Samsung Hits New Record Amid Smartphone Fears

Samsung has reported another record quarterly profit, amid fears over flagging demand for expensive smartphones.

The South Korean tech giant, the world's largest technology firm by revenue, said its April-June profit after tax surged 49.7% year-on-year to 7.77 trillion won (£4.49bn).

The profit rise is based on robust shipments of its flagship Galaxy S smartphones and higher chip prices.

Second-quarter operating profit surged 47.5% on-year to 9.53 trn won (£5.56bn) in the same period as sales grew 20.7% on-year to 57.46 trn won (£33.56bn).

"Entering into a typically strong season for the IT industry, we expect earnings to continue to increase," Robert Yi, senior vice president, said.

But he warned: "We cannot overlook delayed economic recovery in Europe and risks from increased competition for smartphone and other set products."

However, Samsung's share price has been falling - wiping about £20bn off the firm's value - since late April when the flagship Galaxy S4 hit stores, as sales have not been as high as hoped.

That is despite the company spending billions on a global marketing campaign that has squeezed margins.

Samsung's share price fell 0.91% on Friday at the close in Seoul.

"Expectations had been too high for high-end smartphone sales. Many investors now think the Galaxy S4 has not been selling so well," Oh Young-Bo, of Hanmag Securities, said.

He added that investors are growing concerned as Samsung relies heavily on sales of smartphones to drive growth.

With an expected drop-off in demand for high-end phones, analysts began cutting their forecasts for profit and sales in June.

Samsung did not reveal smartphone shipments but it is thought to have sold about 75 million in the past quarter, some 760,000 a day, including around 20 million Galaxy S4s.

But while that helped Samsung maintain its status as the world's largest handset maker, the figure is only slightly up from the estimated 70 million shifted in the previous three months.

The easing of shipped units has suggested a slowdown in growth momentum.

That compares with Apple, which sold 31.2 million iPhones in April-June  - a record for the quarter - compared with 37.4 million in the previous three months, according to research firm Strategy Analytics.

However, Apple's fiscal third-quarter results on Tuesday showed net profit plunged 22% year-on-year.

And while iPhone sales beat expectations, there are still fears for the high-end smartphone market as cheaper Android devices from China and emerging markets become more attractive options.

Samsung, Nokia Corp and HTC Corp are launching more affordable devices to diversify their product line-ups, although analysts have warned that such a move could hit their profit margins in the longer term.

ABI Research said Apple's global smartphone share was down to 13.1% from 16.6% a year ago - its lowest level since Q3 2009 - despite the market growing 52% in the same period.

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BSkyB Sees Full-Year Profit Up 9% To £1.33bn

BSkyB, the owner of Sky News, has announced a 9% rise in full-year operating profit to £1.33bn.

Revenue for the entertainment and home communications company was up 7% to £7.235bn.

The company saw paid-for product growth of 3.3 million, taking the total to 31.6 million subscriptions, as customers increasingly add products including broadband, HD TV and Sky Go Extra.

It also saw a 170% rise year-on-year in the number of connected Sky+HD boxes - which give access to on-demand television - to 2.7 million units.

There was a fivefold increase in On Demand downloads and a 200% growth in Sky Store video rentals.

BSkyB has reaffirmed a commitment to original content

The broadcaster also unveiled a budget £9.99 Now TV box, which wirelessly connects a TV to a broadband connection, giving contract-free access to BBC iPlayer, Demand 5, Sky News and Now TV.

Through Now TV, viewers can also pay to watch Sky Sports and Sky Movies. It also allows people to catch up on previously-broadcast programmes.

BSkyB said it now has 10.42 million pay TV subscribers and 4.9 million broadband customers.

The company has also announced a £500m share buyback and an 18% increase in the dividend.

Chief executive Jeremy Darroch told Sky News: "We are delighted with the results today."

"The economy is a challenge and it is providing head-winds for all consumer businesses."

Team Sky rider Chris Froome won this year's Tour de France

Mr Darroch said: "Against that backdrop, we have a strong set of plans that will extend our leadership in core areas - onscreen, in home communications, and in front-line service delivery; accelerate growth in new services; and improve efficiency to build a bigger, more profitable business for shareholders."

