a
potential takeover of the companies’
interests in the well, however City A.M.
understands that the announcement
Oilfirms’shares
onholdahead
ofAimupdateBY CAITLÍN MORRISON relates to tests that have been carried
out at the well, which is located in the
Weald Basin near Gatwick Airport.
The Aim regulator is aware of the con-
tents of the upcoming announcement.
Shares in UKOG, which had been
falling off earlier in the week, rose dra-
matically by 20 per cent on Wednesday,
closing at 2.65p.
UKOG, which is led by Aim veteran
David Lenigas, and the other
companies which suspended trading
on the market yesterday, saw their
share prices skyrocket in early April
when they announced the discovery of
potentially 100bn barrels of oil near
Gatwick.
Shares in the company itself jumped
by more than 300 per cent when the
find was first revealed. Both UKOG and
Aim declined to comment yesterday.
LLOYDS Banking Group could be
slammed with a record fine from
the Financial Conduct Authority
for its handling of PPI complaints.
The bank – which is currently
still part-owned by the taxpayer –
could receive a penalty of “well
over £100m” from City watchdog
the FCA .
The fine could be made public
as early as today, Sky News said.
Compared to fines recently
doled out for various UK and US
banks’ involvement in the forex
and Libor scandals the fine is
relatively small, but it is a
significant amount for the FCA.
Last month it handed Clydesdale
Lloydsmayfacerecordfineover
£100mforPPIcomplaintsfiasco
Lloyds,ledbychiefexecutiveAntonioHorto-Osorio,mayfacearecordFCAfineoverPPI
Moneysupermarket.com was established in 1993 as a provider of offline mortgage data
BY CATHERINE NEILAN Bank a £20.7m fine, which was at
that time the largest PPI-related
penalty in FCA history.
Lloyds Bank was one of the
biggest players in the PPI market.
The bank has set aside more than
£12bn to deal with compensation
claims from customers. Lloyds and
the FCA declined to comment.
Only last week the FCA said it
was considering changes to rules
around PPI, following a Supreme
Court ruling in Plevin v Paragon.
The judge ruled that the fact the
lender had failed to disclose how
much commission it received from
selling the PPI products created a
“sufficiently extreme inequality of
knowledge and understanding”
between parties.
INVESTORS cannot fairly compare
banks’ capital buffers and financial
soundness because the rules allow
them too much flexibility in how
they report their numbers, analysts
at credit ratings agency Fitch
warned yesterday.
The biggest banks calculate their
risk-weighted assets (RWAs) based on
internal models of risk, which are
then approved by regulators.
But the models can produce
wildly differing interpretations of
risk from institution to institution,
meaning even under the apparently
harmonised international regime, it
can be difficult to accurately
compare banks to other banks.
“The Basel Committee on Banking
Supervision’s Regulatory
Consistency Assessment Programme
(RCAP) initiative is making slow
progress in reducing RWA
variability and there is limited
transparency on which banks’ ratios
might be overstated,” said the
analysts.
“For example, in April 2015, the
Committee announced it had
agreed to remove just six of around
30 national discretions from Basel
II’s capital framework.”
“The Committee’s reluctance or
inability to name the banks whose
capital ratios are overstated
undermines confidence in the
internal ratings-based models
generally.”
The analysts hope the rules will be
tweaked following a consultation.
Fitch:Itisstill
toodifficultto
comparebanks
BY TIM WALLACE
SHARES in Moneysupermarket.com
tumbled yesterday after it said it may
be the target of an Ofgem probe.
In a statement released on
Wednesday night, the firm informed
investors it was being required by
Ofgem to provide information in
connection with an investigation:
“into whether two or more
BY ADAM HIGNETT companies providing a supporting
service for the energy industry have
breached competition law.” Ofgem
then said the information it provides
would also determine if it too would
be a subject of investigation.
Investors reacted badly to the news,
with shares closing down 9.9 per cent
at 275.80p. Contagion spread to
Zoopla, which owns uSwitch, where
shares closed down 5.32 per cent.
1
2
3
4
UK OIL & GAS INVESTMENTS
P
4 Jun
2.65
Jan Feb Mar Apr May
290
295
285
280
275
300
305
310 p
2Jun 3Jun 4Jun29May 1Jun
MONEYSUPERMARKET.COM
275.80
4 June
Moneysupermarket.comspooks
investorswithOfgemwarning

5. 5NEWScityam.com
THE INSTITUTE for Fiscal Studies has
warned that it will be “anything but
easy” for the Conservatives to stick to
their campaign promises.
IFS deputy director Carl Emmerson
said yesterday that with underlying pres-
sures set to drive up spending, deeper-
than-expected cuts amounting to more
than 15 per cent for unprotected
Whitehall departments will be needed to
balance the budget.
Prime Minister David Cameron said
before the General Election that his
government would not cut spending
for the NHS, schools or foreign aid.
But Emmerson said yesterday that
unprotected departments, including
the department for business, innova-
tion and skills, the department
for transport and the
department for commu-
nities and local govern-
ment, would face £30bn,
or 5.4 per cent, on aver-
age, in cuts under
Cameron’s plans.
He added that such
Think tank says
Whitehall will
face bigger cuts
BY LAUREN FEDOR departments could expect a total cumu-
lative cut of nearly 33 per cent over the
eight years from the start of the first
Cameron government in 2010.
And those cuts could prove even more
drastic, Emmerson said, if the govern-
ment continued to meet Nato’s defence
spending target of two per cent of GDP.
Leaving defence spending unchanged
would increase the cuts for other depart-
ments over the next three years to 18.7
per cent, and the cuts over the eight
years from 2010–11 to nearly 37 per cent,
Emmerson said.
The IFS warnings came on the
same day as chancellor George
Osborne announced £3bn of new
in-year cuts for unprotected
Whitehall departments. Osborne
said the cuts would come from
tightened budgets, efficiency
savings and the sell-off of
various government
properties across
departments.
Osborne is wasting no
time implementing cuts
DIVING European repo trading volumes
exactly offset a rise in business in US
instruments, brokerage Icap said
yesterday.
Its data for May shows no growth in
overall electronic broking volumes,
down from six per cent growth in April.
US Treasury volumes climbed 13 per
cent on the year to an average daily
volume of $184.2bn (£119.7bn).
US repo volumes increased nine per
cent to $217bn, according to the figures
from Icap, a brokerage headed by
Michael Spencer.
And EBS volumes rose 30 per cent to
$95.9bn in the month.
But European repo volumes fell 24
per cent on the year to $193.7bn.
As a result, overall electronic broking
volumes held flat at $690.8bn.
By contrast overall volumes in April
rose on stronger US performance and
only a one per cent dip in European
volumes.
FallinEurorepo
volumes wipe
outUSincreases
BY TIM WALLACE
Michael Spencer heads up brokerage Icap
RickPerryinUSPresidentialbid
n Former Texas governor Rick Perry has
thrown his hat into the ring to become the
next Republican nominee for US president.
Perry also ran for president in 2012, but his
campaign derailed in a GOP debate in which
he forgot the third of three government
agencies he wanted to scrap. Perry’s
announcement came on the same day that
Jeb Bush indicated he would formalise his
own candidacy later this month. The two
men join a crowded race that already
includes nine other declared candidates.
Yahooshutsdownmapservice
n Yahoo said it was shutting down a few of
its services, including Yahoo Maps, as it
realigns itself to focus on search and digital
content. Maps.yahoo.com will shut down by
the end of this month, Amotz Maimon,
Yahoo's chief architect, said in a blog post,
as the service faces intense competition
from Google. Yahoo’s search and other
services including photo-sharing website
Flickr will still support Yahoo Maps, Maimon
said. Yahoo said the Philippines homepage
would close, as will Yahoo Music in France
and Canada and Yahoo Movies in Spain.
OPECwarnedshaleheretostay
n The US shale revolution that sent oil
prices tumbling last year is here to stay, and
can withstand the effects of cheap Brent
crude, the head of US major ConocoPhillips
said yesterday. Ryan Lance spoke at a
seminar hosted by the Organisation of
Petroleum Exporting Countries (Opec). The
organisation has been holding a series of
talks over the past two days, ahead of
today’s meeting in Vienna during which it is
expected to decide to maintain its current
high levels of production. Brent Crude
traded at around $64 yesterday.
INBRIEF

