Hunt To Get £17m Payout From Hotcourses Sale

By Mark Kleinman, City Editor

Jeremy Hunt, the Health Secretary, is in line for a windfall worth more than £15m from a company sale that would propel him to the top of the Cabinet rich list.

Sky News can exclusively reveal that Hotcourses, an education listings service set up by Mr Hunt 17 years ago, is in detailed negotiations about being sold to Inflexion Private Equity, an investment firm, for about £35m.

Mr Hunt is understood to own 49% of Hotcourses, meaning that his shareholding would be worth just over £17m if the takeover is completed.

News of the prospective windfall for Mr Hunt, the MP for South West Surrey, may cause embarrassment for the Government at a time when a debate about the cost of living is dominating Britain's political discourse.

With the NHS expected to face a strain on resources during the winter, Mr Hunt is likely to face a tough few months in Westminster.

Ed Miliband, the Labour leader, has frequently sought to portray the Conservative-led coalition as an out-of-touch millionaires' club, and Mr Hunt is far from the only independently wealthy Cabinet minister.

Prime Minister David Cameron, Chancellor George Osborne, Foreign Secretary William Hague and Defence Secretary Philip Hammond are all said to have amassed multimillion pound fortunes.

Jeremy Hunt set up the company after working in Japan

However, a £35m sale of Hotcourses would also cement Mr Hunt's status as one of the most successful entrepreneurs to have forged a parliamentary career in recent times, during a period when politicians are frequently accused of having inadequate experience of the business world.

Private equity insiders said that Inflexion had outbid a number of other buyout firms to win a period of exclusivity in which to finalise an agreement. The roughly £35m price-tag is higher than previous estimates of Hotcourses' value.

It was unclear on Friday when the exclusivity period ends, but a source close to the transaction said it was unlikely to be announced for at least a few weeks.

"It could still fall through. It's not a done deal," they said.

Hotcourses was set up in 1996 by Mr Hunt and his business partner, Mike Elms, and provides listings information about evening, training, university and other courses.

Now employing more than 200 people, Mr Hunt established the business when he returned to the UK after two years in Japan teaching English and learning Japanese.

It now claims to be the world's largest course database, advertising more than 700,000 courses and 33,995 scholarships from more than 27,000 institutions.

According to accounts filed at Companies House for the six months to July 31, 2012, the company had a turnover of £6.5m, generating pre-tax profits during the period of just under £2m.

The Health Secretary, who turned 47 last week, has received several million pounds in dividends since Hotcourses was founded.

An aide to Mr Hunt refused to comment on the deal or on the size of his shareholding, but a person close to him insisted that he was not playing any role in the sale negotiations.

The latest Register of MPs' Interests confirms that the Health Secretary remains an investor in Hotcourses but does not disclose the size of his interest.

The company's website lists Mr Hunt as a member of its management team but states that he "stepped aside from all management responsibilities at Hotcourses Ltd in order to focus on his parliamentary duties, and is no longer involved in the running of the company".

It is unclear when Mr Hunt would receive the money from the sale of the company or whether he would remain as an investor under new owners.

Mr Elms is expected to continue running Hotcourses if Inflexion succeeds in acquiring it.

Inflexion, whose other investments include the retailer Ideal Shopping Direct and On The Beach, an online holiday business, declined to comment on the talks.

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Metro Bank Seeks £285m In New Cash Call

By Mark Kleinman, City Editor

Metro Bank is to tap shareholders for nearly £300m in a larger-than-expected fundraising that will see the high street lender delaying a flotation until 2016.

Sky News has learnt that Metro Bank told its existing investors on Friday that it plans to raise £250m with the option of a top-up offer to increase that sum to £287.5m, more than it has received so far in its brief existence.

The new capital will be used to fuel the further growth of the first new British high street bank in more than a century, as it accelerates the opening of new branches and its expansion into London's broader commuter belt.

According to sources familiar with a prospectus issued as part of the fundraising process, Metro Bank's board wants to grow its branch network from 21 stores today to 150 by 2020, and is targeting 280,000 customers by the end of the year, up from 238,000 on September 30.

The bank has already been a beneficiary of a new seven-day current account-switching regime launched by the Government earlier this autumn as ministers attempt to kickstart a more competitive retail banking market.

Sky News revealed earlier this week that Metro Bank had decided to shun an immediate stock market listing in favour of a private fundraising, with existing shareholders able to subscribe to new stock commensurate with their existing holdings.

The much larger-than-expected scale of the new share offer, which closes on December 6, underlines the pace at which Metro Bank's board wants to grow its balance sheet but may stoke fears about escalating losses at the company.