He added: "On the back of this performance, we are increasing returns to shareholders with the ninth consecutive rise in the ordinary dividend and we intend to seek approval for a further £500m of share repurchases."

BSkyB said it will continue to expand its plans for original content, including a big step up in commissioned drama.

The number of entertainment shows with an audience of more than 1 million has risen 200% during the last two years.

The company also has an ongoing commitment to British Cycling, taking the partnership up to and including the 2016 Olympics.

Team Sky won back-to-back Tour de France cycling races, in 2012 and 2013.

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Toyota Still Global Top Seller Amid Boycott

Toyota has shrugged off anti-Japanese sentiment in China to remain the world's top selling carmaker for the first half of this year.

It sold 4.91 million cars and trucks around the world for the January-June period - 26,830 vehicles daily.

Although the sales figure was down 1.2% from the previous year it still outpaced US rival General Motors (GM).

Earlier this month, GM revealed it sold 4.85 million vehicles worldwide in the six months, growing almost 4% as it gained US sales faster than Toyota.

For the second quarter alone, GM had a slight edge, outselling Toyota by about 10,000 vehicles.

GM was the top-selling manufacturer for seven decades before losing that title to the Japanese brand in 2008.

The American carmaker, which owns marques such as Chevrolet, Vauxhall, Opel, Pontiac and Hummer, retook the spot in 2011.

General Motors held the global top position for seven decades

That was at a time when Toyota's plants were slowed by an earthquake and tsunami in northeastern Japan that wiped out parts suppliers.

Toyota has since recovered and was at the top again last year even as sales in China were hurt by boycotts of Japanese goods over a territorial dispute.

It has also suffered successive vehicle recalls over safety concerns.

The Japanese firm stayed ahead of GM in the first half of 2013 because of solid sales in other regions.

The maker of the Prius hybrid, Yaris and Verso also did better than expected in Japan, where the car market has been stagnant for years.

Volkswagen AG of Germany, which includes Audi, Porsche and Bentley, trailed Toyota and GM in the global race, selling 4.7 million vehicles during the first half of this year.

Yet it is posting strong growth in countries such as China, offsetting a bleak European market, and it is also determined to become the world's premier brand.

Toyota president Akio Toyoda said sales were not the only measure of excellence, and profitability, quality of workers and productivity were also significant.

"What truly defines being number one is an eternal pursuit for which there is never an answer," he said earlier this week.

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LSE Calls Audit Review Amid Industry Shake-Up

By Mark Kleinman, City Editor

The London Stock Exchange's (LSE's) parent company is to review its long-standing audit relationship just days after competition authorities backed away from enforcing mandatory rotation of accounting ties.

Sky News understands that the LSE has put PricewaterhouseCoopers (PwC), its auditor since the 1990s, on notice that it may appoint one of its rivals to oversee the lucrative work.

The news represents part of a double-blow to PwC, which was notified today by Unilever, the Anglo-Dutch consumer goods producer, that it plans to hire another auditor.

Jean-Marc Huet, the company's chief financial officer, said: "Our business is very large in scale and reach, with operations in over a hundred countries.

"The challenge that this poses for our auditors has been successfully met by PricewaterhouseCoopers over many years and we have always been impressed with the rigour and quality of their audit.

"However, given changes in the regulatory environment and market expectations, it makes sense for Unilever to rotate its auditors at this time."

The reviews make Unilever and the LSE the first FTSE-100 companies to begin overhauling their audit relationships since the Competition Commission unveiled plans on Monday to make the accountancy market more competitive.

Critics will argue that since both the LSE and Unilever are likely to appoint one of PwC's principal rivals among the 'Big Four' - Deloitte, EY and KPMG being the other three - the market is simply likely to see greater rotation but no real new competition.

The Competition Commission said it wanted to see mandatory tendering for audit contracts every five years among the biggest 350 listed companies in the UK, which the accountancy firms have argued will lead to work of lower quality for their clients.

It also made recommendations about lifting restrictions on borrowing agreements in order to improve access to the FTSE-350 audit market for smaller firms, two of which - Baker Tilly and RSM Tenon - disclosed yesterday that they were in merger talks.