6. Sainsbury’s chief
executive Mike Coupe
FRIDAY 5 JUNE 2015
6 NEWS cityam.com
SAINSBURY’S chief executive Mike
Coupe missed out on an annual bonus
last year after the supermarket chain
failed to meet sales and profit targets.
The retailer’s annual report pub-
lished yesterday revealed that Coupe’s
annual pay package dropped to £1.5m
in the year to March, down from £2m
the previous year, when he was still
commercial director.
Annual bonuses were not awarded
to Coupe or any senior directors,
however he was granted £458,000
worth of deferred share awards,
which will pay out in 2017,
according to the report.
Coupe took over from his pred-
ecessor Justin King in July last
year just as Sainsbury’s began to
feel the effects of food price
deflation and the inten-
sifying price war
launched to stem the
flow of shoppers to
discounters Aldi and
Lidl.
Sainsbury boss
misses out on
payday perksBY KASMIRA JEFFORD Sainsbury’s posted a £72m loss in the
year to 14 March – its first loss in a
decade – after booking £753m of
charges, mainly related to write-downs
on the value of its property.
Its dividend also fell 23.7 per cent on
last year, after changing its policy in
November to help strengthen its bal-
ance sheet and invest £150m in lower
prices.
Despite seeing his total pay decrease,
Coupe will receive a 1.75 per cent pay
rise this year, taking his annual
salary for the year to next March
to £915,750 – up £15,750 but
still below his predecessor
King’s pay of £960,000 the previ-
ous year.
Chief financial officer John
Rogers took home a total payout
of £1m compared with £1.7m in
2014. His base salary will
increase to £610,500
this year.
MARKS & Spencer chief executive
Marc Bolland has pocketed a bonus
for the first time in two years after
the high street retailer reported its
first rise in annual profits in four
years last month.
The Dutchman, who joined M&S
in 2010, received a £596,000 bonus
on top of a basic salary of £975,000,
taking his total pay package to
£2.1m, M&S’s annual report shows.
Last year Bolland and all 80,000
staff had to forgo a bonus after
M&S failed to hit performance
Marks&Spencer’sseniorexecs
collectfirstbonusintwoyears
Bolland said M&S had “taken a step in the right direction” after a pick-up in annual profits
BY KASMIRA JEFFORD targets. The year before he received
a bonus of £829,000.
Steve Rowe, executive director of
M&S’s fast-growing food division
has received a larger bonus than
Bolland at £653,000, giving him a
total package worth £1.4m.
In contrast John Dixon, who was
brought over from food to head up
the ailing general merchandise
division two years ago, received
£217,00 on top of his £600,000
salary.
Staff will also receive a cash
bonus, however the details are not
disclosed by M&S.
TROUBLED British giant Tesco has
hired HSBC to explore a sale of its
South Korean operations, valued at
about $6bn (£3.9bn), according to City
sources familiar with the matter.
The appointment of an adviser is
Tesco’s first concrete step towards a
sale of some Asian assets, which
analysts think could be its best bet as
it looks to cut debt and fund a
turnaround plan at home.
The supermarket group, whose
credit rating was cut to “junk” status
by Moody’s and S&P in January, is
battling to recover from an
accounting scandal and reverse
market share losses in Britain to
discount chains Aldi and Lidl.
In April, the group announced a
£6.4bn annual loss – the biggest in
its 97-year history.
South Korea is its largest business
outside Britain, with more than 400
stores, 500 franchise stores and more
than 6m customers a week.
The division has attracted several
bid enquiries in the past, which has
encouraged Tesco to explore a formal
sale process.
Global buyout firms KKR, Carlyle
Group, CVC Partners and TPG as well
as Asian buyout firms including MBK
Partners are likely bidders for the
business, the sources said.
Tescoappoints
HSBCforSouth
Koreaunitsale
BY DENNY THOMAS
Reuters

7. FRIDAY 5 JUNE 2015
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MORRISONS’ new management
pledged to review its pay policies after
the supermarket faced a shareholder
revolt yesterday over the size of the
bonus awarded to its ousted chief exec-
utive Dalton Philips.
More than a third of shareholders
(35.6 per cent) rejected the retailer’s
remuneration report, according
to proxy voting results
revealed at its annual gener-
al meeting in Bradford.
Philips was forced to step
down in February, after
failing to halt the decline
in sales at the grocer
during his five years in
charge.
He walked away with a £1m
bonus on top of a base salary of
£850,000, a £239,000 pension and bene-
fits pot as well as a £1.1m payoff.
Andrew Higginson, a former Tesco
executive who joined the board in
October, noted concerns over Philips’
payout but said this was the “mini-
mum, legally” that could be paid.
However he also added that bonuses
BY KASMIRA JEFFORD were deserved, given that it managed
to hit a number of performance targets
despite the turmoil it faced last year.
Sir Ken Morrison, the son of the
supermarket’s founder, who ran the
chain for over 50 years, voiced his sup-
port for new chief executive David Potts
and urged investors to give manage-
ment time to turn sales around.
“It’s a big job to restore the
company’s fortunes, please
be patient and give man-
agement some breath-
SPORTS Direct yesterday named an
insider as interim chief financial
officer after leaving the post vacant
to the concern of shareholders for
over 18 months.
Matt Pearson, Sports Direct’s
group financial controller, who
joined the retailer from EY in 2007,
has been promoted to the board
with immediate effect.
The retailer, controlled by
Newcastle United owner Mike
Ashley, has faced criticism from top
BY KASMIRA JEFFORD shareholders Odey Asset
Management and Standard Life
over its slow response to replacing
Bob Mellors, who retired in
December 2013, on health grounds,
after almost a decade as chief
financial officer.
“After a thorough process and
following soundings from leading
institutions I am delighted that
Matt has been appointed acting
chief financial officer and is to join
the board,” Sports Direct chairman
Keith Hellawell said in a statement
yesterday.
Chief executive Nick Wood with his two Bichon Frise dogs Oscar and Louis
SportsDirecthiresfinancechief
18monthsafterBobMellorsexit
Investorsrevolt
overMorrisons’
ex-chief’spay
PETS AT HOME yesterday posted a
record set of full-year results and said
it enjoyed a strong start to the year as
owners splashed out more on
grooming services and special
nutrition products for their pets.
Underlying core earnings for the
year to 26 March rose 10 per cent to
£121m, in line with expectations, on
revenue up 9.6 per cent to £729m.
Sales at stores open over a year
BY KASMIRA JEFFORD were up 4.2 per cent, the firm said,
helped by “excellent progress” of its
Advanced Nutrition products and
services such as grooming and
veterinary care.
Chief executive Nick Wood, who
owns two Bichon Frise dogs called
Oscar and Louis, said the trends in
pet nutrition was similar to that in
the “human market”, with owners
increasingly feeding their pets better
quality food such as organic or
higher-meat content alternatives.
Food revenues grew 9.8 per cent.
Pets at Home has 400 stores, 179
grooming salons and 330 vetinary
practices after buying Vets4Pets in
2013. It aims to have 500 UK stores,
more than 700 vet practices and 300
groom rooms in the medium term.
Though still only 11 per cent of
revenues, its services arm grew by 25
per cent last year to £63m. As a result
the group appointed the division its
own chief executive, Sally Hopson,
who has led its veterinary arm.
PetsatHomeiskeepingpooches
happyasitpostssurgeinprofits
Dalton Philips’ pay and
bonus was criticised
ing space,” 83-year-old
Morrison said.
His show of support for
the current team contrasts
with his tirade against Philips at last
year’s AGM, when he described the for-
mer chief executive’s strategy as “bull-
shit” in front of shareholders.
Potts has already made his mark by
slimming its head office, hiring more
people on the shop floor, and focusing
on its core supermarket business.

