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Don't bet against BSkyB's Chief Executive Jeremy Darroch, the Sunday Times's Danny Fortson advised. Darroch is expanding his pay-TV business after agreeing to buy sister companies in Italy and Germany. Shareholders need to consider whether BSkyB is overstretching itself by issuing shares and taking on £5bn of debt to pay for the deal. Targeted cost savings look paltry but the prize is to export BSkyB's ability to sell TV and broadband to Germany and Italy, where takeup is lower than in the UK. If Darroch achieves this, shareholders can do well. Rupert Murdoch controls BSkyB and the Sunday Times.

ake a punt on Firestone Diamonds, Midas advised in the Mail on Sunday. The miner has proved a rough ride for investors but with new management installed the shares are starting to rise after tumbling from more than £20 in 2008 to 21p by April last year. Stuart Brown, who became Chief Executive last September, has secured new financing from serious investors such as South Africa's Absa. The cash is a vote of confidence in Brown's decision to focus on Firestone's Liqhobong mine in Lesotho. Firestone burnt investors in the past, but the situation looks different this time.

he Questor Column: Avoid Kingfisher falls as sales slump: B&Q Owner Kingfisher is stuck in a Catch-22 situation. If it cuts prices to drive sales then profits fall and if it holds prices to protect earnings then turnover drops. Questor thinks its shares, which were down more than 8%, may have further to fall. The largest DIY retailer in Europe reported group like-for-like sales down 1.8% during the second quarter. Kingfisher blamed weaker than expected sales in France and Poland, and while this certainly won’t have helped, there are worrying signs of weak consumer demand during its crucial summer selling season. In the first quarter the company missed market expectations for profit because of discounting activity to shift stock from the previous year. Retail profit increased by 20.3% on a constant currency basis to £142 million in the three months ended May 3, but the market was expecting something more in the region of £150 million. Gross margins were down around 200 basis points throughout the first quarter and Kingfisher said this was due to discounts on kitchens, bedrooms and bathrooms along with rising delivery costs and selling some lower margin building and garden products. Market expectations are for revenue to increase by 2.5% to £11.4 billion, and pretax profits to rise 3% to £782 million. However, that full year profit performance could be under threat if demand remains weak. So the shares, trading on 13.7 times forecast earnings, look exposed to further weakness going into the second half.Kingfisher at 308½p-27½p. Questor Says ‘Avoid’.

One Savings Bank Directors get £34 million from share awards scheme: Twelve Directors of One Savings Bank bagged £34 million from the lender’s float last month thanks to a lucrative private equity award scheme.

Russian property tycoons with a home in London have made record returns on their investment, thanks to a combination of the capital’s recent housing market boom and a weakening rouble. The value of a luxury property in London has appreciated by 102.7pc over the last five years for Russian homeowners as the number of roubles to the pound continues to increase, according to a new report by real estate agents, Knight Frank. Russian investors have capitalised on a 71pc rise in prime central London house prices, the strong pound and the rouble’s falling star. The rouble has weakened by a third over the last 18 months, due to tensions in the Ukraine. In comparison, a US investor who bought in London in 2009 made 95.4pc, while a British buyer made a 69pc return, due to the comparatively strong pound, the study found

Diageo, the world’s biggest spirits maker, is to write down the value of its majority stake in its troubled premium Chinese baijiu brand, after plummeting sales of the 600-year-old white spirit which has suffered a prolonged hangover under the anti-extravagance drive of Chinese President Xi Jinping. An announcement will be made on Thursday when the UK-based company reports its full-year results. Diageo declined to comment. (Financial Times)