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Faulty Dreamliner Beacons Found In Japan

A Japanese airline has found damage to battery wiring on two Dreamliner emergency beacons, the same device suspected of causing a recent plane fire in London.

All Nippon Air (ANA) announced the discovery a day after the US aviation regulator issued an advisory telling carriers to check or replace the beacons on Boeing's troubled next generation aircraft, the 787.

"We have found small damage to the covering of the battery wiring in two emergency locator transmitters (ELT)," ANA spokesman Shinsuke Satake said.

The company, which operates the world's largest fleet of Dreamliners, will send the two ELTs back to the US manufacturer, Honeywell International.

Around a third of Boeing's 787 Dreamliner components are made in Japan and the country has the largest fleets of the plane.

One of the devices, which emit distress signals to help rescuers locate downed craft, had not yet been installed on a plane.

An Ethiopian Airlines 787 Dreamliner caught fire at London's Heathrow airport on July 12, forcing the airport to shut down for an hour-and-a-half.

Fire crews doused the aircraft and fire damage could be seen on the top of the rear part of the fuselage, in front of the tail fin.

British authorities recommended that the distress beacons onboard all Boeing Dreamliners be disabled after identifying the devices as the likely cause of the fire.

The Ethiopian Airlines Dreamline after it caught fire at Heathrow

Boeing's troubled jet was also grounded for more than three months earlier this year after safety incidents involving the plane's lightweight lithium-ion batteries.

Despite spending thousands of man-hours investigating the battery fault, Boeing was unable to ascertain the exact cause.

Instead, the plane maker decided on beefing up the housings to prevent further fires in the auxiliary power units.

A number of other issues have hit the global fleet but Boeing recently said it had full faith in the future of the composite construction aircraft.

:: A 787 operated by Air India suffered an overheated oven earlier this week during a domestic flight.

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Welby Defends Wonga After Church Link Emerges

The Archbishop of Canterbury has insisted he was not picking on Wonga after it emerged the Church of England invests in the payday loan firm.

The Most Reverend Justin Welby admitted being "irritated" and "embarrassed" by the revelation but went on to heap praise on Wonga and its management.

Mr Welby hailed the company for its professionalism and suggested it was far from the worst organisation in the loan sector.

The link between the Church and the firm emerged hours after the Archbishop said he wanted to force Wonga out of business by expanding credit unions.

The Financial Times found the Church's pension fund had put money into Accel Partners, a US venture capital firm that led Wonga's 2009 fund-raising efforts.

Until the report emerged, Mr Welby had no idea about the connection.

Sources suggested he was "furious" but on Friday, in a lengthy interview, he merely said: "I was irritated for a few minutes but, you know, these things happen."

Justin Welby: 'It's very embarrassing'

He did admit the affair was "very embarrassing" and vowed to investigate, signalling there could be a review of the Church's entire investment portfolio.

But he said: "I never took on Wonga in particular. The context was talking about the entire payday lender movement.

"Wonga is actually a very professionally managed company. Errol Damelin, the chief executive is a very clever man, [who] runs it extremely well."

Despite praising the company, he said he was still unhappy about the Church's investment.

"They shouldn't be investing in Wonga. We don't think that's a good thing," he told the BBC's Radio 4 Today programme.

And he insisted he was not backtracking on his commitment to clamp down on the industry, which is currently the subject of a Competition Commission probe.

"We need to provide a proper alternative to these very, very costly forms of finance. The worst people are not Wonga. There are plenty of others much worse," he said.

Mr Welby said Church policy allows investments in a company where 25% of its business is in the loan area, indicating the arrangement with Wonga may be against its rules.

"I think we have to review these levels and make sure we are consistent between what we're saying and what we're doing," he said.

The Archbishop conceded that it was almost impossible for the Church to make an investment that was not somehow tainted.

He said: "If you exclude any contact with anything that directly or indirectly gets in any way bad, you can't do anything at all."

Lambeth Palace has said it will ask the Assets Committee of the Church Commissioners to investigate the link to Wonga and review the holding.