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HOUSE prices dropped in May, one of
the UK’s major mortgage providers
said yesterday, but analysts expect a
quick rebound.
Houses lost 0.1 per cent of their
value from April to May, according to
figures published by Halifax.
However, house prices are up 8.6
per cent compared to May 2014.
Nationwide said earlier this week
that price growth was 4.6 per cent.
While the two survey’s differ in their
methodologies, giving varying fig-
ures, both show price growth run-
ning above income growth. Housing
experts point to the fact that the
supply of housing has not kept up
with demand.
“House prices fell in May as pre-
election uncertainty led to less activ-
ity in the market and a
consequential dip
in house price rises. Now that the
result of the election is known,
demand will increase as those who
have been holding off from entering
the market return,” said Stephen
BY CHRIS PAPADOPOULLOS Smith, a director at the Legal and
General Mortgage Club.
The current lack of supply means
that an increase in demand will
drive up prices in the remainder of
the year as more people compete for
fewer properties. The Government
has promised to build
more houses and we need to see
action on this now so that a strong
pipeline of new homes is in develop-
ment. This will keep prices afford-
able and make homeownership an
achievable goal for people looking to
buy.”
Economist Martin Ellis from
Halifax said: “Housing supply
remains extremely tight with the
stock of properties available for sale
currently at its lowest level for many
years. At the same time, ongoing eco-
nomic recovery, increasing employ-
ment, real earnings growth and very
low mortgage rates are all support-
ing housing demand. This combina-
tion has kept annual house price
inflation well above earnings growth
although activity levels are sub-
dued.”
NEW GUIDANCE has been
published on the regulation of
adverts for payday loan products,
designed to prevent ads from
trivialising taking out short-term
high-cost loans.
The Committee of Advertising
Practice’s rules, which come into
immediate effect, say that ads must
be responsible to the audience and
society, and should not encourage
consumers to make ill-considered
or rushed decisions about loans.
BY ASHLEY KIRK There are warnings that ads risk
breaching the rules if they: suggest
loans are a suitable means of solving
ongoing financial concerns; condone
non-essential or frivolous spending;
or unacceptably distort the serious
nature of payday loan products.
Payday loan company Wonga has
previously come under fire for such
tactics, leading to it scrapping its
advertising puppets last year.
The new guidance, published
yesterday suggests that animation,
catchy upbeat jingles and humorous
themes are used with care.
Prices are up 8.6 per cent year-on-year in May despite falling in the run up to the election
Newguidanceissuedforpayday
loancompanyadvertisements
Housepricesset
tobebolstered
byscantsupply
THE HOUSING shortfall in England
is set to reach 1m homes within 10
years, according to new research
from a leading estate agent.
Savills said that England faces an
annual housing shortfall of 100,000,
a problem that the estate agent said
can only be solved by the
government boosting the supply of
development land in high-demand
locations and supporting more
BY LAUREN FEDOR property developers.
Savills estimated that with
government support, the number of
new homes started per year in
England could increase from
140,500 - the latest figures for the
year to the end of March - to 205,000
by 2020.
“Although we have seen an
increase in new homes starts over
the last two years, progress could
come to a halt if housebuilders are
not able to replenish their supply of
consented land, particularly in the
high-demand markets of Surrey,
Hampshire, Berkshire,
Cambridgeshire and parts of
Suffolk,” Susan Emmett, Savills
residential research director said.
Savills said that while growth is
dependent on a larger number of
planning consents in high-demand
markets, it will also require
government intervention on the
demand side with the continuation
of such programmes as Help to Buy.
Savills says housing gap to hit
1m without more being built

10. FRIDAY 5 JUNE 2015
10 NEWS cityam.com
MEDICAL device manufacturer Smith &
Nephew was forced to announce its
plans to withdraw one of its hip-
replacement systems as it required too
many post-operative follow-ups.
The 46mm model in question will be
withdrawn from its Birmingham Hip
Resurfacing system due to concerns it
does not meet the standards set by
health watchdog, Nice.
Smith & Nephew said is was not advis-
ing proactive revisions for existing
patients unless required for clinical rea-
sons.
The firm also said the removed prod-
ucts accounted for around one per cent
of Smith & Nephew’s global hip
implant revenue in 2014, and 0.1 per
Sharestiltsouth
asmedicalgiant
pullshipdeviceBY ADAM HIGNETT cent of group revenues and the action
will have no impact on guidance for the
full year.
Despite these reassurances, shares in
the company fell by over 1.1 per cent to
close down at 1,440p.
JohnsonMattheybottomline
liftedbybenignUKtaxregime
SUSTAINABLE tech firm Johnson
Matthey said its annual results
were in line with expectations
yesterday as falling revenues failed
to stop growth at the bottom line.
The UK-based company, which is
the world’s largest of autocatalysts,
reported strong growth in sales of
its emission control technologies
and processing technologies.
However, these gains were offset by
BY ADAM HIGNETT weak growth in its precious metals
division and increased losses in
new businesses. Johnson Matthey
said it expected performance in
precious metals to continue to
suffer in the new financial year as a
result of the sale of its gold and
silver refining business and due to
difficult trading conditions.
The company also reported
ballooning debt, which climbed
from £792m to £994m. The firm
attributed this to an increase in
working capital brought about by
business growth and higher
precious metal inventories.
Overall revenues for the company
declined 10 per cent to £10bn.
However positive changes in
underlying taxation, specifically
corporation tax, sent pre-tax profits
up three per cent to £440m.
Chief executive Robert MacLeod
said the firm will continue to invest
in research and is well positioned to
deliver growth for shareholders.
1,140
1,150
1,160
1,170
1,180
1,190
29May 1June 2June 3June 4June
SMITH & NEPHEW
1,137.00
4 June

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NEW CAR sales are being tipped by
analysts to break their all time annu-
al record this year after they
increased for the 39th consecutive
month in May.
Brits registered 198,706 new cars
last month, according to data from
the Society for Motor Manufacturers
and Traders (SMMT).
The figure is up 2.4 per cent on the
same month last year.
It takes the number of new cars
registered so far this year to
1,119,072, a climb of 5.7 per cent on
last year’s figure.
Sales have been boosted by a num-
ber of factors. One is rising
consumer confidence as UK unem-
ployment continues to fall and the
economy grows. Another is due to
struggling manufacturers in Europe
offering more attractive finance
packages. Suppliers have found it
easier to offload vehicles using
cheaper credit rather than cutting
back on production and firing staff.
“May was another good month for
BY CHRIS PAPADOPOULLOS new car sales, up 2.4 per cent, as the
carmakers continue to support the
market with cheap credit. With ris-
ing consumer sentiment and a
strong pound it looks likely that the
market will continue to perform
well over the summer. It is still pos-
sible that UK new car sales will break
the all-time record of 2.58m cars sold
in 2003,” said John Leech, head of
automotive at financial services firm
KPMG.
There was also a surge in the regis-
trations of ultra-low emission vehi-
cles. Only 2,838 were bought in May
2014 which has now increased to
11,842.
“The remarkable growth in
demand for plug in vehicles is
expected to continue as the range of
ultra low emission vehicles on sale
increases,” said SMMT chief
executive Mike Hawes.
However, Hawes is less inclined to
believe the current growth will carry
on for long. “We anticipate a natural
levelling out of the overall new car
market throughout the remainder of
2015,” he said.
FOREIGN exchange provider
Moneycorp increased its gross
profits by 26 per cent on the year
in the first quarter of 2015, its
financial results show today.
Its earnings rose from £22.7m in
the first three months of 2014 to
£28.6m in the same period of this
year.
Retail growth was relatively
subdued, with revenues up five
per cent to £12.6m.
But its international payments
BY TIM WALLACE arm recorded growth of 49 per
cent with revenues coming in at
£15.9m.
“Confidence among SMEs (small-
and medium-sized enterprises) is
helping to boost interest in both
import and export markets, and
the strong sterling is encouraging
UK investors to take advantage of
overseas property opportunities,”
said Moneycorp’s chief executive
Mark Hogan.
“The result for Moneycorp is
growing demand from corporate
and private clients.”
GREENE King’s proposals to the
Competition Market Authority
(CMA) regarding its acquisition of
the Spirit Pub Company reached
consultation stage yesterday.
The consultation comes after
the regulator raised concerns
about the £774m merger shortly
after it was announced in May. At
the time the authority said the
current proposal would
BY ADAM HIGNETT “substantially” lessen competition
in the pubs sector but
pointed to difficulties in only
16 locations.
In order to comply and
avoid a more detailed phase
II merger investigation
Greene King offered to sell 16
pubs which would be divested
as properties, together with
the relevant pub name and, for
managed pubs, the transfer of
staff.
The CMA has until 21 July to
consider accepting the
undertaking, or a modified
version of it and has invited
interested parties to make
their views known by 18
June.
Of the identified pubs the
firm is willing to divest, half
are in Oxfordshire, with the
remaining pubs mainly
concentrated in
Nottinghamshire.
Moneycorp profits up on boom
in international payments unit
ConfidentBrits
setfornewcar
purchaserecord
GreeneKingcompetitionprobe
movesontoconsultationstage
Shares plunged in London-based spirits firm Distil yesterday after the maker of Jago
Vanilla Cream Liqueur recorded a disappointing year ending 31 March. Revenues fell from
£2.4m to just £666,000. However, the firm’s pre tax losses narrowed to £289,000.
DISTIL SHARES FALLAS LIQUEUR SALES STALL