RISKS INVOLVED The deal is not without risks, however, and it could take a while for the creation of a "Sky Europe" to pay off. Sky Italia, Italy's biggest pay-TV operator, has lost 220,000 customers since its peak in 2011 as the country's prolonged economic downturn led more people to ditch their monthly TV packages. Sky Deutschland is growing strongly in terms of customer additions and revenue, helped by the appeal of its domestic and European soccer matches, but the percentage of those willing to pay for TV in Germany remains low - below 20 percent. The company's credit rating is likely to be downgraded. Its ratio of debt to core earnings will also move to just below 3 from the current level of 1. As a result, the group said it would not resume share buybacks or do any further acquisitions until its leverage target was achieved. Chief Executive Jeremy Darroch said he did not envisage any regulatory problems with the deal. Barclays and Morgan Stanley acted as advisers for BSkyB, while J.P. Morgan co-led the financing. Herbert Smith was BSkyB's legal adviser. Deutsche Bank, Lazard Ltd, Goldman Sachs and law firm Allen & Overy advised Fox.

Under German takeover law, BSkyB also has to make an offer for the minority investors in Sky Deutschland, but with only a small premium on the table, analysts doubt that many will sell. The overall price for the deal would rise to around 7 billion pounds if German investors did sell out. For Sky Italia, the price will be made up of cash and BSkyB's 21 percent stake in the National Geographic Channel, valued at around 382 million pounds. Fox said it would subscribe to the share issue to keep its stake in BSkyB stable, meaning it will take net proceeds from the deal of around $7.2 billion. The placing raised 1.4 billion pounds, according to traders. In the eyes of many media executives and investors, programming and content are now seen as more valuable than the infrastructure that carries it to people's homes. That change has been driven in part by firms such as Netflix and Google's Youtube, which have taken away viewers from traditional pay-TV services delivered by satellite operators or cable companies. The shift has led some like Murdoch's Fox to concentrate more on content, but for those like BSkyB that remain in both content and distribution, they need to invest heavily in technology and fresh programming to see off the challenge. DRIVE DOWN COSTS BSkyB's deal is a bet that it can squeeze out costs on everything from set-top boxes to broadcasting rights. It aims to reap 200 million pounds of annual cost savings by the end of the second financial year, with revenue synergies coming after that. It will compete with John Malone's Liberty Global, which is available in 12 European markets. Analysts said the deal could make BSkyB an attractive takeover target in the future for a group such as Vodafone which has been buying fixed-line assets in Europe to bolster its mobile offering. Vodafone Chief Executive Vittorio Colao told reporters the deal could make BSkyB more appealing in terms of the content sharing agreements the two companies already have. "It demonstrates that in a world which is increasingly digital it is important to have scale and cross-country presence, which is exactly what Vodafone has," he said. The increased scale, and the fact the group has not hiked its leverage too high, should also bolster BSkyB when it goes up against telecoms group BT in the next auction for English Premier League rights - its most important offering for many of its subscribers. RISKS INVOLVED The deal is not without risks, however, and it could take a while for the creation of a "Sky Europe" to pay off. Sky Italia, Italy's biggest pay-TV operator, has lost 220,000 customers since its peak in 2011 as the country's prolonged economic downturn led more people to ditch their monthly TV packages. Sky Deutschland is growing strongly in terms of customer additions and revenue, helped by the appeal of its domestic and European soccer matches, but the percentage of those willing to pay for TV in Ge