It added: "We will also be requesting the Church Commissioners to investigate whether there are any other inconsistencies as normally all investment policies are reviewed by the Ethical Investment Advisory Group (EIAG)."

Mr Welby is seeking to expand the reach of credit unions as part of a long-term campaign to boost competition in the banking sector and clamp down on short-term loan firms.

The Government announced an investment of £38m in credit unions in April to help them offer an alternative option to payday lenders.

The Office of Fair Trading referred the entire payday lending industry, which is worth £2bn, to the Competition Commission last month after finding "deep-rooted" problems.

It said it decided to make the referral because it continues to suspect that features of the market "prevent, restrict or distort competition".

Wonga said in March that it welcomed any attempt to encourage responsible lending and that it has been "instrumental" in helping to raise industry standards.

Mr Damelin, its founder, said: "The Archbishop is clearly an exceptional individual and someone who understands the power of innovation.

"There is mutual respect, some differing opinions and a meeting of minds on many big issues.

"On the competition point, we always welcome fresh approaches that give people a fuller set of alternatives to solve their financial challenges. I'm all for better consumer choice."

The company has launched a new advertising campaign setting out "ten commitments" about its lending practices in an apparent tongue-in-cheek reaction to the Archbishop's original remarks.

Mayor of London Boris Johnson backed the Archbishop's plans and said it was an "interesting interpretation of the gospels".

He told Channel 4 News: "I think it's a wonderful idea.

"Wonga is a perfectly legitimate business but there's no doubt their rates are usurious. There are people who find it very, very difficult to repay the loans once they get into trouble.

"He's not turning over the tables of the money lenders, he's bringing in his own money lending tables."

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Sainsbury's Stunned As Tesco Wins ASA Battle

By Mark Kleinman, City Editor

Tesco will next week score a victory over one of its bitterest rivals when advertising regulators reject a complaint from J Sainsbury that sparked a war of words between the two companies.

Sky News can reveal that the Advertising Standards Authority (ASA) will on Wednesday dismiss Sainsbury's challenge to a series of Tesco advertisements which claimed that its own-label products were cheaper than those of its competitors.

The ruling will deliver a blow to Sainsbury's and its chief executive, Justin King, who was publicly critical of Tesco's marketing campaign, arguing that it misled millions of British shoppers.

The ASA has been investigating the complaint for nearly four months and is understood to have taken detailed legal advice about the merits of Sainsbury's case, repeatedly seeking new information from both companies during the process.

The regulator's ruling will mark a temporary ceasefire in one of the angriest disputes between the two chains for many years.

Tesco's victory is, though, likely to spark a renewed advertising conflict between the two chains, which spend tens of millions of pounds each year promoting themselves on television, in newspapers, online and on billboards.

Britain's biggest retailer is expected to run ads after the ruling emerges next week.

Sainsbury's complaint to the ASA centred on separate advertising campaigns being run simultaneously by Tesco, one of which focused on the importance of the provenance of its food products in the wake of this year's horsemeat scandal.

Tesco found itself at the centre of the contamination crisis, with some of its products containing large quantities of horsemeat, leading Philip Clarke, its chief executive, to pledge an overhaul of its supply chain.

Sainsbury's is said to have argued that it was dishonest of Tesco to claim that provenance was crucial to customers' food preferences and at the same time run another marketing blitz comparing the own-label products of different supermarket chains.

The latter campaign, called Price Promise and which involved Tesco issuing money-off vouchers after comparing rivals' prices without taking account of sourcing or ethical credentials, caused controversy throughout the grocery retailing sector, with Wm Morrison also threatening to lodge an ASA complaint.

Mr King's chain prides itself on the ethical sourcing and high-quality nature of its own-brand products, making it invidious, Sainsbury's argued, for Tesco to compare them with its own lower-quality ranges.

The ASA is now expected to judge that the campaigns were separate and that it was therefore legitimate for Tesco to compare own-label products that were not entirely alike.

"We have exhausted everything we could with them [Tesco], so were left with no choice but to go to the ASA," Mr King said in May.