Bank of America Merrill Lynch and Royal Bank of Canada have been appointed to identify buyers for any new shares not acquired by current Metro Bank investors.

Among the lender's existing shareholders are the billionaire Reuben brothers and Steven Cohen, the head of the US hedge fund SAC Capital, which was this week the subject of the biggest-ever insider trading settlement in the US.

A recent circular to shareholders outlined the escalating losses at Metro Bank, which lost £14.3m before tax in the three months to September and £38.6m in the year-to-date. That took the lender's total losses since being set up to nearly £140m.

However, Vernon Hill, chairman, and Craig Donaldson, chief executive, told shareholders that the second quarter of 2013 "will therefore have marked the peak quarterly loss and that quarterly losses will now fall until the bank achieves profitability".

The losses underline the costs associated with breaking into the UK's retail banking sector at a time when Government ministers are attempting to foment new competition through a string of new policy measures, including reducing capital and liquidity requirements for new entrants

In the prospectus published on Friday, Metro Bank said that it would have "increasing capital needs" and reminded shareholders that its longer term objective was to "seek an IPO on the main market of the London Stock Exchange as early as possible to enable Metro Bank to seek significant additional capital to support future growth in new stores and balance sheet assets and also provide liquidity to Shareholders".

Metro Bank's first branch opened in Central London in July 2010, and it now has 21 open, with aggressive expansion plans set out over the next five years.

Among the innovations it has introduced to the UK are dog-friendly and drive-through branch facilities, reflecting Mr Hill's determination to revolutionise the British consumer banking experience.

Mr Hill enjoyed huge commercial success with the launch of similar banking ventures in the US before encountering difficulties with regulators.

The fundraising prospectus includes further insight into Metro Bank's structure and operations, including an ownership ceiling of 9.9% contained in its articles of association.

In a lengthy list of risk factors, the company warned of the potential impact of various reforms to banking regulation and said it could be adversely affected by property market volatility.

"Fluctuations in the London residential and commercial property market, in particular, could expose Metro Bank to a heightened level of risk of customer default or depreciation of the value of property securing mortgages," it said.

It also highlighted a hitherto little-known risk relating to the use of its name, according to one insider who had seen the prospectus.

"Although the Company has acquired the trade mark "Metrobank" in the UK... There is a risk that Metro Bank's trade mark registration for the word "Metrobank" and the wider use of the "Metro Bank" name might be challenged by the owner of another similar trade mark. In the event that such a challenge was to be successful it may result in Metro Bank having to re-brand under a new name at considerable cost and disruption to the business."

A Metro Bank spokeswoman was unavailable for comment on Friday.

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Mobile Spending 'Could Be Worth £23bn' By 2018

By Poppy Trowbridge, Business and Economics Correspondent

This year has been dubbed 'The Mobile Christmas' and with 48% growth in mobile shopping, retailers are increasingly targeting shoppers through digital devices.

British retailers will spend nearly £400m on advertising during the last three months of 2013 and consumer spending via mobiles and tablets is worth about nearly £8bn a year, according to research firm Verdict.

But over the next five years, the spread of smartphones and tablets will see our spending on these devices triple to £23bn.

Spending via mobiles and tablets is expected to triple over five years

Two thirds of that shopping is done at home, as buyers often wait until they are logged in to a secure network before purchasing items.

Matthew Rubin, retail analyst with Verdict Research, said: "While we are expecting growth in successive years, we are expecting this year to be the highest level of growth. Retailers really need to invest in their mobile websites now."

John Lewis announced its £7m Christmas television advertising campaign on Friday. The ad is set to a cover of Keane's 2004 hit Somewhere Only We Know sung by Lily Allen.

Supermarket chain Morrisons launched its Christmas TV advertising campaign during the prime-time slot of ITV's Coronation Street.

Some 20% of home shopping business at Asda is done via mobile or tablet

Asda says 20% of its home shopping business is done via a mobile or tablet, and that figure is growing by 1% each month.

The living room is becoming a key location for retailers to target consumers, as 67.2% of all online shoppers making a purchase from their home do so in their living room.

Wealthy young shoppers currently dominate mobile and tablet expenditure, but with increased access to cheaper, high-specification devices, older shoppers will have a much bigger impact over the next five years, Verdict research shows.

Still, window shopping hasn't entirely given way to digital methods yet.

Around 38% of online shoppers still research goods by viewing them in a store before purchasing them online.