12. Young’s Seafood
remains on its own
FRIDAY 5 JUNE 2015
12 NEWS cityam.com
YOUNG’S Seafood, the Grimsby-based
fish manufacturer, will be hived off
into a standalone company as part of a
takeover of its owner Findus Group.
Consumer group Nomad Foods,
which owns fish finger maker Birds
Eye, on Wednesday said it was in exclu-
sive talks with the owners of Findus
Group to buy the group.
Findus yesterday said Nomad was
conducting due diligence on the
group, with a view to buying Findus
Nordic and
Findus Southern
Europe.
A deal would
give the group
Findus’ food oper-
ations in Sweden,
Norway, Finland,
Denmark, France,
Spain and
Belgium.
However, Findus
operations in the
UK are not includ-
Young’sSeafood
togoitaloneas
partoftakeoverBY MICHAEL BOW ed, meaning Young’s Seafood and the
use of the Findus brand in the UK will
remain with Findus’ current owners,
which include Lion Capital and JP
Morgan. Findus has its headquarters
in London.
Centerview Partners is acting as
exclusive financial advisor to Lion
Capital and the other shareholders.
Nomad Foods, which is 22 per cent
owned by well known hedge fund
investor Bill Ackman, was founded last
year by Noam Gottesman and Martin
Franklin.
Franklin is the
tycoon behind the
Jarden conglomer-
ate, the owner of
sandwich-toaster
maker Breville
while Gottesman
co-founded hedge
fund GLG
Partners.
PRIVATE equity firm 3i announced
it had agreed to invest around
€250m (£183m) in Weener Plastic
Packaging Group (WPPG) yesterday.
WPPG, which specialises in the
design of packaging products for
the personal care, food and
beverage markets operates in 15
countries, employing 2,000 people.
3i is expected to support
management at the German-based
firm, which generated sales of
approximately €270m in 2014, to
Privateequityfirm3iin€250m
packagingcompanyinvestment
BY ADAM HIGNETT secure further growth and build on
its international connections.
It will do this by installing Leslie
Van de Walle, a former chief
executive of Rexam, as chairman on
the advisory board bringing with
him his deep design sector
knowledge and contacts in the
packaging sector.
Roel Zeevat, chief executive of
WPPG said: “With the support of
3i, we will be able to take our
company’s development to the next
level by fostering growth and
expanding our global footprint.”
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JohnLaingEnvironmentalprices
n John Laing Environmental Assets Group
yesterday priced its £45m fundraising at
101p a share, a 2.9 per cent premium to the
firm’s value of assets. The group said in May
it would place shares with investors to fund
the acquisition of Branden solar park and
Carscreugh and Wear Point wind farms. The
101p price is a discount to yesterday’s
opening price of 104.5p. The company is
using Winterfloods to place the shares with
investors.
DolphinCapitalraises£46m
n Dolphin Capital Investors yesterday
closed a £46m fundraising it unveiled on
Wednesday. Liberum and Panmure Gordon
placed shares at 21p each, which was a 6.67
per cent discount to the firm’s share price.
The junior stock market listed property
company owns a portfolio of coastal
developments in places like Cyprus, Greece,
Croatia and Turkey designed for holiday
makers. Top shareholder Third Point took
about 23 per cent of the new shares.
NextEnergysettolistinLondon
n NextEnergyEuropeanSolarUtilityintendsto
launchaninitialpublicofferingtolistonthe
LondonStockExchange’smainmarket.The
companyisaninvestmentfirmfocusingon
utility-scaleenergyassetsintheEU,excluding
theUK.Thefirmwillreceiveinvestmentadvice
fromNextEnergyCapital(NEC),andchief
executiveMichaelBonte-Friedheimsaid:“The
skillsoftheNECGroup...givethecompany
accesstothenetworktodeploycapitalquickly
toconvertitspipelineintoalargeportfolio.”
INBRIEF
Sales have fallen at
US clothes retailer
J Crew, which
opened its flagship
European store in
London in 2013. Its
J Crew brand,
which accounts for
around 90 per cent
of total sales, faced
a sales dip of five
per cent to
$508.7m in the
quarter ending 2
May. Its net loss
widened to
$462.4m, from
$30.1m this time
last year.
JCREWSALESFACING SALES DIP

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14. FRIDAY 5 JUNE 2015
14 NEWS cityam.com
THE BANK of France expects the coun-
try’s economy to pick up this year, put-
ting an end to three years of
stagnation.
Meanwhile, unemployment fell for
the first time since 2012.
The Eurozone’s second largest econ-
omy surprised most economists when
it grew 0.6 per cent during the first
three months of the year, faster than
the UK and Germany.
The Bank of France now expects it to
grow 1.2 per cent this year, rising to 1.8
per cent in 2016, boosted by cheap
energy and a low euro exchange rate
which helps exporters, it said yester-
day. It marked the bank’s first publica-
tion of its medium-term growth and
inflation forecasts.
The prediction is above the govern-
ment’s, which could mean that
President Francois Holland will find it
France expects
higher growthBY CHRIS PAPADOPOULLOS easier to meet budget deficit
reduction targets.
In a further sign of a turnaround in
French economic fortunes, unemploy-
ment ticked down to 10.3 per cent in
the first three months of the year
from 10.4 per cent three months earli-
er, according figures released by Insee
yesterday.
Economist Dominique Barbet from
investment bank BNP Paribas played
down the healthy jobs figures.
“We do not believe Insee data mean
there is a profound improvement. The
improvement is reflecting the rise in
temporary jobs, underground econo-
my and an increased number of dis-
couraged workers who are not
registered as unemployed people
because of lack of proactive actions to
find a job, which can be understand-
able considering that 66 per cent of
job seekers have been looking for a
work for more than one year,” he said. Higher growth would help President Francois Hollande to hit EU budget deficit targets
SierrainAfricanLionpartnership
n Mineral sands producer Sierra Rutile said
it has entered into an agreement with
Carmanor Limited, an emerging-markets
focused agricultural company, yesterday.
The partnership will see Carmanor take a 75
per cent interest in Sierra subsidiary African
Lion if it successfully develops the business
within a predefined timeline.
NovartisdeclinestobuyGamida
n Swiss drug giant Novartis announced it
would not buy Israel based stem cell
specialist Gamida Cell yesterday. The news
follows the $35m investment made by
Novartis into the firm last year which gave it
the option of paying shareholders an
additional $165m if it exercised its option to
buy the company.
Audioboomtobeatexpectations
n Audioboom said it was on track to meet
or exceed full-year targets yesterday after
adding 650 new content partners in the last
quarter, taking its total content partners to
over 3,000. In addition, it added nearly
600,000 registered users during the
quarter, taking the user base to over 4m.
Shares in the firm closed up 3.45 per cent.
INBRIEF

15. FRIDAY 5 JUNE 2015
15
THE BBC is understood to have offered former
Top Gear stars James May and Richard Hammond
a multi-million pound deal to stay.
The pair have both been offered deals in the
region of £1m a year, according to The Times,
contracts that would make them two of the most
well-paid talents on the BBC’s books.
Top Gear lost its iconic presenting team of
when May and Hammond followed Jeremy
Clarkson out of the door when the abrasive host
was fired for assaulting a producer.
Together the trio helped Top Gear become the
most popular show on BBC 2, with the channel
immediately losing 5m viewers the first weekend
the show was pulled off the air. Hammond, May
and the BBC declined to comment on any deal.
BBCluresex-Top
Gearhostswith£1m
BY JOE HALL
THE GOVERNMENT needs to cut more red tape,
small businesses have said.
Reducing the amount of bureaucracy and reg-
ulatory formalities – that can be a big burden to
smaller firms – was listed as a top priority by 51
per cent of over 1500 surveyed small and medi-
um enterprises (SMEs), according to figures
released today by Lloyds Bank.
It comes despite Prime Minister David
Cameron launching initiatives such as the Red
Tape Challenge which claims to have saved
small business £300m in a year.
That sentiment has carried through
to the other side of the election, with
business secretary Sajid Javid recent-
ly expressing his desire to cut red
tape for business,
“Businesses have welcomed the
Government’s recent commit-
ment to cut red tape and they
recognise it as a priority.
However they will want reas-
surance that their concerns
about skills, investment and
exports will also be
addressed,” said Tim Hinton,
a director at Lloyds Bank.
Small firms
want more
red tape cutBY CHRIS PAPADOPOULLOS
TRINITY Mirror subsidiary MGN, under which
the Daily Mirror newspapers operate, is seeking
the right to appeal the fine that was imposed on
it on 21 May over phone hacking.
In a statement released yesterday, Trinity
Mirror said that while the firm accepted it
should pay damages to victims of phone
hacking, “we believe that the basis used for
calculating damages in the judgment is
incorrect and the amounts awarded by the
Judge are excessive and disproportionate.”
The publisher had said at the time of the
original judgement that it felt that the scale of
the damages awarded was excessive.
BY CHARLOTTE HENRY
Mirror to fight
its hacking fine
New business secretary Sajid
Javid wants to cut red tape
Apple11"MacBookAir
£749Buynow,pay12monthslater
1.4GHzdualcoreIntel®
Core™i5processor,128GB
flashstorage,4GBRAM.
Model:MJVM2B/A.AppleCare£199for3yearsserviceandsupport.
Representativeexample:Cashprice£749,10%depositof£74.90,creditamount£674.10,12monthsafterpurchaseeithersettletheaccountbypaying£699.10(creditamount+£25settlementfee)orstart36monthlyrepayments
of£32.34.Totalamountpayableincludingdeposit£1239.14.Rateofinterest24.9%(fixed)24.9%APRrepresentative.Websiteoffersandpricesmayvary.Allofferssubjecttoavailability.DSGRetailLtd.,MaylandsAvenue,Hemel
Hempstead,Herts.,HP27TG.RegisteredinEngland.No.504877.
MacBookfromonly£749.
Buynow,pay12monthslater.
Deal