"You can't have advertising saying that where your chicken comes from is important, while at the same time still sourcing your chicken from Thailand and Brazil, and then doing a price comparison with Sainsbury's chicken, which is sourced from the UK. That is inherently unfair."

It is unclear whether Sainsbury's plans to appeal against the ASA's ruling. The regulator does allow complainants to challenge its adjudications although it rarely overturns them.

The ASA, Sainsbury's and Tesco all declined to comment.

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Royal Baby: George Gives UK Business Boost

By Emma Birchley, Sky News Correspondent

The UK's newest Prince might be less than a week old but he is already proving to be a trendsetter as aspiring parents race to keep up with the Cambridges.

Sales of Britax Baby Safe seats have trebled at Kiddicare superstores since the newborn set off in one on his first car journey after leaving St Mary's Hospital on Tuesday.

And there has been a surge in orders of the £45 hand-finished merino wool shawl made by GH Hurt and Son in Nottingham that Prince George of Cambridge was wrapped in for his first photo shoot.

Alex Fisher, commercial director at Kiddicare, said: "I think it's fabulous news in terms of parents engaging with the fact there is a Royal baby.

"I think it will encourage people to renew and buy new products.

"Parents look at what is the latest product, who is the latest celebrity, and I think on the back of that the seat by default becomes aspirational."

There was so much interest in the dress worn by the Duchess of Cambridge that the designer's website crashed earlier in the week.

But it later emerged that the Jenny Packham design was a one-off and not for sale.

The royal seal of approval has been a blessing for some companies

The Centre for Retail Research predicts the new arrival will end up boosting the UK economy by close to £250 million.

That includes everything from the champagne sipped to help celebrate the baby's safe arrival to commemorative mugs.

And Richard Cope, director of trends at market researchers Mintel, believes spending inspired by the young Prince will be sustained by visitors to the UK.

"Tourist numbers are up by about 10% compared with a year ago. They're going to be here throughout the summer and they buy into the concept of the Royal Family.

"The tourist factor is going to drag out spending for months and months."

But it is not just retailers enjoying the Royal feelgood factor.

William and Kate's chosen charities are already benefiting, including East Anglia's Children's Hospices (EACH), of which the Duchess is patron.

Melanie Chew, fundraising director of EACH, said: "The donations are coming in from the UK, but overseas as well.

"We have had all kinds of generous offers from an ornate handmade cradle from Poland, we've had children's bedroom furniture from Slovenia and we have a charm bracelet on its way, so it's been terrific."

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Barclays Faces Fresh Customer Mis-Selling Bill

By Mark Kleinman, City Editor

Barclays will face up to mis-selling misdemeanours on three fronts next week when it sets aside hundreds of millions of pounds more for historical malpractice.

Sky News understands that the bank will make provisions for compensation for customers who were mis-sold payment protection insurance (PPI), interest rate derivatives and identity theft cover through the stricken credit card insurer CPP.

Insiders said this weekend that Barclays chief executive Antony Jenkins had been told by its regulators to be "conservative" in topping up its previous £2.6bn provision for PPI and an £850m bill for mis-selling swap products - designed to insure customers against sharp interest rate movements - to small businesses.

Barclays directors are also understood to have discussed taking its first hit for compensating CPP customers at a board meeting this week.

The final bill will be signed off by Mr Jenkins, Sir David Walker, the bank's chairman, and the soon-to-depart finance director Chris Lucas on Monday.

A Barclays spokesman declined to comment on the size of the new compensation figures but it is understood that they will take the amount it has set aside for swaps mis-selling to well over £1bn.

The scale of the new provisions will partly explain why Barclays is also planning to announce a major capital-raising comprising conventional shares and contingent convertible (or 'coco') bonds alongside its results.

That follows pressure from the Prudential Regulation Authority for Barclays to meet a target measuring the strength of its balance sheet, called the leverage ratio, by the end of next year.

The announcement will be made as part of Barclays' half-year results on Tuesday, and could undermine Mr Jenkins' efforts to overhaul the bank's reputation following last summer's Libor rate-rigging scandal.

Barclays was fined £290m for its role in the affair, leading to the departure of Mr Jenkins' predecessor, Bob Diamond.