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Thames Water 8% Price Hike Stopped By Ofwat

Britain's biggest water company has been stopped from imposing a price hike of 8% on its customers for 2014-15.

Ofwat, the water regulator, said the Thames Water price rise of £29 was not justified, despite the company saying the extra money was needed to fund the construction a "super sewer" under London.

The watchdog's chief regulation officer Sonia Brown said: "We said we would challenge Thames' application, in the interests of customers.

"We did just that and on the evidence provided we are not convinced that an extra bill increase is justified."

This announcement is Ofwat's final decision on the application.

Thames Water now has the right to trigger an appeal to the Competition Commission. The company told Sky News it was reviewing the decision by Ofwat.

The decision by Ofwat means the maximum that Thames Water can add to customers' bills for 2014-15 is capped at 1.4% above inflation, as set in the 2009 price review.

 Thames Water had submitted the application to Ofwat for an interim adjustment to prices over the current five-year price period.

The firm, which is privately owned by a global consortium led by Australia's Macquarie group, said it has spent £273m on acquiring land needed for the construction of the Thames Tideway Tunnel.

It also said bad debt as a result of the economic slowdown had prompted the application.

Ofwat criticised Thames Water over delays to a sewage treatment programme

In September, Ofwat criticised Thames Water over the application, saying it had made "substantial savings" by doing less than expected to tackle sewer flooding.

A major investment programme in sewage treatment has also dragged on too long, it added, despite customers being charged for the improvements.

Last week, Ofwat chairman Jonson Cox wrote to all water companies asking them to consider whether they needed to increase their bills for 2014-15 by the full amounts set in the last price review.

On 2 December, companies will submit their business plans for the next price review, which will cover the period from 2015 to 2020.

Ofwat has called on these plans to reflect their customers' priorities, and believes there is scope for reductions in bills from 2015.

If companies do not propose reductions, they will need to fully explain to their customers why.

Mr Cox told the firms that Ofwat will set 2015-20 prices using an independent, rigorous process, ahead of a final decision is due on these prices by January 2015.

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BA Owner IAG Profit Soars In Third Quarter

IAG, the owner of BA and Iberia airlines, has seen its profit fly high in the third quarter to £575m.

The company saw the rise in the three months to the end of September up from £224m in same period last year.

Iberia, which has been hit by major cuts and strike action, made an operating profit of 74m euro (£61m), up from only 1m euro (£830,000).

Total passenger numbers for the company were up 8.9% for October, compared to the 2012 figure.

IAG also saw total revenues advanced 6.9% to £4.5bn in the reporting period.

"These are strong results," chief executive Willie Walsh said.

"This is an improved performance (for Iberia), bearing in mind it's the strongest quarter of the year.

"However, the airline must continue to implement its restructuring plan and reach agreement on productivity changes to bring about long term sustainable profits and growth."

Third-quarter operating profit at British Airways surged to £400m, up from £223m.

"Its performance continues to benefit from a strong London and transatlantic market as well as a 100m euro (£83m) revenue bounce-back from the Olympic effect last year. In addition, the airline has maintained its focus on cost control," Mr Walsh said.

IAG's latest results also featured the first full-quarter contribution from Spanish budget carrier Vueling, which the group took control of in April.

It made an operating profit of £115m in the third quarter.

Mr Walsh said that the division benefitted the group with its low cost base and successful product strategy.

"This summer, there was a tourism boost in Barcelona and Vueling was able to capitalise on this seasonal spike due to its leadership position at the airport."

Turning to the outlook for the rest of the year, IAG predicted that it would make an operating profit before exceptional items of around £620m in 2013.

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Twitter's Share Price Rockets In NYSE Launch

Smooth Sailing For 'TWTR' Launch

Updated: 11:34pm UK, Thursday 07 November 2013

By Hannah Thomas-Peter, New York Correspondent

The "pop" at the beginning of the day prompted some early investors to sell a portion of their shares.

Meridian Equity Partners trader Jonathan Corpina said: "I have a client right now who bought some of the stock on the IPO and wants to sell some of it out right now.

"They like the pricing and they like the gain that they've seen so far."

Public trading began after a prolonged period known as "price discovery", when experienced traders known as "designated market makers" sift through orders, assess new demands, coordinate between Twitter, its investment banks and other traders to try and decide on a fair opening price.

Anticipation built on the floor of the exchange as a large group of traders converged at the trading post, some shouting orders out to the market makers.

It took well over an hour for the price to be agreed and trading to start.

Sources close to the deal told the Reuters news agency that investors were asking for 30 times the number of shares on offer.

As the market makers shouted "we're getting close" to an agreed price, a cheer went out across the floor.