17. FRIDAY 5 JUNE 2015
17cityam.com
cityam.com/the-capitalistTHECAPITALIST
GotAStory?Email
thecapitalist@cityam.com
“Sorry” may be the hardest word, but trust is slipping off the
tongue faster than ever. It’s use in company documents has risen
more than eight-fold in the past decade, according to a study by the
Chartered Institute of Management Accountants (CIMA) alongside Robert
Phillips, author of “Trust me, PR is dead”. The two argue that the focus on
trust is not always backed by corporate action. Phillips said: “Trust often
spoken is trust rarely earned.” In annual reports of FTSE 100 companies
over the last decade, mention of the T-word rose from 38 to 317. The
phrase “building trust” appeared just once in 2005, in a single annual
report; in 2013 it was mentioned 18 times. Phillips argues that banks
would be better to try earning trust rather than talking about it – by
adopting the John Lewis Partnership employee ownership model, ceasing
extravagant bonuses, and charging retail banking customers.
In an age where street-food reigns supreme in the City, it’s a relief
to know you can still find a decent meal for over £1,000. Today,
fine art aficionados Christie’s announces plans to host a series of dinners
for its clientele of high net-worth wine buffs. The auction house is
delivering three slap-up meals to loyal bidders from October to
December. Prices range from £1,300 per-head to £1,500 for its “1945
Vintage dinner”, which will pour out 60-year old vino – older than some
of the business’s customers. Stephen Hancock, a director at Wittingtons
Investments, who has been to the event before, said: “They are
awesome. Sometimes there’s an owner of a fancy Chateau to talk you
through the tasting. They hold them in their fancy boardroom in King
Street.” So in spite of the 1945 vintage timeline, there’s clearly no post-
war rationing expected here!
HSBC has been in the headlines for all
the wrong reasons lately, so imagine
the sheer relief on the face of its
Private bank chief, Francesco Morra,
as Private Banker International (PBI)
handed the bank an award for out-
standing work with international
clients.
The PBI London Awards, dedicated
mainly to the UK and European mar-
kets, were set up to congratulate insti-
tutions setting new standards in the
wealth management industry.
They say good things come in threes,
so HSBC will no doubt be awaiting its
third bit of luck for the day after Swiss
prosecutors dropped their investiga-
HSBCPrivate
Bankbreaksa
runofbadpresstion into its private bank yesterday.
Patrick Humphries, HSBC’s head of
communications, said: “Any good
news is positive. There’s been a whole
bunch of bad news about HSBC that’s
very historic. What we’ve been doing
is focusing on developing the business
of our commercial clients.
“We’ve made really good progress
with our private banking sector, pro-
viding us with a strong base to move
on from and get in shape.”
The judging criteria include demon-
strating a unique strategy for business
growth, superior customer service,
and strengthening the reach of their
brands.
LIFE IN THE FAST LANE AT CANARY WHARF SHOW
Time for a mid-life crisis? Thinking about trading in for a younger model? You’re in luck! Motorexpo holds
its 20th annual free-for-all car show in Canary Warf next week. From Monday, workers in the financial
village even get a chance to drool over their dream car before showing off to their friends by test driving
it around the Canary Wharf estate. Footfall is expected to exceed 410,000 this year, as Motorexpo will
tease financiers with Lamborghinis, Ferraris and Jaguars. Hot wheels to look out for include the
Lamborghini Aventador, the Ferrari 458 Speciale and the Jaguar XE, all making their UK debut next week.
Time for die-hard Hammers to update their match-
day wardrobe; social trading network eToro has
announced it will partner West Ham United next
season. The social investment network, with
over 4.5m international users, announced
the deal today, ahead of West Ham’s
move to the Olympic stadium in 2016.
The deal has come at a good time for
eToro, which has just secured funding
from three major banks. EToro says users
of its bespoke platform are “tapping into
the wisdom of the crowd and encouraging
people to connect with one another to discuss,
trade, invest, learn and share knowledge across
the network’s platform.”
EDITED BY EDITH HANCOCK

19. FRIDAY 5 JUNE 2015
19NEWScityam.com
LOGISTICS firm Wincanton blamed
lower fuel prices and retailers’
restructuring plans for its poor
revenue performance in the year to
31 March.
Group revenues were up by just
0.9 per cent to £1.1bn, and the
company said: “A strong
performance on new business wins
and renewals was partly offset by
the impact of certain site closures as
retailers reshaped their distribution
networks and also the impact of
lower fuel prices as fuel is largely a
pass through cost to Wincanton.”
Profit before tax tumbled from
£34.9m in 2014 to £24.9m, although
underlying pre-tax profit grew by
22.7 per cent from £25.6m to
£31.4m. Net debt was reduced by
11.2 per cent, to £57.6m.
Wincanton boss Eric Born said
the growth in revenue and lessened
debt was “attributable to continued
operational excellence, delivering
value added services and our focus
Wincantonhit
byoilpriceand
retailers’plansBY CAITLÍN MORRISON on close customer relationships”.
Analysts at Numis noted that
operational issues at Pullman Fleet
Services have been a drag on group
earnings, but said this did not
detract form the “long term equity
story”.
In its outlook for this year,
Wincanton said it is placing
increased emphasis on winning new
business, as well as returning the
Pullman business to profitability.
Shares in the company were down
by 0.44 per cent yesterday.
EASYJET yesterday announced a
7.2 per cent rise in passengers for
May 2015, compared to May 2014.
The budget airline flew 6.4m
passengers last month, compared
to 6m the year before.
Its load factor, the average
portion of capacity an airline has
filled with travellers, was up to
91.2 per cent, from 89.4 per cent.
Passenger numbers were also up
6.1 per cent for the rolling twelve
months to May, compared with
the 12 months up to May 2014.
Passenger numbers are up for
Easyjet as summer approaches
Low cost carrier Easyjet welcomed more passenger onboard last month up from May 2014
BY CHARLOTTE HENRY Last month the carrier
announced a pre-tax profit of
£7m for the six-month period
ending on 31 March.
It is trying to turn a corner
after what boss Carolyn McCall
called a “horrible month” in
April, due to the French air
traffic controllers’ strike.
Easyjet is preparing to retrofit
its A320 aircraft next year, and
will cram six extra seats into its
cabins by summer 2018.
Shares in Easyjet ended the day
up 0.63 per cent, at 1,592p a
share.
BUDGET Airline Wizz Air
announced a 20 per cent rise in
passengers for last month,
compared to May last year.
Passenger numbers were up to
1.6m, from 1.3m last year. This was
in part helped by the introduction
of two new A320 aircraft, which
have 180 seats each.
The firm also announced that
BY CHARLOTTE HENRY capacity was up to 1.8m seats, an
increase of 18 per cent from 1.5m
in May 2014.
Revenue passenger kilometres,
the distance travelled by paying
customers, was also up by 20 per
cent to 2.4m.
Load factor, the amount of
capacity that an airline actually
uses, was up to 89 per cent from
87.5 per cent. The measurement is
particularly important for low cost
airlines who do not have higher
priced, first-class tickets.
Wizz Air has launched a new
Plus Fare category, giving some
customers a higher end experience,
with priority boarding included.
It will also launch a new base in
Debrecen, Hungary, its 22nd.
Furthermore, five new routes – 3
in Hungary and two in Lithuania
will launch in December and
September respectively.
MONARCH airline yesterday
reported a half year loss of £69.9m,
a 37.7 per cent improvement on the
the loss of £110.6m for the same
time last year.
The airline is coming through a
turbulent time, and undergoing a
restructuring programme, to
reduce £200m of costs.
Chief executive Andrew
Swaffield explained: “We remain
positive that the changes we have
Monarchemergesfromslumber
astravellernumberstakingoff
BY CHARLOTTE HENRY made to the structure of the group,
the network and our cost base have
set us in good stead to achieve the
turnaround.”
The airline succeeded in
reducing losses over the winter
period by £40m. Monarch said
£30m of this to the success of its
turnaround programme, while the
other £10m was down to the
reduction in fuel costs.
Capacity fell by four per cent,
while passenger traffic was down
by five per cent from 2014.
Wizz Air unveils new routes and
fares as passenger numbers soar
172.5
175.0
170.0
167.5
165.0
177.5 p
2Jun 3Jun 4Jun29May 1Jun
WINCANTON
171.00
4 June
Gatwickspent£2.35monnoise
n Gatwick airport yesterday announced
that it has spent 95 per cent of the
applicable budget on noise insulation in
the last year. It is offering acoustic
insulation worth £3,600 to every eligible
household. It has committed £2.35m so far,
and has set aside a total of £7.2m for the
noise insulation scheme. The airport,
which is locked in a battle with rival
Heathrow to gain a runway, has more than
doubled the number of homes eligible for
the scheme.
SciSysissuesprofitswarning
n IT firm SciSys yesterday issued a profit
warning. In a market statement, the Aim-
listed company said it “is experiencing
difficulties in one major fixed price
development project in its Enterprise
Solutions and Defence (ESD) division.”
Shares in the firm plummted 29.7 per cent
on the back of the announcement, ending
the day at a value of 58p a share, and
having traded as low as 36p a share during
the course of the session.
AirCharterfirmseessunnyskies
n Charter aviation firm Air Partner
yesterday held its annual general meeting.
At the meeting, chief executive Mark Briffa
said statement: “Trading has continued at
similar levels, and given our forward
bookings, we remain optimistic about the
group’s prospects for the remainder of the
year.” The firms shares closed down 0.93
per cent at 386.25p a share. It announced
the acquisition of Cabot Aviation on 13 May.
INBRIEF

