Royal Mail Rides The Online Parcel Wave

The newly-privatised Royal Mail has revealed a rise in parcel delivery revenue of 8% in the nine months to December 29.

The spike in like-for-like earnings comes as the shift to online purchases continues.

The company said the figures were boosted by strong demand over Christmas.

Despite parcel volumes remaining flat, price delivery changes pushed revenue upwards.

Meanwhile, revenue for its letter delivery service was down 3% in the same period - blamed on the rise of email and social media.

Royal Mail said the trading performance was in line with expectations and it has confidence it will deliver results consistent with key value targets for the full year.

The postal firm's part-flotation last October by the Government was fiercely opposed by unions and Labour.

The Government still has a 30% stake but was widely criticised for potentially short-changing the taxpayer on the flotation price.

Shares in the firm closed at 588p on Thursday, up 78% from the 330p per share price.

In early Friday trading shares remained flat. The company is currently valued at around £5.9bn.

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Microsoft Gets Xbox One And Surface Boost

Global software giant Microsoft has reported better-than-expected results for the fourth quarter - on the back of booming Xbox One game consoles and tablet sales.

It made a profit of £3.94bn in the three months to the end of December, up nearly 3% on same period in 2012.

The Washington-based company sold 3.9 million Xbox One consoles to retailers and doubled revenue from its line of Surface tablets, compared to the third quarter.

Revenue rose in the fourth quarter by 14% to $24.52bn (£14.76bn).

The firm has also had a solid 12 months on the stock market, with its share price rising around 30% over the previous year.

Outgoing CEO Steve Ballmer said its devices and consumer segment had a "great holiday quarter."

Microsoft launched its Surface tablet last year

Surface tablet revenue rose to $893m (£537m) in the quarter, up 123% from Q3.

The company benefited from a US summer price cut to its first-generation models, unveiled the Surface 2 and expanded the number of places it is sold at retail.

"There's better hardware, the software continues to improve and there's better market perception," Microsoft's general manager of investor relations Chris Suh said.

However, analysts continue to question the company's new focus on manufacturing hardware on top of its mainstay software business.

The Surface division still need to reach manufacturing scale that would make it profitable and knock Apple off its iPad perch.

And the Xbox One, which launched late last year to rival Sony's PlayStation 4, is yet to maximise returns from game sales.

Market watchers are also concerned about the company's purchase in the current quarter of struggling Finnish firm Nokia's phone segment, in a deal valued around £4.7bn.

Xbox One has gone head-to-head against Sony amid Nintendo Wii's woes

On Thursday, Nokia revealed that its smartphone sales plummeted 29% in the December quarter, even though it released new Lumia models.

Microsoft has also continued to weather to storm of declining PC sales, once its main revenue source.

PC sales between October and December are estimated to have fallen globally by 6.5%, but Microsoft said revenue from its flagship operating system fell just 3%.

However it did not give figures for the split between Windows 7 or its troubled Windows 8.1 operating system.

Overall, revenue from its devices and consumer segment grew 13% to $11.91bn (£7.18bn), while business service revenue from server and cloud computing grew 10% to $12.67bn (£7.64bn).

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Hornby Hits The Rails Over Supply Chain Woes

Profit for model train maker Hornby has been derailed after the company admitted problems with its supply chain.

The Kent-based company released an interim management statement and also warned it has lost almost £1m in sterling reserves used to purchase products.

"As a result of the supply chain issues … the group sales for the financial year are now expected to be below current market expectations and below the total for last year," it said in the statement.

Full-year figures to March 31 are due to be released in early June.

Hornby over estimated Olympic-theme toys in 2012

In the previous year it made an underlying pretax profit of just £150,000 on turnover of £57.4m.

That was a 96% drop on the 2011-12 pre-tax profit, on 10% lower turnover.

In Friday's statement, it said net debt last December stood at £6.5m - down 18% on three months earlier.

Executive chairman Roger Canham added: "Whilst the outlook for the year is disappointing, we have used this year of management change to make some important decisions that we are optimistic will enable us to return to growth.

"I am confident that this draws a line under this painful period of the group's recent trading."

Shares plunged more than 30% in 2012 after it issued a profit warning over poor sales of its London Olympics merchandise.

Hornby expects good sales of its military models in 2014

Hornby was forced to offer up to 85% off its Olympic and Paralympic ranges, which include model London 2012 taxis, Olympic-themed train sets and die-cast athlete figurines.