It was also recently hit with a £300m penalty by a US energy regulator for attempting to manipulate electricity prices, although the bank is appealing against it.

Barclays will not be the only lender to add to its PPI mis-selling provisions during next week's results, with Lloyds Banking Group and others also expected to belie suggestions that the tidal wave of compensation claims had abated.

Barclays has, though, been particularly affected by the way interest is calculated on PPI compensation claims because of its liabilities dating back many years.

Mr Jenkins will also spell out the progress of his overhaul of the bank, called Transform, in which he will say that Barclays is exceeding cost-reduction targets announced in February.

Barclays declined to comment.

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£2bn Lloyds Profit Triggers Stake Sale Talks

By Mark Kleinman, City Editor

The agency which manages taxpayers' £19bn stake in Lloyds Banking Group is expected to hold talks with City investors this week about a quick-fire sale of shares as Britain's biggest high street lender unveils a £2bn half-year profit.

Sky News understands that UK Financial Investments (UKFI) and the Treasury will discuss in the coming days the prospect of an accelerated placing of shares in Lloyds with major institutional investors on or around the day that Lloyds announces half-year results on Thursday.

Treasury sources said that the results would show a "stellar" first-half performance from the bank, which owns the Halifax brand and is in the process of spinning TSB off into a separately-listed company.

Lloyds, they said, would report a statutory profit of approximately £2bn - in line with the consensus forecast of analysts - and also provide further positive news in the form of better-than-expected cost reductions and a stronger-than-anticipated capital position.

The move into the black would contrast with a loss of more than £400m at the half-year stage in 2012.

"The stars are aligned for us to start selling shares now," said one Whitehall insider.

The Government is understood to believe that it has a window of a few days beginning on the day of Lloyds' results to place a chunk of stock before the markets slow down too far for the summer to make such a substantial transaction more difficult.

Lord Davies is assembling a consortium keen to buy part of Lloyds

If the discussions do not point to sufficient demand for an institutional placing of shares, the Government would postpone any attempt to begin selling its 39% stake in the bank until September at the earliest.

A Treasury spokesman said that no timetable for the sale of shares had been set and refused to comment on the prospect of a sale next week.

Earlier this month, UKFI hired JP Morgan Cazenove, the investment bank, to advise on its privatisation strategy for Lloyds and Royal Bank of Scotland, in which taxpayers hold an 82% stake.

The agency also appointed a roster of other banks to execute deals in the capital markets to sell down the shares in the two banks during the coming years.

One banker said on Saturday that a report suggesting that Lloyds was priming City investors for a sale was inaccurate, arguing that the deal would be orchestrated by UKFI rather than the bank itself.

The source added that it would be theoretically possible to brief a group of investors the night before the results announcement - making them insiders unable to trade in Lloyds shares - with the objective of announcing a deal alongside on Thursday.

Sky News revealed earlier this month that Lord Davies, the former trade minister, was assembling a consortium of investors keen to buy at least half of the Government's stake in Lloyds.

The half-year results are expected to include a modest new provision for payment protection insurance mis-selling, taking Lloyds' total bill so far to more than £7bn, one insider said.

However, unlike Barclays, the bank is not expected to have to set aside money to compensate small businesses for mis-selling interest rate swaps or customers of CPP, the identity theft insurer.

On Friday, Lloyds shares closed at 68.37p, which if sustained until after next week's results announcement would make a placing at or above 61p viable, banking sources said. Such a deal would be likely to take place at a discount to the prevailing share price.

The 61p figure is significant because Lloyds said in March that it had been notified by the Treasury that that was the average price at which taxpayers' support for Lloyds during the banking crisis had been recorded in the public finances.

Selling above that price would be significant for George Osborne, the Chancellor, because it would allow him to hail the return of funds injected by taxpayers into Lloyds after its initially disastrous merger with HBOS.

It would also be potentially meaningful for Antonio Horta-Osorio, Lloyds' chief executive, whose £1.48m deferred share bonus awarded in March will only vest under certain conditions, one of which is that at least one-third of the Government's shareholding is sold for at least 61p-per-share.

Lloyds declined to comment on Saturday.

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