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21. FRIDAY 5 JUNE 2015
21NEWScityam.com
Reuters
MadronatapsAmazon,Microsoft
alumnifornew£194mventure
SEATTLE-based Madrona Venture
Group said it has raised $300m
(£194m) for a new fund, its sixth,
drawing on the growing start-up
community in the backyard it shares
with Amazon and Microsoft.
About half the entrepreneurs in
its previous fund, raised three years
ago, have worked at one of those two
Seattle-area technology leaders,
Madrona partner Tim Porter said.
Those entrepreneurs benefit from
Amazon’s and Microsoft’s
BY SARAH MCBRIDE diversification beyond their narrow
beginnings.
“If you go back certainly 10 years,
Amazon was an e-tailer, and
Microsoft was Windows and Office,”
Porter said in an interview on
Wednesday, referring to the popular
software programs. “Today they’re in
so many different businesses.”
Those newer businesses include
entertainment; various
infrastructure plays; and the remote
data storage that has become known
as the cloud.
Madrona, then a young venture
firm, was an early Amazon investor.
Today, it manages $1.3bn in assets,
including high-profile active
investments that predate startups
spawned by Amazon or Microsoft.
Those include Redfin, a real estate
agency, and Apptio, an analytics
firm, whose bosses had not worked
at Amazon nor Microsoft before
landing at their current ventures.
Madrona generally makes seed
investments of under $1m, and
follows up with $2m to $5m for the
next investment stage, known as
Series A.
AN ACTIVIST US hedge fund yesterday
threw a spanner in the works of
Samsung Group’s restructuring by
opposing a merger that would allow
the controlling Lee family to consoli-
date their holdings ahead of a leader-
ship transition.
In a rare instance of investor
activism in South Korea, hedge fund
Elliott said it had built its stake in con-
struction firm Samsung C&T and said
it opposed Cheil Industries’ $8bn
takeover offer because it was too low.
Both are Samsung Group affiliates.
The move is the first significant chal-
lenge to a merger that many believe is
crucial to a smooth transfer of power
at South Korea’s biggest family-run
conglomerate, after patriarch Lee
Kun-hee, 73, fell ill a year ago.
It could also galvanize opposition
to the deal from other investors
amid growing complaints that
South Korea’s top conglomer-
ates put their founding fami-
lies’ interests before
shareholders.
“Elliott believes that Cheil
Industries’ proposed
takeover of Samsung C&T
significantly undervalues
ActivistElliott
tohaltSamsung
restructurebidBY JOYCE LEE Samsung C&T and the terms are nei-
ther fair to nor in the best interests of
Samsung C&T’s shareholders,” the
fund, Samsung C&T’s third-largest
shareholder with a 7.1 per cent stake,
said.
The fate of the deal may ultimately
depend on Korea’s National Pension
Service (NPS), Samsung C&T's top
shareholder with about a 10 per cent
stake. NPS had yet to decide on
whether to accept the offer, a
spokesman said.
The merger of Cheil and Samsung
C&T would consolidate stakes both
companies hold in key Samsung
Group affiliates such as smartphone
giant Samsung Electronics under a
single entity controlled by
heir apparent Jay Y. Lee,
46, and his two sis-
ters.
Elliott had owned
4.95 per cent of
Samsung C&T before
acquiring an additional
2.17 percent for about
216bn Korean won (£126m)
on Wednesday.
IKEA, the world’s biggest furniture
retailer, plans to spend €1bn (£737m)
on renewable energy and steps to
help poor nations cope with climate
change, the latest example of firms
upstaging governments in efforts to
slow warming.
Chief executive Peter Agnefjall
said the measures would “absolutely
not” push up prices at the Swedish
group’s stores. The investments will
be “good for customers, good for the
climate and good for IKEA too”.
He said IKEA was motivated by a
desire to tackle climate change,
rather than gaining publicity.
“Getting that message out to the
customers is secondary,” he said.
An internal review last year
Swedishfurnituregiantpledges
€1bntoclimatechangeprojects
IKEA said it plans to get more of its wood and cotton products from sustainable sources
BY ALISTER DOYLE showed only 41 per cent of its
customers see IKEA as a company
that “takes social and environmental
responsibility”, below its goal of 70
per cent by 2015.
IKEA, which had sales of €30bn
last year, wants to generate all the
energy used in its shops and
factories from clean sources by 2020.
To that end, it will invest €600m on
wind and solar power projects,
adding to €1.5bn invested since 2009.
It has already signed up to own and
operate 314 wind turbines and has
700,000 solar panels on its roofs.
The IKEA Foundation, the
charitable arm of the firm, would
invest €400m by 2020 in supporting
families and communities in nations
vulnerable to impacts of climate
change.
TECH giant Alibaba will buy for
$194m an undisclosed stake in
domestic financial media firm
China Business News (CBN), the
firm said yesterday, adding to its
growing clout in financial services.
The deal, with CBN, part of
Shanghai Media Group, will involve
setting up a financial data and
information platform targeting the
China’s fast-growing investment
community, Alibaba said.
Alibaba’s stake will bolster
executive Chairman Jack Ma's
already extensive holdings in
China's financial sector, where he
is aiming to build an array of
online services to challenge state-
owned banks and financial
institutions.
Ma’s interests in the financial
sector include Ant Financial, an
affiliate of Alibaba which operates
China's biggest online payment
processing service.
The financial data platform with
CBN will target small and medium
sized companies (SMEs) as well as
investors and
financial
decision
makers, the
statement
said.
BY ADAM JOURDAN
Samsung is Korea’s
largest family-run conglomorate
Rich-lister Jack
Ma wanted a
piece of CBN
AIG
The insurer has announced the
appointment of Angus Marshall
as mergers & acquisitions (M&A)
manager for the UK. He joined
AIG in 2013 as an M&A
underwriter. Marshall has also
held positions in PwC’s
international tax and M&A
practice and in Norton Rose
Fulbright’s private M&A division.
EdmonddeRothschild
Philippe Jouard has been appointed head of private
merchant banking in London at the asset management
and private banking group. He was most recently chief
executive of Concordia Capital in Qatar, which he co-
founded in 2011. Jouard has also held senior positions at
Qinvest, Dexia, and Credit Suisse.
CBRE
The commercial property and real estate services adviser
has announced two appointments to its retail capital
markets division. Richard Lunn joins as associate director.
He transfers internally from CBRE’s rating division, and
has also held positions at Dalton Warner Davis and
Savills. Tim Saull joins as a senior surveyor. He spent the
past six years in CBRE’s retail agency.
CityofLondonPolice
Matt Crabtree has been seconded to the City of London
Police’s insurance fraud enforcement department. He has
worked at LV= for the past five years, latterly as technical
controller of the claims crime prevention team. Crabtree
has over 18 years’ experience in the insurance industry.
AddleshawGoddard
The law firm has appointed Oliver Carruthers as a partner
in its infrastructure, projects and energy practice. He joins
from Norton Rose Fulbright, where he was of counsel in
its infrastructure, mining and commodities team.
Carruthers advises sponsors/developers, lending
institutions, funds and governments on all aspects of
project finance.
Baker& McKenzie
Mark Ford has been appointed global chief knowledge
officer at the law firm. He joins after 20 years at Clifford
Chance, where he led its global knowledge management
team. Ford is a qualified solicitor.
PensionsManagementInstitute
Kevin LeGrand has been elected president of the
professional body for pension scheme managers. He
qualified as an associate of the PMI in 1987, and was
admitted to its fellowship in 1995. LeGrand has been a
member of the PMI Council for five years.
WHO’SSWITCHINGJOBS EditedbyTomWelshCITYMOVES
To appear in CITYMOVESplease email your career updates and pictures to citymoves@cityam.com
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MORNING UPDATE AT CITYAM.COM/CITY-MOVES
Jeff Bezos’ Amazon has had geographical benefits for neighbouring start-up venture funds
Alibabapays
$194mforChina
BusinessNews
Reuters
Reuters
Reuters