New company will have 20 million customers * Will pay in cash, debt, TV stake, share placing * Murdoch likely to use proceeds to pursue Time Warner * Risks seen in creation of "Sky Europe" * BSkyB shares fall 5 pct (Adds names of banks that advised on the deal) By Kate Holton and Leila Abboud LONDON/PARIS, July 25 (Reuters) - Britain's BSkyB has agreed to pay $9 billion to buy the Rupert Murdoch's pay-TV companies in Germany and Italy, taking its hunt for growth into Europe by creating a media powerhouse with 20 million customers. Under the deal, BSkyB will pay Murdoch's 21st Century Fox for the pay-TV companies using cash, debt, its stake in a TV channel and a placing of shares that represents around 10 percent of its issued share capital. Murdoch is also the largest shareholder of BSkyB. The deal, which will make BSkyB the leading pay-TV provider in Europe, adds to a flurry of consolidation in the global media sector as traditional entertainment companies seek to bulk up to compete against more nimble Internet rivals. Fox is expected to use the proceeds to fuel its pursuit of Time Warner, which recently rejected a bid by Fox of $80 billion. BSkyB had flagged a possible deal for Sky Deutschland and Sky Italia in May. The price announced on Friday was slightly lower than expected by some analysts and the cost and revenue benefits higher. But BSkyB's shares fell 5 percent, pulled lower by the plan to issue stock and suspend a share buy-back. "It is a bit of a step in the unknown for Sky," said Conor O'Shea, an analyst at Kepler Capital Markets. "For the first time, it will go from UK-focused to European and be asked to prove that it can add value from being larger." O'Shea has a "buy" rating on BSkyB shares. Facing the toughest market conditions in its 25-year history, BSkyB has decided its future growth lies in creating a European pay-TV leader that will operate in Britain, Ireland, Germany, Austria and Italy. BSkyB dominates British pay-TV, offering its premium sports, movies and U.S. drama programming to more than 10 million homes. Of 97 million households in the five countries it wants to target, 66 million are yet to take pay-TV. "Sky is clearly taking the strategic view that pay TV, already ingrained in the U.S. culture, will become prevalent in Europe," said Richard Hunter, head of equities at Hargreaves Lansdown. EUROPEAN TIE-UP Fox owns 100 percent of Sky Italia, 57 percent of Sky Deutschland and 39 percent of BSkyB. BSkyB will pay 2.45 billion pounds ($4.2 billion) for Sky Italia and 2.9 billion pounds for Fox's 57 percent stake in Sky Deutschland. Under German takeover law, BSkyB also has to make an offer for the minority investors in Sky Deutschland, but with only a small premium on the table, analysts doubt that many will sell. The overall price for the deal would rise to around 7 billion pounds if German investors did se

LONDON, July 25 (Reuters) - Britain's BSkyB has agreed to pay around 4.9 billion pounds ($8.3 billion) to buy Rupert Murdoch's pay-TV assets in Germany and Italy, responding to the slowing growth at home with a deal to create a European powerhouse. It will pay for the deal with cash, debt and by a placing of shares that represents around 10 percent of the firm's issued share capital. BSkyB said under the deal with Murdoch's 21st Century Fox , it would pay 2.45 billion pounds for Sky Italia and 2.9 billion pounds for Fox's 57 percent stake in Sky Deutschland to create a combined group with nearly 20 million customers. The payment for Sky Italia will be made up of cash and BSkyB's stake in the National Geographic Channel. ($1 = 0.5885 British Pounds) (Reporting by Kate Holton; editing by Paul Sandle)

B&Q’s cold comfort: Shareholders in Kingfisher have seen something nasty in B&Q sheds and the shares, having fallen a quarter since April, fell 8% on Thursday. This is after the group revealed a 2% drop in like-for-like sales over two months. Kingfisher buyers did not just make a bad decision to put gnomes clad in the cross of St George on the shelves. Barbecues and gardening gear are also languishing in B&Q sheds, despite the sunshine. And for all the housing boom, doing up kitchens has not taken off as expected either. It would be wrong to view Kingfisher entirely through the prism of its U.K. business, which contributes 40% of profits. But that makes the suddenly soft DIY market in France and Poland all the more worrying. But analysts have pared £30 million off full year profit forecasts to £750 million. Kingfisher is proving as unpredictable as the weather. And like Aunt Ada, its shareholders may struggle to recover.

U.K. retailers had strongest quarter in more than 10 years from April to June: Britain’s retailers enjoyed the strongest quarter in more than a decade between April and June, but consumers were less willing to spend towards the end of the period, according to the Office for National Statistics.

