Business Round-Up And Week Ahead

Sky's Naomi Kerbel offers a round-up of what's coming up in the week's business news.

:: Monday December 9

On Monday, eurozone finance ministers will gather in Brussels ahead of Tuesday's Economic and Financial Affairs Council meeting.

:: Tuesday December 10

Wall Street banks will get clarity on Tuesday on a controversial ban on betting with their own money. The U.S. Commodity Futures Trading Commission is to hold a public meeting on the Volcker rule.

:: Wednesday December 11

On Wednesday, investors in the Co-operative Bank will vote on the proposed £1.5bn recapitalisation plan which will see the Group cede control of the bank to bondholders and several US hedge funds.

:: Thursday December 12

Sports Direct reports half year results on Thursday. The sports retailer bought 20 JJB Sports stores and all of its stock when it went into administration in October 2012.

:: Friday December 13

And on Friday, the Royal Institution of Chartered Surveyors releases its housing market forecast for the coming year.

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Qantas Sinks To 'Junk' Status In Airline War

The credit standing of embattled Australian airline Qantas has been downgraded by a leading rating agency to "junk" status.

Standard & Poor's reassessment of the world's second oldest airline comes after the carrier issued a shock profit warning and slashed jobs on Thursday.

Qantas revealed a half-year loss of £165m and said it would axe 1,000 jobs as it struggles under the weight of record fuel costs, fierce competition from subsidised rivals and a strong Australian dollar.

In response, S&P cut the airline's rating from BBB-, the lowest investment grade, to BB+ and placed it on a credit watch with negative implications.

Qantas shares closed 3.74% lower on Friday, having lost more than 10% on Thursday.

CEO Alan Joyce has taken a 38% pay cut as the airline struggles

At one point on Thursday its share price dropped more than 17%.

The BB+ rating puts Qantas in what is known as "junk" status among professional investors, increasing the cost of financing for the carrier and restricting access for investors that do not put their money in lower-rated companies.

"The downgrades reflect our view that intense competition in the airline industry has weakened Qantas' business risk profile to 'fair' from 'satisfactory' and financial risk profile to 'significant' from 'intermediate'," S&P said.

"We don't expect Qantas to recover to a credit profile commensurate with a BBB- rating in the near term."

The move comes after another ratings agency, Moody's, on Thursday put the airline's investment-grade BAA rating on review for a potential downgrade, saying the forecast conditions were "outside the rating expectation".

Qantas chief executive Alan Joyce admitted the challenges facing the airline were "immense" and "urgent" action was needed.

"Since the global financial crisis, Qantas has confronted a fiercely difficult operating environment - including the strong Australian dollar and record jet fuel costs, which have exacerbated Qantas' high cost base," he said.

Industrial action has hit passengers in recent years

"The Australian international market is the toughest anywhere in the world."

As well as axing 1,000 jobs, Mr Joyce said he would take a 38% pay cut while the airline would conduct a review of spending with top suppliers and put in place a salary and bonus freeze.

The airline claims domestic rival Virgin Australia, which is majority-owned by state-backed Singapore Airlines, Air New Zealand and Etihad, is waging a campaign to weaken it in the lucrative domestic market with cheap seats underwritten by foreign cash injections.

Mr Joyce has been lobbying the government for the easing of restrictions that limit foreign ownership in the national carrier to 49%, or state intervention to shore up Qantas.

But Prime Minister Tony Abbott said government help was unlikely and said: "If we subsidise Qantas, why not subsidise everyone?"

Qantas - originally an acronym for Queensland and Northern Territory Aerial Services - was founded in 1920 by two Australian former First World War pilots.

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Domino's Pizza Shares Sliced As Boss Quits

Britain's biggest pizza delivery firm has seen its share price fall flat after its boss decided to quit.

Domino's Pizza's share price dropped more than 9% in early Friday trading after it confirmed that chief executive Lance Batchelor would leave next year.

The company was already due to make a trading statement on Friday, December 13.

Its share price has eased around a third in the last year.

"Lance has been offered a new role in a significant private equity backed company and as a result has tendered his resignation," Domino's chairman Stephen Hemsley said in a statement.

"His new company operates in a non-competing sector."

Domino's said Mr Batchelor would stay with the firm until April 30 and added that it had begun the search for a replacement.

The negative investor sentiment to Mr Batchelor's departure shows how much the market has placed on his leadership at the company.

Domino's has had a string of successes since the recession as cost-conscious consumers moved from dining out at restaurants to eating takeaways at home.

It has also embraced online ordering technology, with more than 55% of all orders last year being made through the internet.

