In a marked turnaround for a business that has been fighting
to adapt to a more competitive market and falling letter
volumes, Royal Mail reported adjusted operating profit of 403
million pounds ($613 million) in the year to March 31, against
152 million pounds a year earlier.

The increase reflected the impact of growing parcel volumes
fuelled by internet shopping, alongside price rises and cost
cuts after modernising its sorting operations. Parcel volumes
rose 9 percent to account for almost half of Royal Mail’s
revenue.

An initial public offering (IPO) is expected to value the
state-owned business at 2-3 billion pounds – Britain’s biggest
privatisation for 20 years. Royal Mail has 150,000 staff and
annual sales of 9.15 billion pounds.

Momentum behind privatisation began gathering pace last year
after the European Commission cleared the government to take on
Royal Mail’s hefty pension liabilities and regulators gave the
green light for the business to increase prices.

Despite fierce union opposition, Britain is pushing ahead
with plans to privatise the company this financial year to give
it access to external capital for future investment. It expects
to appoint lead bank advisers within weeks.

After Tuesday’s results, Chief Executive Moya Greene said
that she had been meeting potential investors in Britain, the
United States and Canada.

‘HIGH-QUALITY INVESTORS’

“I’m speaking largely to long-only, high-quality investors
that would normally participate in an IPO of this scale;
investors like pension funds and mutual funds,” she said. “I
would say the response has been positive.”

A stock market listing remains the preferred option, but
ministers have said that a private sale could be an alternative.

This month business minister Michael Fallon said that
several overseas buyers had expressed “significant interest” in
buying the 497-year-old postal service, with Greene adding that
no route to new capital should be discounted.

“I think it would be foolhardy for anyone to rule out any
option at this time,” she said.

The Communication Workers Union (CWU), which represents
120,000 Royal Mail employees, has been extremely vocal in its
opposition to privatisation, warning that the move could put the
firm’s universal six-day-a-week service at risk.

Such a change, however, would also require a change in
British law.

In a statement on Tuesday the CWU said that Royal Mail’s
positive results showed that it is making progress and that
privatisation is unnecessary.

Included in a sale would be a 10 percent stake reserved for
Royal Mail workers. Last Thursday the firm said it had hired
Equiniti to set up the employee share scheme.

European peers Austrian Post and Deutsche Post
both reported quarterly operating profit rises this
month, boosted by growth in parcel volumes and international
express business.

Nick Buckles, 52, who has led the company for eight years,
will be succeeded at the end of the month by Chief Financial
Officer Ashley Almanza, a former executive of oil and gas firm
BG Group who joined in March.

Although G4S shares have outpaced the FTSE 100 index
of blue-chip companies during Buckles’ tenure, he will likely be
remembered for mistakes over the last 18 months that have
rattled investors.

These include a squeeze on margins that led to the profit
warning earlier this month and a failed takeover bid for rival
Danish cleaning firm ISS, as well as the Olympics contract which
Buckles said at the time had left the company’s reputation in
tatters.

Shares in G4S have fallen by 12 percent since Buckles
announced the proposed $8 billion takeover of ISS in October
2011.

Two of G4S’s biggest shareholders welcomed his departure on
Tuesday.

“I think we feel that the time is right for Nick (Buckles)
to move on,” a leading shareholder who declined to be identified
said.

“We’ve got a very high regard for Ashley Almanza, we know
Ashley well from his time at BG, we think he’s an excellent
appointment.”

Chris White, portfolio manager at Premier Fund Managers, the
30th biggest investor in G4S, said the move was positive and
should accelerate the company’s restructuring.

G4S, whose rivals include Serco and Swedish security
firm Securitas, wants to increase revenue from
emerging markets to half the total from a third to soften the
pressure on margins from government austerity drives in
developed markets. It is looking for acquisitions in the Middle
East and India.

The company warned earlier this month that its margins and
profits would be lower in 2013, blaming a shake-up of the Dutch
prison system, problem clients in Africa and lower volumes in
its British cash and justice businesses.

That prompted a 14 percent fall in the share price, which
analysts at Jefferies and Espirito Santo said on Tuesday may
have been the catalyst for Buckles’ departure.

Buckles started at British security firm Securicor in 1985.
That company merged with Group 4 Falck in 2004, where Buckles
oversaw the transition into the current G4S brand after becoming
CEO the following year.

Shares in G4S have risen 67 percent, outstripping a 31
percent rise in the FTSE 100 index under his leadership.

But his decision in late 2011 to launch a surprise takeover
of ISS severely hit investor confidence, not least because of
the 2 billion pound rights issue required to secure it. The deal
collapsed after shareholders opposed it.