Fitch comments lift banks Ratings agency Fitch gave the banking sector a rise today after it said that so-called Viability Ratings (VRs) on banks in European developed markets have improved since the start of 2014, "indicating early signs of recovery in European banks' intrinsic creditworthiness". VRs reflect Fitch's opinion on the likelihood that an entity will fail. Improving macroeconomic conditions were partly responsible for this improved outlook, Fitch said, with banks' restructuring plans having contributed to the "stabilisation" of the Eurozone. For the first time since 2009, no country in the Eurozone is on Fitch's 'Negative Outlook'. Also adding to the gains were changes in accounting standards, meaning the way banks recogise losses will move from an "incurred loss" to an "expected loss" approach.

LONDON, July 25 (Reuters) - Britain's economy is set to pass a landmark on Friday when official data will probably show that it is bigger than it was before the financial crisis struck six years ago. Gross domestic product is expected to have kept up the same strong pace as in the first three months of the year, expanding by 0.8 percent in the April-June period, according to a Reuters poll of economists. In annual terms, growth is forecast to have been 3.1 percent, the fastest pace since late 2007. That will mean that gross domestic product is finally back above levels seen in the first quarter of 2008, when problems in the world's banking sector were rapidly building into a storm that hammered the global economy. Britain's economy largely flat-lined after a 2008-09 recession. But it sprang back to life last year and is set to grow 3.2 percent in 2014, the International Monetary Fund said on Thursday, making it the fastest-growing country in the Group of Seven rich nations. The pace of the recovery has put the Bank of England on alert that it may have to raise interest rates this year, although its policymakers expect a slight slowing of growth in the rest of 2014 and are worried about weak growth in pay. "It's welcome news that the UK economy is starting to move back to normal. With that would come an increase in interest rates," the Bank's governor, Mark Carney, said on Wednesday. "But none of us should forget the extraordinary forces that are still weighing on this economy." While economists have predicted that GDP expanded by 0.8 percent in the second quarter, there is a chance it could be weaker after some disappointing industrial output and construction data during the period. The government, facing national elections in 10 months' time, is unlikely to draw much attention to the economy getting back to its pre-recession size. Other countries recovered the output they lost to the crisis much more quickly than Britain. Germany passed that milestone in 2010 and France and the United States followed in 2011. British GDP per person is only expected to return to pre-crisis levels in 2017, reflecting growth in the population and the country's stubbornly weak productivity since 2008, according to Britain's independent budget forecasters. The protracted nature of Britain's recovery is partly due to the size of its banking sector, which took a huge hit in the crisis. But critics of the government say it is also because finance minister George Osborne opted for sharp curbs on public spending to rein in the country's high budget deficit. (Editing by Susan Fenton)

ARM shares jump on confident outlook: ARM Holdings, the Cambridge-based company whose chips are used in virtually all smartphones, gave a confident outlook as trading in the second quarter exceeded market expectations. Although the shares are now 20% cheaper than at the start of the year, Questor thinks it’s not the time to jump in just yet. The FTSE 100-listed company said revenue from licensing its microchip technology increased by 42% when compared to the same period last year. This strong performance helped group revenues rise 17% when compared to the second quarter last year. Shares jumped almost 6% higher on the upbeat trading news. The technology company generates revenue in two ways. One is through granting a licence to a company that manufactures ARM-designed electronic chips for use in its mobile devices. Secondly the company receives a royalty payment for every mobile device produced that includes the chips. Recently, ARM has been hit by much weaker sales of mobile devices than expected. This is because the current 3G generation of phones are coming towards the end of their sales cycle. The company still finished the first half with net cash up to £746 million, from £706 million six months earlier. Investors have little by way of dividend to keep them company, on a forecast yield of 0.7%. So, as we said, the shares in ARM are worth keeping a close eye on during the next six months, but for now, hold. ARM Holdings at 881p+47½ Questor Says ‘Hold