22. Bank chief
Elvira
Nabiullina
China’s shares are at a
high, like Beijing’s
People’s Daily building
FRIDAY 5 JUNE 2015
22 NEWS cityam.com
Reuters
CHINA’S stock market went on a dra-
matic roller-coaster ride yesterday, with
an after-lunch meltdown spurring a
wave of fresh buying that produced
gains for the day instead of a sharp loss.
The wild swing – at one point
3.4 trillion yuan (£357bn) of
market capitalisation had
been wiped out – came
one week after the mar-
ket plunged more than
six per cent.
And it underscored
increasing volatility in
the high-flying, and high-
ly-leveraged, China market.
The pattern of abrupt falls
being followed by a quick
rebound has become a “new nor-
mal” for China, said Hong Hao, chief
China strategist at Bank of
Communications Co.
“Many investors are holding cash on
the sidelines, so when they see tumbles
like this, they jump in,” he said.
“The upward trend is not changed,”
Chinamarketin
wildswingtoa
seven-yearhighBY SAMUEL SHEN Hong said, advising investors to buy
small on dips, and buy big on a slump.
The Shanghai Composite Index,
down 5.3 per cent at the lowest point
yesterday, in the end rose 0.8 per cent,
to 4,947.10 points, its highest close
since January 2008.
The CSI300 index, also down
more than five per cent in
early afternoon, rose 0.7
per cent, to 5,181.42.
RUSSIAN diamond mining company
Alrosa said yesterday its net profit
rose to 22.2bn roubles (£256m) in
the first quarter of 2015, up almost
fourfold year-on-year due to a
weaker rouble.
Alrosa, the world’s top producer
by output in carats, and other
Russian exporters have benefited
from the depreciation of the
rouble, weakened by Western
sanctions and lower oil prices, as
their costs fell in dollar-terms,
supporting margins.
DiamondminerAlrosa’sprofit
sparklesbecauseofweakrouble
Alrosa’s profit rose as the rouble weakened and costs fell in dollar-terms, lifting margins
BY DIANA ASONOVA “First-quarter results were
mainly driven by a favourable
foreign exchange market
environment," chief executive
Andrey Zharkov said in a statement
Earnings before interest,
taxation, depreciation and
amortisation (Ebitda) rose to 42.9bn
roubles, up 65 per cent compared
to the previous year, the company
said. Revenue increased 31 per cent
to 74.6bn roubles.
The miner has said it expects net
income of 100bn roubles in 2015
and to increase sales by one per
cent,
RUSSIA’S central bank intends to keep
accumulating reserves for years to
come, until they reach a
“comfortable” level up to $500bn
(£325bn), bank governor Elvira
Nabiullina said, as an economic crisis
facing the country is far from over.
Her comments yesterday signal
the bank will continue regular
purchases of foreign exchange, a
policy likely to weigh on the rouble
as the bank would need to buy some
$140bn to restore reserves – now
worth $360.5bn – to the indicated
pre-crisis level.
The policy of rebuilding reserves
towards this level also underscores
concerns that the economy is highly
vulnerable to new financial shocks
despite signs of
stabilisation.
Last month the
central bank said it
would buy $100m
to $200m a day in
foreign exchange
to replenish
reserves.
Russianplans
$500bnforeign
exchangepile
BY ALEXANDER WINNING
Hong Kong stocks mir-
rored the dramatic market
reversal on the mainland,
with the benchmark Hang Seng
Index ending only 0.4 per cent lower,
after falling as much as two per cent at
one point.
China’s mid-session plunge was ignit-
ed by a sell-off in Shenzhen’s growth
board ChiNext, the bellwether of this
round of mainland bull run.
Reuters
Reuters

23. NEWYORK
REPORT
LONDONREPORT
Spread Betting I CFDs I Forex
*Tax laws are subject to change and depend on individual circumstances.
Tax law may differ in a jurisdiction other than the UK.
Open an account at spreadco.com
Leveraged products are high risk,
losses may exceed deposits
FRIDAY 5 JUNE 2015cityam.com
B
RITAIN’S top share index fell
yesterday, led lower by specialty
chemicals maker Johnson
Matthey and ex-dividend
stocks in a broad sell-off in equities.
Johnson Matthey, the world’s largest
maker of auto catalysts, shed 5.3 per
cent, making it the top FTSE 100 faller.
The company posted a small rise in
annual profit helped by higher sales of
catalysts in Europe, but investors wor-
ried about an unexpectedly sharp
increase in debt caused by a rise in
working capital and weaker precious
metals prices, which have hit its met-
als division in the last year.
“Rising car sales in Europe and
tighter regulation on fuel discharges
drove profits higher, but the dreary
outlook for the metal business has put
pressure on the stock,” David Madden,
a market analyst at IG, said in a note to
the market.
Royal Mail fell 4.9 per cent after
finance minister George Osborne said
Britain will sell its 30 per cent stake in
the postal operator.
The FTSE 100 closed down 1.3 per
cent at 6,859.24.
“If we look across developed
markets, sell-off in equities is pretty
broad. To me, it’s probably more to do
with monetary policy than anything
else,” said James Butterfill, global equi-
ty strategist at Coutts.
The European Central Bank’s insis-
tence on Wednesday that there was no
need to adjust monetary policy in the
face of volatility rattled financial mar-
kets. The sell-off on the FTSE put all
sectors in negative territory.
Many of the top fallers traded with-
out the attraction of their latest divi-
dend payouts, with National Grid and
WPP dropping 5.1 per cent and 3.5 per
cent respectively.
Commodity stocks were also weaker,
with gold pinned near a three-year low
and further downside to metal prices
seen. UBS trimmed its full year target
for the FTSE 100 to 7,200 points from
7,300, citing weak commodity stocks,
even as it raised its target price for the
STOXX Europe 600.
“We see FTSE 100 earnings falling 8
percent this year [in the main, due to
the fall in commodity prices, but
rebounding 10 percent in 2016,” ana-
lysts at UBS said in a note.
Among the few gainers, budget air-
line easyJet rose 0.6 per cent after it
reported traffic figures.
“Shares in easyJet are outperforming
blue-chip rivals after monthly traffic
statistics pointed to monthly passen-
ger growth... coupled with load factors
up one to two percentage points to
exceed 91 per cent,” said Mike van
Dulken, of Accendo Markets.
RoyalMailsale
andJohnson
MattheyhitFTSE
6,850
6,900
6,950
7,000
7,050
7,100
29May 1June 2June 3June 4June
FTSE
6,859.24
4 June
USstocksfell
aheadofjobs
dataouttoday
U
S STOCKS fell yesterday, hit
by nervousness ahead of
today’s jobs report and
lingering uncertainty over a
Greece aid deal with creditors.
Declining oil and gold prices also
weighed on energy and materials
shares, which led declines in the
benchmark S&P 500.
Data showed the labour market
tightening, with first-time applica-
tions for unemployment aid down
last week and the number of people
on benefit rolls hitting the lowest
level since 2000, suggesting the
Federal Reserve will remain on track
to raise interest rates later this year.
The data came ahead of today’s key
US jobs report, expected to show a
225,000 gain in non-farm payrolls,
according to a Reuters estimate.
Some investors think stronger jobs
numbers could increase chances the
Fed could raise rates sooner rather
than later.
Adding to investor concerns,
Greece delayed a debt payment to
the International Monetary Fund
due today and German Chancellor
Angela Merkel said talks on a cash-
for-reforms deal were still far from
an agreement.
The Dow Jones industrial average
fell 170.69 points, or 0.94 per cent, to
17,905.58, the S&P 500 lost 18.23
points, or 0.86 per cent, to 2,095.84
and the Nasdaq Composite dropped
40.11 points, or 0.79 per cent, to
5,059.13.
Meanwhile the International
Monetary Fund urged the Federal
Reserve not to raise rates until there
are clear signs of a pickup in wages
and inflation.
In a bearish sign, the S&P 500
closed below its 50-day moving aver-
age, a key technical indicator.
SOCOINTERNATIONAL
GMPSecuritiesreiteratedits“reduce”ratingontheoilexplorer,statingthatthecurrentdividendis
“unsustainable”.Thebrokeradded:“Giventhecompany’sexpensivevaluationonourestimates,a
fallingproductionprofileandlittleexplorationnewsflow,weseematerialdownsideriskforthisstock.”
180
182
184
186
188
190
192 4 June
181.00
29May 2June1June 3June 4June
P
TULLOWOIL
CantorFitzgeraldinitiatedcoverageoftheoilfirmwitha“sell”rating,citinga“challenging”12months
fortheoilandgassector“andinparticularforTullow”.Whileitnotedthegroup’sattemptstoalleviate
marketpressures,itsaidanover-relianceondebttofundriskyventures“couldprovecostly”.
VP
WHIrelandreiteratedits“buy”ratingforthehirecompany,afterthefirm’sresultsbeatexpectations.
Thebrokerraiseditsforecastforthecurrentyear,andsaidtheresultsare“allthemorepleasinggiven
thechallengesfacedintheoilandgasrelatedbusiness,AirpacBukom”.Targetpriceremains800p.
ToappearinBestoftheBrokers,emailyourresearchtonotes@cityam.com
BESTof theBROKERS
Inassociationwith
CITY
YOUR ONE-
STOP SHOP
BROKER VIEWS AND
MARKET REPORTS
ToappearinBestoftheBrokers,emailyourresearchtonotes@cityam.com
BESTof theBROKERS
CITYDASHBOARD
380
385
390
395
400
405
4 June
381.00
29May 2June1June 3June 4June
P
680
690
700
710
720
730
740
4 June
734.50
29May 2June1June 3June 4June
P
23