The following year, G4S failed to provide a promised 10,400
security guards just weeks before the London Olympics, forcing
British Army troops to step in and sparking a barrage of public
and political criticism.

Buckles was grilled by British lawmakers over the Olympics
failure in public hearings, where is shaggy hairstyle caught the
attention of Twitter users.

An internal review in September spared Buckles, who earned
about 1.2 million pounds ($1.8 million) last year, after it
concluded it did not find any significant shortcomings in his
handling of the contract. Two managers left instead.

The company’s reputation with the British government took a
further hit last week when the Ministry of Justice said it may
have been overcharged by G4S and Serco on a contract to monitor
offenders released from prison.

G4S said on Tuesday it had appointed Eddie Ashton from
German postal firm DHL as chief operating officer. Stuart Curl,
currently a regional chief financial officer, will become acting
CFO until a replacement for Almanza can be found.

Shares in the firm were down 0.4 percent by 1055 GMT to
249.7 pence.

“We’re not being distracted by gimmicks happening around the market,” Andy Clarke, chief executive of the British arm of United States retailer Wal-Mart (WMT.N: Quote, Profile, Research, Stock Buzz), told reporters on Thursday.

“Vouchering is unsustainable in our view,” he said.

Britain’s supermarkets, despite their focus on essential goods, have not been immune to the economic downturn and are battling intensely for market share.

Between mid-March and mid-April, market leader Tesco (TSCO.L: Quote, Profile, Research, Stock Buzz) offered customers who spent 20 pounds a 5-pound ($7.61) voucher to spend on a shop of 40 pounds or more, while No. 4 player Wm Morrison (MRW.L: Quote, Profile, Research, Stock Buzz) recently launched a “Payday Bonus”, giving customers a 10-pound voucher if they do four shops over 35 pounds.

“That’s pretty heavy investment,” said Richard Mayfield, Asda’s chief financial officer.

“What we’re focused on is more sustainable investment in long-term prices,” he said.

Asda said sales at shops open over a year, excluding fuel and VAT sales tax, rose 1.3 percent in the 14 weeks to April 12 – a significant improvement on a 0.1 percent increase in the fourth quarter of the previous financial year.

“We had a pretty tough April precisely because of the level of vouchering activity. Since that’s finished, our sales are looking pretty strong again,” said Mayfield, referring to second-quarter trading so far.

Asda, which has been investing more in 50-pence and one-pound lines and lowering prices on essentials such as milk, eggs and bread, said online sales grew by more than 16 percent in the first quarter. The firm’s market share remained unchanged at 17.9 percent.

On Wednesday, the Bank of England nudged up its outlook for growth and inflation.

However, Clarke said: “The message from families and the general public is it’s still pretty tough”.

Last month Tesco posted a 51.5 percent slump in year profit, while last Thursday Morrisons posted a 1.8 percent fall in first-quarter like-for-like sales.

However, last Wednesday No. 3 grocer J Sainsbury (SBRY.L: Quote, Profile, Research, Stock Buzz) reported a 6.2 percent rise in annual profits.

Asda’s sales update was released as parent Wal-Mart, the world’s largest retailer, posted a higher quarterly profit on Thursday, even as underlying sales fell 1.4 percent.

(Editing by Rhys Jones)

“We’re not being distracted by gimmicks happening around the
market,” Andy Clarke, chief executive of the British arm of
United States retailer Wal-Mart, told reporters on
Thursday.

“Vouchering is unsustainable in our view,” he said.

Britain’s supermarkets, despite their focus on essential
goods, have not been immune to the economic downturn and are
battling intensely for market share.

Between mid-March and mid-April, market leader Tesco
offered customers who spent 20 pounds a 5-pound ($7.61)
voucher to spend on a shop of 40 pounds or more, while No. 4
player Wm Morrison recently launched a “Payday Bonus”,
giving customers a 10-pound voucher if they do four shops over
35 pounds.

“That’s pretty heavy investment,” said Richard Mayfield,
Asda’s chief financial officer.

“What we’re focused on is more sustainable investment in
long-term prices,” he said.

Asda said sales at shops open over a year, excluding fuel
and VAT sales tax, rose 1.3 percent in the 14 weeks to April 12
- a significant improvement on a 0.1 percent increase in the
fourth quarter of the previous financial year.

“We had a pretty tough April precisely because of the level
of vouchering activity. Since that’s finished, our sales are
looking pretty strong again,” said Mayfield, referring to
second-quarter trading so far.