It said that in 2012 one-in-five orders was made on a mobile device - double the rate in the previous year.

Domino's full-year results to the end of 2013 are expected to show an even greater mobile device ordering take up.

It sold 61 million pizzas in 2012 and opened a record 69 stores.

London-listed Domino's now operates more than 800 stores and operates and franchises outlets in several other countries, including Ireland, Germany and Switzerland.

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E.ON Dual Fuel Price Tariff To Go Up By 3.7%

Energy supplier E.ON has announced an average price rise of 3.7% for its dual fuel customers, effective from January 18.

The company said the increase in the dual fuel tariff will add an average of £48 to customers' bills.

Consumers with electricity only variable tariffs will also be hit by a 3.7% rise, equal to £20 on their annual payments.

Meanwhile, customers using variable gas tariffs can expect to see an increase of 4.6% - around £37 - to their bills.

The company said in a statement: "For the second year running E.ON has announced an increase later than any other major supplier and has once again shown it is working hard to limit the impact on its customers by announcing a lower average percentage rise than any other major supplier."

The firm said it is offering simpler discounts to customers.

It added that a price alert will automatically inform customers of cheaper deals it may offer in the future.

Chief executive Tony Cocker acknowledged any price rise is dreaded by customers but said his company would improve advice and practical measures for customers.

The price rises incorporate a change to the Government levy system that is calculated into bills.

But Mr Cocker admitted future price rises may occur by 2016.

He said: "Whilst there can be no guarantees, the likelihood of further price rises over the next 18 months caused by an increase in the cost of social and environmental obligations has receded due to the recent action taken by the Government."

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JCB To Create 2,500 Jobs In £150m Expansion

Construction machinery maker JCB has announced a plan to create 2,500 jobs as part of a £150m investment programme.

The company said it would expand its operations in Staffordshire and create the jobs by 2018.

It estimates that the job boost would add another 7,500 for companies that supply it with goods and services.

The decision was made as Chancellor George Osborne visited its facilities and comes a day after he delivered the Autumn Statement.

Mr Osborne told Sky News: "Investment in the infrastructure here has allowed this company to announce 2,500 jobs, which is all part of an economy that's growing and investing in the things that matter.

"Of course the job is not done yet but we have to stick with that plan."

Mr Osborne has committed Government funding to unlock economic growth in Staffordshire with a major road improvement project on the A50 trunk road in Uttoxeter.

The JCB plan is part of a wider global growth strategy to expand sales and increase market share.

In April JCB put on a display at its new location in Brazil

It has already launched new facilities in Brazil, and the £150m JCB project in Britain is the single largest investment in the company's history.

JCB said it will build a 350,000 square-foot factory in Beamhurst to replace a smaller site in Rugeley.

The family-owned company will now build its own vehicle cabs rather than outsource their construction.

JCB said it would also expand its production facilities for hydraulic cylinders at Rocester.

The company is also to build a new factory on the Harewood Industrial Estate in Cheadle, to expand existing earthmoving facilities.

The firm admitted it still required planning permission from the local authorities in Staffordshire.

JCB chairman Lord Bamford said: "Our plan to create 2,500 high-quality manufacturing jobs locally is clear evidence of the important link between infrastructure improvement and job creation.

"The Chancellor's decision to invest in the regional infrastructure means JCB can continue to invest locally, which is good for Staffordshire and good for Britain, especially given the wider benefits to our UK supply chain."

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RBS Sued In £150m Pre-Crash Advice Battle

Royal Bank of Scotland and a leading rating agency are being sued for £150m over so-called toxic products in the global financial crash.

Sixteen European institutional investors have launched legal action against Standard and Poor's (S&P), and the UK taxpayer-backed RBS, over losses stemming from 2007 and 2008.

"We have created a foundation in the Netherlands and it has filed a claim in the district court in Amsterdam," the executive director of Bentham IMF, John Walker, said.

Bentham IMF is a litigation finance company providing investment capital to plaintiffs for large disputes in the United States and abroad.

S&P told Sky News it would defend the legal action

A court official in the Dutch capital confirmed the filing, saying "proceedings are under way in this regard".

The investors from Austria, France, Germany and Switzerland want the damages over financial products which collapsed during the crisis.

Approached by Sky News, RBS - which is 81% owned by taxpayers - declined to comment on the dispute.

S&P told Sky News: "This claim has no merit and we will oppose it vigorously.

"The ratings on these securities, which date back to 2005-6, were assigned in good faith based on the information available to us at the time."

The complex products, known as constant proportion debt obligations (CPDOs), were created in 2006 and given a top AAA credit rating by S&P's before their value crashed, Mr Walker said.