24. O
N MONDAY, Gateley will
become the first UK law firm to
list as a public company. It
should serve as a wake-up call
for the entire industry and
morefirmsshouldfollowsuit.Forsome
lawyers, moving away from the
partnership model will be terrifying –
but it’s an essential evolution, not just
for the success of individual firms but
for the legal sector as a whole.
The current partnership model pro-
motesshort-termismthatharmsclients,
partners, associates and firms’ culture.
The shift from a partnership structure –
in which partners can remain owners
only for so long as they are employees –
to a more conventional corporate form
withpermanentequityhasthepowerto
transform loose associations of econom-
ically-motivated free agents, who seem-
ingly just happen to practice law under
the same roof, into holistic entities.
H
OW CLOSE is the corporate
debt market to boiling over?
Given the vast volumes of
institutional and retail money
that have flowed into high
yield funds and other leveraged finance
vehicles in recent years, it’s a key
question for financial markets in both
the US and Europe.
For the last six years, corporate bor-
rowers have been calling the shots in
capital markets, enjoying ready access
to long-term funding at extraordinarily
low rates, thanks to the frantic search
for yield unleashed by central banks’
highly accommodative monetary poli-
cies.
That has particularly been the case in
the US, where the proportion of new
corporate borrowers rated B (defined by
S&P) increased to nearly 80 per cent in
2014 from just 45 per cent in 2008-09.
Even in Europe, speculative grade
issuance (BB+ and below) has increased
from 30 per cent to 69 per cent between
2009 and 2014. This financing bonanza
has created a virtuous circle, where easy
liquidity conditions have lowered refi-
nancing and credit risks, which in turn
cityam.com/forumTHEFORUM
Twitter:@cityamforum ontheweb:cityam.com/forum orbyemail:theforum@cityam.com
Agree?Disagree?Gotasharpcomment?
TheForumwantsyoutojointhedebate. TopresponseswillbereprintedinTheForum.
24
FRIDAY 5 JUNE 2015
nJAYANDHRU
TheUScorporatedebtmarketiscloseto
boilingover–andEuropecouldbenext
has trimmed yield spreads.
All that may be about to change. If, as
expected,theUSFedraisesinterestrates
later this year, riskier borrowers will be
among the first to feel the pinch. As
credit conditions tighten, speculative
grade companies – which issued nearly
80 per cent of new US corporate debt in
2014–willfindithardertoobtaincredit
and raise new debt. Lenders, in short,
will be back in the driver’s seat.
Until now, investors have been more
than willing to accept the higher risks
associated with speculative-grade
issuers, in return for higher yields –
especially when corporate default rates
have remained well below the historical
average. But as US rates rise, lenders will
become more picky about extending
credit, and market access for these pro-
lificborrowerscouldtighten.Ifratesrise
fasterthanthemarketanticipates,there
is a risk of a liquidity drought.
In these circumstances, borrowers
with weak credit profiles that had
obtained cheap financing will be more
vulnerable when refinancing or new
financing needs arise. And those that
took advantage of the leveraged finance
market’s willingness to extend loans
with weaker covenants will face more
stringent lending standards.
The peak in refinancing risk for US
companies is expected between 2017
and 2019. If a liquidity crunch were to
occur during this period, banks and
investors could become even more risk
adverse. That in turn would amplify liq-
uidity risk for borrowers of maturing
debtandforcompaniesthatcan’tsatisfy
their ongoing liquidity requirements,
resulting in rapid credit deterioration.
Thepreviousvirtuouscircleincorporate
funding would become a vicious one.
Awkwardly for many US firms, this
financing squeeze could coincide with
competition from cheaper imports and
export headwinds associated with the
stronger US dollar. Without the protec-
tionofartificiallylowinterestrates,they
couldbedoublyexposed.Formanyspec-
ulative grade borrowers, creditworthi-
ness will probably fall by the year-end.
There are pointers in all this for the
European corporate debt market. The
launch of QE by the ECB is designed to
ensure that the financing environment
remains highly supportive for compa-
nies, especially smaller and weaker
ones.
European investors – and banks
underwriting leveraged loans – seem to
be maintaining discipline and discrimi-
nating on credit quality. With compa-
niesreluctanttoborrowwhengrowthis
so subdued, total leverage for European
companies issuing leveraged loans
remainsat2005levels.Andcashinterest
cover, a key default indicator, is at a
record high level in the region, improv-
ingcompanies’abilitytopaydowndebt.
Yet there are straws in the wind.
Documentation standards on leveraged
loans are deteriorating. “Covenant-lite”
loan structures – which limit protection
toinvestorsinastressedsituation–have
become increasingly standard in the
European market. At the same time, a
growing proportion of high yield fund-
ing in Europe – around a third in the
first quarter – is being raised in support
of M&A, which is pushing up the debt
leverage of new issuers of high yield
bonds to close to five times.
There are other omens. The recent
bounce-back in European corporate
bondyieldsfromthelowstheyplumbed
in March – a correction exacerbated by
poor liquidity in the secondary debt
market – underlines the real risk of sub-
stantial mark-to-market losses in the
event of a credit shock, especially for
smallerormorecomplexhighyieldbor-
rowers.
Europe’s economic and financial cycle
is behind the US, and the credit metrics
of its companies are less stretched. But
similar risks are starting to build and
sentiment could turn quickly. What
happens in the US leveraged finance
market over the coming months could
well be a foretaste of what is to come on
the other side of the Atlantic.
Jayan Dhru is executive managing director
and global head of corporate ratings at
Standard & Poor’s Ratings Services.
Two years ago, the UK’s world-leading
legalindustrywascalculatedtobeworth
£21bn to the economy. Yet remaining
reliantonanantiquatedbusinessmodel
could hinder its future success.
I wrote about the need for US law
firms to move away from the partner-
ship model in the Southern California
Law Review earlier this year. I argued
that abandoning the structure is crucial
for long-term value creation by firms.
This is because the partnership struc-
tureisfundamentallyflawed,confusing
ownership and employment to the
pointthatundueemphasisfallsonmax-
imising billable hours in the short term
andundervaluingclientservice,employ-
ee wellbeing and firm profitability in
the long term. Law firms cling to the
billable hour model, seeking to max-
imise current profits, and in doing so
they leave clients feeling overcharged,
and junior lawyers feeling overworked
and undervalued.
Under the partnership model, law
firms are unwilling to give up the bill-
ablehourforthesakeoflong-termvalue
creation, as this would be perceived as a
pay cut for current partners. It is very
difficult for an organisation to ask its
employees – as opposed to investors – to
sacrifice current compensation in the
hope of increased future compensation,
especiallywhentheorganisationcannot
offer the employees any mechanism to
ensure that they capture the resulting
long-term value.
It’s unsustainable. Client surveys of
FTSE-listed companies by legal journals
regularly evidence dissatisfaction with
hourly billing, and propose revamped
billing structures.
The decision to float on the stock mar-
ketcouldsignifyashifttowardslong-ter-
mism. When law firms have permanent
equity,individuallawyershaveanincen-
tive to maximise their firms’ long-term
value and, in so doing, maximise the
value of their equity shares in the firm.
Anyfirmthatdecidestolistasapublic
company will undergo intense scrutiny.
Some UK accountancy firms similarly
decidedtomovefrompartnershipstruc-
tures to more corporate forms by float-
ing on the stock market at the turn of
the millennium. The fact that the deci-
sion was fatal for two of the four that
listed (Vantis and Numerica) gives law
firms reason to be cautious.
Caution, however, should not mean
settling for the status quo. Aside from
the benefits cited above, the corporate
model would also enable mid-market
firms to consider opportunities to
expand, thereby creating value in the
business and for shareholders. And
should more law firms float, those look-
ing for new investors, be they institu-
tionalorretail,wouldseeanew,healthy
market develop.
WilltheUK’sfamedMagicCirclefirms
ever list? Yes – although it may take a
few years. And when they do, they will
become FTSE 100 companies.
The move to list as a public company
should be seen as for the good of the
industry, and a leap to be followed not
feared. The UK legal market should take
pride in leading a trend that the rest of
the world will soon follow.
Jonathan Molot is co-founder of Burford
Capital,thelitigationfinancefirm,andaprofes-
soroflawatGeorgetownUniversityLawCenter.
nJONATHANMOLOT
It’stimeforlawfirmstogopublic–andendthearchaicpartnershipmodel
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