Asda, which has been investing more in 50-pence and
one-pound lines and lowering prices on essentials such as milk,
eggs and bread, said online sales grew by more than 16 percent
in the first quarter. The firm’s market share remained unchanged
at 17.9 percent.

On Wednesday, the Bank of England nudged up its outlook for
growth and inflation.

However, Clarke said: “The message from families and the
general public is it’s still pretty tough”.

Last month Tesco posted a 51.5 percent slump in year profit,
while last Thursday Morrisons posted a 1.8 percent fall in
first-quarter like-for-like sales.

However, last Wednesday No. 3 grocer J Sainsbury
reported a 6.2 percent rise in annual profits.

Asda’s sales update was released as parent Wal-Mart, the
world’s largest retailer, posted a higher quarterly profit on
Thursday, even as underlying sales fell 1.4 percent.

In April ministers outlined proposals for a statutory code
to stop pub companies abusing the “beer tie”, under which
tenanted pubs are forced to buy their beer from the firms who
hold their leases, often at above-market prices.

The proposals come as the trend of pub closures shows no
signs of easing and Enterprise, which has 6,000 pubs, argues
they could deter future investment and support for the sector.

To ensure fair rent and beer prices, the government wants to
introduce an adjudicator who tenants can complain to if they
feel they have been mistreated.

The regulatory review is the 43rd covering the industry
since 1969 and some analysts say the latest regulation could
weigh on the shares of companies which would be affected.

Enterprise, which along with Punch Taverns, Greene
King and Marston’s, would fall under the code,
said a voluntary framework was in place and there was a
widely-held industry view that the proposals were based on poor
evidence.

The company said what seemed like a high level of complaints
to the British Institute of Innkeeping (BII) was a
misrepresentation, since most calls were simply asking for
advice and only four in four years were categorised by the BII
as grievances relating to Enterprise Inns.

Enterprise chief Ted Tuppen said firms such as his had
supported pubs at a time when a squeeze on consumer spending had
hit trade, adding that free-of-tie pubs were closing at higher
rates as a result of constraints on lending to small businesses.

“Everywhere one looks, one sees inconsistencies in their
(the government’s) argument and … there are so many issues in
this consultation that are just based on false and
misrepresented evidence,” Tuppen told Reuters.

In the UK, where almost half of the total 50,000 pubs are
tied, recent industry data has shown weekly pub closures rose
from 18 to 26 in the six months through March.

While the government says its changes would save tenants 100
million pounds ($153.4 million) a year, Enterprise say they
would lead to reduced investment, resulting in increased
closures and shutting off the industry to new entrants.

Enterprise, which has been heavily focused on reducing debts
of 2.7 billion pounds and whose shares are up 45 percent on a
year ago, also posted an expected 14 percent fall in first-half
pretax profit to 55 million pounds, as bad weather and supply
disruption hit trading.

M&C, with 100 hotels globally, on Thursday said trading in
Asia, where it makes 40 percent of its revenue, had suffered
from slower growth in China, falling tourist numbers in South
Korea and a host of problems in its biggest market, Singapore.

“Singapore will see another increase in the number of hotel
rooms this year, which is putting pressure on revenues, whilst
government’s tighter foreign labour quotas are putting pressure
on costs,” Chairman Kwek Leng Beng told reporters.

“We also have the spectre of Avian flu returning in Asia, so
all in all the continent looks like it will remain a more
challenging hospitality market for the time being … The worst
in Asia, I think, is not over.”

Shares in the firm, whose profit has also been hit by a 240
million pound hotel refurbishment roll-out, fell 4 percent to
533 pence after the group said the slowdown in Asia – a region
that has led growth in recent years – would hit annual profit.

“I would recommend that the 160 million pounds (full-year)
profit before tax figure to be adjusted downwards to in the
region of 140 million pounds to 150 million pounds,” Chief
Financial Officer John Chang told reporters.

According to a Reuters poll of nine analysts, M&C had on
average been expected to post a full-year pretax profit of
161.25 million pounds.

M&C’s warning contrasts with more upbeat recent statements
from larger rivals including Intercontinental Hotels,
Starwood Hotels and Marriott.

M&C’s pretax profit for the first quarter to March 31,
posted on Thursday, fell by 34.7 percent to 16.9 million pounds
after revenues were hit by the impact of a slowing economy and
less corporate spending in Singapore, poor weather and austerity
measures in Europe, as well as the closure of hotels for
refurbishment.

The firm added its Seoul hotel in South Korea had also been
effected by geo-political tensions, and was gloomy on prospects
in South East Asia, where markets like Malaysia, Thailand and
Jakarta in Indonesia had improved year-on-year but could soon
see a slowdown due to changing macroeconomic environments.