RBS became involved in a hostile takeover bid of the Dutch ABN Amro

He previously estimated that CPDO notes worth up to €2bn (£1.67bn) were issued in Europe in the three years before the collapse.

They were issued by a branch of the Netherlands' third-biggest bank ABN Amro - which in itself was later taken over by the RBS.

Mr Walker alleged that S&P's used a model created by ABN Amro to evaluate the CPDOs.

"What we are saying is that Standard & Poor's is guilty of negligence and intentional misconduct by allocating triple-A ratings, the highest, to these products," he said.

"Without the rating, investors would not have bought the product, one of the material causes for the crisis," Mr Walker said.

Fred Goodwin was the RBS boss who headed the ABN takeover

Betham IMF filed the claim in the Netherlands as ABN Amro was based there and because Dutch procedures were "cheaper and faster" than in Britain, where RBS is based.

An S&P spokesman told Sky News: "In May this year, we filed an action in the London courts challenging the jurisdiction of the Netherlands in any such claim and that action has now been served on the Dutch claimant.

"S&P has never had a presence in the Netherlands and its CPDO ratings were assigned in the UK."

Betham IMF won a world-first lawsuit against the ratings agency last year on behalf of 13 Australian towns that lost US$16.5m (£10m) on synthetic CPDO derivatives.

It was the first time a ratings agency had stood trial over the complex derivatives, whose collapse was seen as a major cause of the 2008 global meltdown.

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Cath Kidston To Bloom In £250m New Year Sale

By Mark Kleinman, City Editor

Cath Kidston, the retailer known for its floral-print product ranges, is eyeing a new year sale jackpot that could net its eponymous founder at least £50m.

Sky News can exclusively reveal that TA Associates, the buyout group which bought 60% of Cath Kidston in 2010, is planning to put the company on the market in 2014 and is expected to seek well over £250m for the fast-growing business.

UBS, the investment bank, has been appointed to handle the sale, insiders said on Friday.

A successful sale, which is expected to attract interest from dozens of private equity firms as well as sovereign wealth funds, pension funds and other retailers, would underline Cath Kidston's status as one of the biggest success stories in the British retail sector.

Last week, the London Stock Exchange named it as one of 1000 companies "to inspire Britain" because of its growing international customer base.

On Thursday, the company opened its new flagship shop next to the department store Fortnum & Mason on London's Piccadilly, selling 20,000 product lines displaying the distinctive patterns which have become synonymous with the brand.

Cath Kidston now has nearly 200 shops across the UK, Europe and Asia, including a store opened in Shanghai last month.

It is unclear whether Ms Kidston plans to sell any of her shares as part of the deal or whether TA will be the only investor to offload its stake.

The company's founder remains actively involved with the business and is not expected to leave after any new takeover. A stock market flotation is not thought to have been ruled out by TA.

Cath Kidston has seen an explosion in sales in recent years, while earnings before interest, tax, depreciation and amortisation rose 13% to £21m for the year to March 31. At a pre-tax level, losses narrowed sharply to £0.6m for the 12-month period.

At the time of the sale to TA, Ms Kidston said: "We are delighted to have found a fantastic partner in TA Associates whose expertise and international reach will help us to take the business to the next stage of its development.

"We now have the necessary partner in place to expand the brand internationally in Asia and other markets whilst enhancing our core offer in the UK."

Founded by its namesake in 1993, Cath Kidston has positioned its products as 'affordable yet aspirational', a factor that analysts say has contributed to its success during a tough economic climate and brutal period for UK high streets.

A spokesman for Cath Kidston declined to comment on Friday.

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Corbett To Log Out Of Moneysupermarket Chair

By Mark Kleinman, City Editor

Gerald Corbett is to step down as chairman of Moneysupermarket, the online price comparison business, seven years after steering it through its stock market debut.

Sky News understands that Mr Corbett, the former head of Railtrack, will relinquish the reins at Moneysupermarket next year.

Russell Reynolds, a headhunting firm, has been appointed to oversee the search for Mr Corbett's successor. It will be led by Moneysupermarket's senior independent director Michael Wemms, a former Tesco executive.

Mr Corbett's exit will come at a sensitive time for the price comparison sector, which is braced for a wide-ranging review by the City watchdog, the Financial Conduct Authority (FCA).

Announcing the inquiry, Clive Adamson, the FCA's director of supervision, said last week: "We've all used a price comparison website so we know how simple they make buying motor, travel or home insurance.

"We don't want to lose that convenience, but we do need to ask the question, 'does cheapest equal best?'