One trader puffed out his cheeks and said to himself "here we go".

Mr Corpina said: "It's a lot of fun, the energy the excitement in the room, the information flow, the trading, it really gets your heart pounding and this is what we do this for."

In the short term, the NYSE seems to have avoided the technical glitches that plagued rival exchange NASDAQ's ill-fated launch of Facebook last year.

NYSE head of capital markets David Ethridge told Sky News the smooth IPO was in part due to the designated market makers, which are unique to the NYSE and have the power to trade without the computerised system if anything goes wrong, as well as the authority to step in with their own company's money if trading becomes too volatile.

He said: "This is a process that requires judgement and not just a computer algorithm to get it right, because a stock never trades just on valuation when it starts trading.

"It trades on sentiment, and you need a person to figure out what's the sentiment; How do people feel about the stock? How do people feel about the economy? That's all part of the process of getting it right."

Still though, the team of market makers from Barclays Capital looked relieved when it became clear this day at least, had gone without any noticeable hitches.

I asked them if it had been nerve wracking

Team head Patrick Murphy said: "No, it was business as usual. This is what we do. There were a lot of eyes on this and we had to get it right."

But Barclays head of electronic trading William White responded: "Yes. You always have that anxiety about hitting the button. You don't want to be in the position where there are technology glitches, but this one was seamless."

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Morrisons Sales Fall 3% In Third Quarter

Morrisons says subdued consumer confidence and its low exposure to online and convenience shopping is to blame for falling sales.

Like for like sales including fuel in the third quarter - a measure charting the performance of continuing operations - plunged 3% or by 2.4% when fuel sales were excluded.

That was worse than analysts had predicted though the supermarket chain said it was in line with its own expectations.

Morrisons said its fledgling M local convenience stores had helped total sales grow 1% over the three month period to November 3 when fuel and VAT were excluded.

The chain has battled stronger competition from discount chains and previously admitted its late entry into the convenience market would hurt sales growth while it is yet to get its online food offering on the road.

It confirmed such deliveries would begin, as planned, in January but cover only Warwickshire initially, then Yorkshire followed by 50% of UK households by the end of 2014, including London.

The £200m investment in partnership with Ocado is coupled with continued expansion of its convenience network.

Morrisons expects to have 200 M local stores by the end of 2014 but its late entry into online grocery and convenience store channels, which are growing at about 16% and 20% a year respectively, has hurt its market share and profits.

The group trails market leader Tesco, Wal-Mart's Asda and Sainsbury's by annual revenue while - like its major rivals - it has also endured a threat to sales from discounters such as Aldi and Lidl.

The latest market share figures demonstrated the scale of the challenge to the so-called 'big four' - with Aldi enjoying a record share.

Morrisons said today its financial outlook for the full year was unchanged, though it noted consumer confidence remained subdued and it continued to see heavy promotional activity across the industry.

Its efforts to claw market share from rivals include an expanding Fresh Format concept and a Big Christmas Bonus scheme to reward customer loyalty.

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Twitter IPO: Shares Hit Stock Exchange At $26

Twitter has set a price of $26 (£16) for its public stock offering and can begin trading on the New York Stock Exchange.

The price values the San Francisco-based micro blogging site at $14.1bn (£8.8bn), based on its outstanding stock and options, Reuters reported.

It is offering 70 million shares in the Initial Public Offering (IPO), with an option to buy another 10.5 million.

Twitter had originally set a price range of $17 (£10.57) to $20 (£12.44), but raised the range on Monday signalling an enthusiastic response from prospective investors.

A statement from the company read: "We've priced our initial public offering of 70,000,000 shares of our common stock at a price to the public of $26 (£16) per share.

"In addition we've guaranteed the underwriters a 30-day option to purchase up to 10,500,000 additional shares of common stock.

"Our shares are expected to begin trading on the NYSE on November 7 under the symbol TWTR."

Analysts said they expected shares in the company to experience a small rise during the first day of trading.

Investor enthusiasm for Twitter, which boasts 230 million users, is strong even though the micro-blogging site has never turned a profit.

Despite this, Securities and Exchange Commission chairwoman Mary Jo White suggested technology companies with large numbers of users will not always translate them into big profits.

"In the absence of a clear description, it can be hard not to think that these big numbers will inevitably translate into big profits for the company.

"But the connection may not necessarily be there. What if only a fraction of those users are paying customers?

"What does that mean for future financial results? What if the bulk of the growth in the number of users is in an area where the company has not yet figured out how to turn those users into paying customers?