“The outlook is more cautious than normal … In terms of
trading it looks pretty soft and I wasn’t expecting it (the
profit downgrade) to be as severe a drop as it was,” Liberum
analyst Patrick Coffey said.

M&C, whose brands include Millennium, Grand Millennium,
Copthorne and Kingsgate, said global revenue per available room
(RevPAR) – a key hotel measure – grew by 1.6 percent in the
first quarter, however, on improved trading in the United States
and Australasia.

It was also up 1.9 percent in the first four weeks of its
second quarter, it said, with its important London and New York
markets both up, but Singapore and the rest of Asia down.

“The group’s financial strength will get us through any
economic storms ahead, we remain focused on repositioning and
upgrading a number of our properties,” said Beng, whose firm
ended the first-quarter with net cash of 56.4 million pounds.

In what would be one of the most significant privatisations
of a British asset since John Major’s Conservative government
sold the railways in the 1990s, Business Minister Michael Fallon
said on Monday a listing is the preferred method of sale for
government and that investor feedback so far had been positive.

An initial public offering (IPO) of the group, which has
around 150,000 staff and sales of 9.5 billion pounds ($14.72
billion), is expected to take place this autumn, with British
media reports valuing it at between 2 and 3 billion pounds.

In a speech to the Policy Exchange, Fallon said Royal Mail
would also soon begin exploring access to debt market capital.

Momentum behind privatising Royal Mail has increased since
government took on its hefty pension deficit last year and the
firm received regulatory approval to rise some stamp prices. It
says it needs access to external capital for future investment.

The group posted half-year operating profit of 144 million
pounds in November, up from 12 million pounds a year before,
after reshaping the company towards a growing parcels market and
away from declining letter volumes.

Included in a sale will be a 10 percent stake reserved for
Royal Mail workers, in what would be the largest employee share
scheme for 25 years, the government said. It has yet to clarify
if shares would be free or at a discounted price.

The Communication Workers Union (CWU), which represents
120,000 Royal Mail workers, has fiercely opposed government’s
privatisation plans, fearing it would lead to a break-up of the
company, job losses and worse terms and conditions.

Last December Royal Mail, which has shed around 50,000 staff
in the last decade, enlisted Bank of America Merrill Lynch
and Goldman Sachs to work alongside Barclays
as its financial advisers. UBS has been advising the
government.

Previously described as a “problem child” by Rentokil
bosses, and like an “albatross round the neck of management” by
analysts, City Link has racked up losses every year since 2007
despite efforts to turn it around.

Shares in FTSE 250-listed Rentokil rose 5 percent to 102
pence on Monday after the firm announced the sale of the parcel
delivery firm for just one pound.

“Rentokil Initial has decided to divest of City Link at this
stage of the turnaround so that we can concentrate on our core
international businesses in Pest, Hygiene and Workwear,”
Rentokil Chief Executive Alan Brown said in a statement.

“The sale positions Rentokil Initial as a stronger and more
focused group.”

City Link, which has struggled with poor management in a
competitive market, posted an operating loss of 26 million
pounds ($40 million) for 2012, and a loss of 8.1 million pounds
in the first quarter of 2013.

The latter represented a 4.6 million pound improvement on
the same period a year ago, reflecting the impact of a new
management team that will now continue to run the business,
backed by a 40 million pound investment from Better Capital.

Analysts at Espirito Santo said the sale was welcome news.

“We believe the exit of City Link is much more important
than its financial consideration. City Link has been a
persistent thorn in the side of management’s efforts to deliver
a turnaround at Rentokil and has assumed both significant
financial cost and management focus, detracting from the core of
the business,” they said in a note.

Rentokil, which offers services from hiring work uniforms
and plants to catering and security, said it believed City Link
had only recently become sellable following improvements to the
business. It had been looking to exit for the last four months
and had held talks with more than one party, Brown said.

The group will take an exceptional charge of around 40
million pounds on the disposal, writing off 30 million pounds of
assets and taking cash costs of another 10 million pounds.

Rentokil also posted an 11 percent rise in group adjusted
pretax profit to 25.1 million pounds for its first quarter on
Monday, with acquisitions helping underpin a 2.7 percent rise in
revenue to 644.8 million pounds.

Despite citing tough trading conditions in Europe, the group
said it was retaining its full-year guidance.

Costa has grown rapidly in Britain to 1,500 outlets as
demand grows for coffee on the go, and is set on increasing that
to 3,500 globally by 2016, with a 500-store target in China a
big focus.

Some analysts warn, however, that expanding in China through
joint ventures may not yield big profits for some time and that
greater exposure to developed European markets could offer
bigger rewards and complement growth in an increasingly
competitive British market.