* Cairn India shares slump as much as 4.7 percent. * Cairn announced a $1.25 billion loan facility to parent group Vedanta Group, of which $800 million was disbursed in Q1, Jefferies says in a note. * "While management justified it as just a treasury operation given a relatively higher yield (LIBOR + 300bps), we believe returning surplus cash to investors through a dividend payout or buy-back would have been a better utilization," Jefferies says. (abhishek.vishnoi@thomsonreuters.com / abhishek.vishnoi.thomsonreuters.com@reuters.net)

MEDIA-BSkyB to confirm European expansion on Friday - Financial Times

Bombardier to cut 1,800 jobs, aerospace head retires: "Struggling with long delays in its CSeries jetliner, aircraft maker Bombardier Inc on Wednesday announced it will reorganize its business structure and cut 1,800 jobs, and it said the head of its aerospace division would retire. The Montreal-based company is splitting its aerospace unit into three segments focused on business aircraft, commercial aircraft and aerostructures and engineering services." (Reuters)

Santander set to introduce blanket LTI cap on residential loans Santander for Intermediaries is set to introduce a blanket loan-to-income cap on all residential loans. While the lender would not confirm the level of the LTI cap, a source close to the lender said it will be set at 5 times income on 25 July. Presently, the lender bases LTI ratios on applicant credit scores but from Friday it will apply the 5 times income cap across all residential lending. This means some borrowers will find they can take a bigger loan than previously, while others will see the loan they are eligible for is smaller. A spokeswoman for Santander says: “On Friday 25 July 2014, Santander is making a number of changes to its residential lending policy in line with competitors and current market conditions. “As we have said previously, our average new business income multiplier currently is 2.85 nationally, and in London it is 3.63 and we have no reason to believe these will alter going forward, while we continue to work within the guidelines of the new regulation.” John Charcol senior technical manager Ray Boulger called the move “bizarre”. Boulger says: “Up until this change, Santander has based its LTIs on an applicant’s credit score i.e. those with better credit can obviously borrow more. “We think the impact of this will be that those with a higher credit rating, who in the past have been able to borrow up to 5.5 times income or possibly higher, will be restricted. However, people with a lower credit score can now borrow more, which seems a bizarre move.” Last month it was revealed that from October the Bank of England will state that loans above 4.5 times income must make up no more than 15 per cent of a lender’s new lending. Many of the high street lenders have moved to introduce LTI caps in the past two months. Prior to the Bank revealing its new LTI rules, Lloyds Banking Group and Royal Bank of Scotland moved to cap loans over £500,000 at 4 times income. RBS has also announced an LTI limit of 4.99 times income for all buy-to-let applicants. This week Nationwide announced that it would apply a limit of 4.75 times income across all residential applications.

A quick survey of Rightmove shows that transaction levels in London and the surrounding areas – where Foxtons mostly operates – have almost come to standstill. Whether it’s down to tighter lending, excessive valuations, no more Russian buyers, or whatever reason you care to attach – property is no longer selling as it was six months ago. It doesn’t make that much difference to Foxtons whether a house sells at £1m or £900,000. The important thing is that it sells. So the biggest threat to Foxtons isn’t falling house prices – it is falling volumes. Turnover is more important than price. But the turnover has vanished – and that is what this falling share price trend is all about. And encapsulated in Foxtons’ price is everything you need to know about London property. When London is in a bull market, it’s good for Foxtons. But when London turns – this is what happens. If there’s one thing my 44 years as a Londoner has taught me (though it’s a lesson I have learnt and forgotten many times), it’s never bet against London property. What we are seeing just now in London is a backing off from extreme valuations. But will it turn into something bigger? Foxtons could be our omen. I’ll be keeping a close eye on the share price. There is bound to be a lot of support between the IPO price of 230p right up to the 270p price where it closed its first day’s trading. But many of those early investors will be trying to grab profits while they still have them – which should cap rallies. If we slip below 230p, you might see a wave of buyers come in – but you might also see a wave of stop losses (ie selling) get triggered. And that could signify deeper problems for the London property market. It’s very exciting.