"We want to get to a place where consumers that use these sites buy with the confidence knowing that they have all the relevant facts."

The review comes in the wake of an explosion in the growth of sites such as GoCompare, Comparethemarket and Moneysupermarket, with millions of consumers now turning to them before buying financial and other products.

Moneysupermarket, which was founded by Simon Nixon in 1993, is one of the few major sites not to have direct ties to a major insurance company, a relationship that is partly behind the FCA's interest in the sector.

Mr Nixon became deputy chairman in 2009 and is not a candidate for the chairmanship, according to insiders.

Mr Corbett is stepping back to concentrate on his other roles, which include chairing Britvic, the soft drinks producer, and Betfair, the online betting exchange.

Moneysupermarket has grown profits from £33.7m in 2006 to £66.5m last year, and now has a market value of close to £1bn.

A Moneysupermarket spokesman declined to comment on Friday.

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US Jobless Rate At Lowest For Five Years

The unemployment rate in the United States dropped to 7% in November, the lowest figure for five years.

The sharp drop in the rate, from 7.3% in October, was unexpected and raised the odds that the Federal Reserve could soon begin moving away from its huge stimulus plan.

Meanwhile, the number of non-farm jobs in November went up by a net total of 203,000, which beat analysts' expectations.

The strengthening job market is likely to fuel speculation that the Federal Reserve may scale back its bond purchases when it meets later this month.

The economy has now generated an average of 204,000 jobs from August through November. That is up from 159,000 a month from April through July.

Many of the November job gains were in higher-paying industries. Manufacturers added 27,000 positions, the most since March 2012. Construction firms gained 17,000. The two industries have created a combined 113,000 jobs in the past four months.

Another month of robust hiring follows other positive economic news.

The economy expanded at an annual rate of 3.6% in the July-September quarter, the fastest growth since early 2012, the government said.

Still, nearly half that gain came from businesses building their stockpiles. Consumer spending grew at the slowest pace since late 2009.

Greater hiring could support healthier spending as job growth has a dominant influence over much of the economy.

If hiring continues at the current pace, a virtuous cycle starts to build. More jobs usually lead to higher wages, more spending and faster growth.

Roughly half the jobs that were added in the six months through October were in four low-wage industries - retail, hotels, restaurants and entertainment, temp jobs and home health care workers.

The Fed has pegged its stimulus efforts to the unemployment rate and chairman Ben Bernanke has said the Fed will ease its monthly purchases of $85bn (£51bn) in bonds once hiring has improved consistently.

The bond purchases have kept long-term interest rates low.

The recent economic upturn has been surprising. Many economists expected the government shutdown in October to hobble growth, yet the economy motored along without much interruption.

Early reports on holiday shopping have been disappointing.

The National Retail Federation said sales during the Thanksgiving weekend - probably the most important stretch for retailers - fell for the first time since the group began keeping track in 2006.

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NatWest Website Hit By A 'Surge Attack'

The NatWest personal banking website has been hit by a cyber attack in the wake of its IT woes earlier this week, Sky News has confirmed.

Some customers trying to log on to the website found it impossible to enter the site.

NatWest, which is owned by the Royal Bank of Scotland Group, said there had been a deliberate swamping of its site.

An RBS spokesperson told Sky News: "Due to a surge in internet traffic deliberately directed at the NatWest website, customers experienced difficulties accessing some of our customer web sites today.

"This deliberate surge of traffic is commonly known as a distributed denial of service (DDOS) attack.

"We have taken the appropriate action to restore the affected web sites. At no time was there any risk to customers. We apologise for the inconvenience caused."

The bank stressed that the problems on Thursday night and Friday were not connected with its banking blackout which began on Cyber Monday - the biggest online retail day of the year - and stretched into Tuesday.

Some technical problems continued until Wednesday and thousands of customers who were unable to use the banks' websites or card services vented their fury online.

The group chief executive Ross McEwan described the earlier glitch as "unacceptable" and added: "For decades, RBS failed to invest properly in its systems.

"We need to put our customers' needs at the centre of all we do. It will take time, but we are investing heavily in building IT systems our customers can rely on.

"I'm sorry for the inconvenience we caused our customers. We know we have to do better.

"I will be outlining plans in the New Year for making RBS the bank that our customers and the UK need it to be.

"This will include an outline of where we intend to invest for the future."

As well as this week's problems, a glitch in May left RBS and NatWest customers using mobile apps unable to access their accounts online.

That followed a major fiasco in June last year which saw payments go awry, wages appear to go missing and home purchases and holidays interrupted - and cost the group £175m in compensation.

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