U.S. rival Starbucks has already opened dozens of
outlets in France in an attempt to compete with the thousands of
family-run cafes along boulevards in Paris and other cities.

Costa has been running stores at travel hubs in Spain,
Portugal and at the Gare de Lyon rail station in Paris to help
gauge further interest in the brand. In February it said early
signs were “very encouraging”.

It is now on the hunt for central Paris outlets, according
to an advertisement seen by Reuters from property agent Harper
Dennis Hobbs, which is looking for shops for Costa on busy high
streets in the French capital.

Harper Dennis Hobbs and Whitbread both declined to comment.
A spokeswoman for Whitbread said it would open a Costa store at
Nice airport in southeast France by the end of April.

Costa, which also has vending machine and wholesale
offerings, has over 900 outlets overseas, mainly via franchises,
in around 25 countries such as Poland, India and Saudi Arabia.
China is its second-biggest market, with 250 outlets.

“While higher risk, there could be a bigger profit pool in,
say, France and Germany than in China,” Morgan Stanley analysts
said in a recent note.

They said Costa was already generating around 80 million
pounds ($122.13 million) in earnings before interest and tax at
British retail stores, which was around 10 times what it might
make in China in three to five years.

Whitbread, which also runs British hotel chain Premier Inn
and the Beefeater and Brewers Fayre pub restaurant chains, makes
almost all of its 1.8 billion pound annual revenue in its home
market, with Costa generating around 30 percent of the total.

Shares in the company, which will post its preliminary
results next Tuesday, have risen 39 percent in a year.

Burberry said demand from affluent Asian customers for its more expensive handbags and coats helped boost sales. It said “aspirational” shoppers were spending less, but its most affluent customers were spending more and its staff were helping to push more expensive items.

Total group revenue for the six months to March 31 was 1.116 billion pounds, ahead of a company-compiled average analyst forecast of 1.098 billion pounds.

Burberry, which is reducing its Europe focused wholesale business to focus on tapping appetite for Western luxury in faster growing Asian and Latin American markets has been repositioning its brand at the higher end of the luxury market.

“Overall, this is a strong performance… While trading remains uneven, Burberry has regained strong momentum in critical Asian growth markets,” said Cantor Fitzgerald analyst Allegra Perry.

Last September, Burberry shook the global luxury industry by warning of a spending slowdown, particularly in China – the driving force behind demand in recent years – but it has been more upbeat on prospects there recently.

Fourth quarter group sales rose 10 percent to 503 million pounds ($769 million), beating Perry’s forecast of 489 million pounds and following a better-than-expected third quarter result. Retail sales, which make up 75 percent of revenue, grew 14 percent to 376 million pounds in the period.

Comparable store sales in the quarter grew by 8 percent, with double digit rises in China and Hong Kong.

Shares in Burberry, whose spring/summer campaign is being modeled by Briton Cara Delevingne and David Beckham’s son, Romeo, rose 4 percent to 1318.5 pence at 0844 GMT, taking it towards the top of the FTSE 100 risers in early trading.

Burberry said it would slow its store openings in 2013/14 after above average growth in the last two years. It said it would open a net 10 Burberry stores in the year, with three larger format stores opening in Shanghai to serve local customers and Chinese domestic tourists.

It expects the new stores to deliver a low to mid single digit percentage increase in retail sales.

In Europe, where consumer spending has been hit hard in a downturn, second half sales rose four percent to 288 million pounds, compared to a 15 percent rise in Asia Pacific.

This week the owner of luxury brand Louis Vuitton LVMH (LVMH.PA: Quote, Profile, Research, Stock Buzz) posted the lowest quarterly sales growth since 2009 at its fashion and leather division, while Italian fashion house Prada SpA (1913.HK: Quote, Profile, Research, Stock Buzz) has outlined plans to expand in the Middle East and the Americas to help offset lower spending in Europe.

In a Reuters survey this month, over half of 23 brands at stores in London, Paris and Milan – including Gucci, Hermes and Jimmy Choo – also reported lower demand from tourists, notably from Asia. Burberry, however, said tourist levels in the region had been fairly stable.

At its wholesale business, lower demand and account closures in Europe, Burberry’s largest region, saw revenue fall in the second half. The firm said it expects underlying wholesale revenue to fall by 10 percent in the six months to September 30.

Total group revenue for the six months to March 31 was 1.116 billion pounds, ahead of a company-compiled average analyst forecast of 1.098 billion pounds.

($1 = 0.6540 British pounds)

(Editing by Elaine Hardcastle)