"What does that then say about the meaning of user growth rates?"

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Universal Credit Scheme 'Has Lost Over £140m'

Universal credit has been savaged by MPs for "shocking" failures that have already wasted at least £140m.

The scheme has been blighted by "alarmingly weak" management, with secretaries allowed to authorise purchase orders worth more than £20m.

In some cases it is unclear what suppliers have been paid for.

The cross-party Public Accounts Committee (PAC) also voiced doubts about whether the project can still be fully delivered by 2017 - branding a pilot "inadequate" and open to fraud.

Universal credit is due to replace a bundle of means-tested benefits in four years' time, with Work and Pensions Secretary Iain Duncan Smith insisting it can ensure people are always better off in jobs and save £38bn by 2023.

Iain Duncan Smith says universal credit can save £38bn by 2023

However, a former Olympics executive had to be drafted in earlier this year to "reset" the programme amid concerns over delays and IT issues.

The PAC report said the Department for Work and Pensions had "neglected to implement basic procedures for monitoring and authorising expenditure".

The MPs said: "We saw evidence that purchase orders with a total value of £8.7m were approved by a personal assistant to the programme director.

"In another case, two purchase orders, one for £22.6m and one for £1.1m, were approved by a personal assistant to the programme director whose delegated financial authority at the time of approvals was only £10m.

"When the department made individual payments to suppliers these could not be linked to particular pieces of work that had been delivered."

PAC chair Margaret Hodge said the implementation of universal credit so far had been "extraordinarily poor".

She said: "The failure to develop a comprehensive plan has led to extensive delay and the waste of a yet to be determined amount of public money.

"£425m has been spent so far on the programme. It is likely that much of this, including at least £140m worth of IT assets, will now have to be written off.

"The management of the programme has been alarmingly weak.

"From the outset, the department has failed to grasp the nature and enormity of the task; failed to monitor and challenge progress regularly; and, when problems arose, failed to intervene promptly."

The MPs said the project would not hit its current target of enrolling 184,000 claimants by April 2014.

As a result the later stages would have to be speeded up to meet the 2017 completion date - but that would "pose new risks".

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M&S Upbeat Despite Clothing Sales Falling Again

M&S v Primark: The Clothing War It Can't Win

Updated: 2:03pm UK, Tuesday 05 November 2013

By James Sillars, Sky News Business

It's a battle for your business. A war to win your custom. M&S has been losing ground to rivals and its problems still run deep.

Marks & Spencer was once of the darling of the retail sector - with its clothing offering top of the pile - but it failed to move with the times.

Suddenly there were challengers to its 'something for everyone' dominance and crucially they were cheaper, online and more adaptable to changing fashions.

Family budgets have been feeling the pinch since the financial crisis of 2008 as a result of the overall cost of living rising faster than wage growth.

That squeeze has tightened - forcing many retailers, including M&S, to discount, advertise aggressively and therefore damage their bottom lines.

Not so at Primark, with its soaring revenues, profits and store growth.

Primark has made its name offering fashionable clothes at affordable prices. That is its brand. Its timing could not have been better.

It grew total sales by 22% to £4.3bn in the year to September - expanding its selling space across major cities to bring an "exciting, fashionable and fun shopping experience".

M&S total sales rose by 3.1% in the UK over the six months to September 30 - but the growth did not come from clothes.

In contrast to the struggles of M&S as it tries to kickstart its fashion business, Primark's buying teams are celebrating autumn/winter and spring/summer ranges selling out.

M&S tried a counter-attack against the threat from the cheaper brands but admitted in May it would once again focus on style and quality, shifting its focus to recapturing custom in the crucial area of womenswear.

Andrea Felsted, the FT's senior retail correspondent, told Sky News that womenswear remained its main challenge.

"It really is the cornerstone of M&S. The launch in May ... there were some improvements but it really will have to be seen whether that does play out.

"M&S did suffer some stock shortages in September. It said it was a return to quality but the FT reported that they'd even had some quality problems with the iconic piece in the campaign the pink coat ... some of the poppers were not sewn on properly.

"That's not exactly the quality they would have been hoping for," she said.

M&S launched its Leading Ladies advertising campaign, featuring a dozen high-profile women including actress Dame Helen Mirren and Olympic boxer Nicola Adams, on September 12 and its first Christmas advert hits TV screens on Wednesday.

Such campaigns cost millions of pounds - as does a drive for quality.

No wonder then that M&S is on a different playing field to that of Primark. Their clothing business models could not be more different.

Marks and Spencer's opponents lie elsewhere on the high street.

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