It now hopes to find success in 2014 with wireless Scalextric cars and Airfix military models trading on the centenary of the First World War and 70th D-Day invasion.

Last June, Hornby told Sky News last June it was 'reshoring' some production facilities from China to the UK.

The company said rising labour costs and overheads in China were hampering returns for the firm.

The latest statement does not reveal if any production facilities will be repatriated in the current financial year.

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'Reshoring' Firm Hailed By PM Plots Float

By Mark Kleinman, City Editor, in Davos

One of the companies hailed by David Cameron for bringing manufacturing jobs back to the UK is drawing up plans for a stock market listing valuing it at hundreds of millions of pounds.

Sky News understands that Volution Group, a manufacturer of ventilation products, is likely to announce plans for a flotation within weeks.

Its owner, the private equity firm Towerbrook Capital Partners, has appointed the investment banks Canaccord Genuity and Liberum to handle the flotation.

Vent-Axia, a British-based subsidiary of Volution, has shifted some of its production capability from China to Crawley, Sussex, and was one of several companies cited by Downing Street as participating in the growing trend of reshoring.

Mr Cameron visited Vent Axia's Crawley factory on Thursday, ahead of his trip to the World Economic Forum in Davos, Switzerland.

In his speech to the conference, the Prime Minister said Britain needed to seize the opportunity to persuade companies to relocate manufacturing and production jobs to the UK.

"To win these jobs we need to understand what is driving these changes. Part of the story is about rising costs in the emerging markets, a natural consequence of these economies developing and their people becoming wealthier.

"At the same time, there are a number of factors pulling companies back home.

"Some companies are choosing to locate production nearer to their consumer markets in the West.

By shortening their supply chains, they can develop new products and react more quickly to changing consumer demand. More customisation. More personalisation. Better customer service."

Mr Cameron said the re-emergence of cheap energy in the US through the shale gas boom was a key factor in reshoring there.

"I want Britain to seize these opportunities. I think there is a chance for Britain to become the Re-Shore Nation," he said.

Towerbrook, which is best-known for its former ownership of Jimmy Choo, the upmarket shoe-maker, declined to comment on its plans to list Volution.

However, insiders said the buyout firm had decided to press the button on a flotation because of the growth potential arising from tighter building regulations, which are forcing landlords to upgrade ventilation equipment.

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More Rural Areas Could Get 5p Cut In Fuel Duty

Fuel duty in a further seven remote rural areas that have high prices at the pumps could be cut by up to 5p a litre.

The Government has already asked the European Commission to consider including 10 areas in the Highlands, Argyll, Cumbria, Devon and North Yorkshire under the duty discount scheme.

It now wants to add postal areas in Strathcarron, Ullapool, Lairg, Mallaig and Halkirk in the Highlands; Oban in Argyll and Bute; and Hexham in Northumberland to the application.

If approved, it could benefit about 125,000 people, according to the Treasury.

Chief Treasury Secretary Danny Alexander, a Highlands MP, said: "High fuel prices in areas where cars are a necessity, not a luxury, is a major issue in rural communities across the UK.

"So, following a supplementary call for information, I'm pleased to announce that seven new areas will join the 10 areas already part of our new application.

"Reaching agreement with the commission will not be easy, but we will now get on with making that case as strongly as we can."

The scheme was first launched in the Hebrides, Northern Isles, islands in the Clyde and the Isles of Scilly in March 2012.

It allows retailers there to register with HM Revenue and Customs to claim back 5p a litre on unleaded petrol and diesel within eligible areas.

A final decision on the Government's proposed expansion of the scheme is expected from the EC later this year.

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Nestlé Chair Warns Over UK Exit From Europe

By Mark Kleinman, City Editor, in Davos

The consumer goods giant Nestle would be forced to re-evaluate the extent of its presence in the UK if Britain decided to leave the European Union, its chairman has told Sky News.

In an interview during the World Economic Forum in Davos, Peter Brabeck-Letmathe said the company was committed to its business in the UK but that he could not envisage a separation from its biggest trading partner being in the country's interest.

Nestle, which makes Nespresso coffee capsules and Kit-Kat chocolate bars, employs approximately 8,000 people in the UK and accounts for exports worth roughly £400m. Its other brands include Nescafe, Smarties and Yorkie.

"From a purely economic point of view, I can't see that the withdrawal of the UK [from the EU] would be favourable for any UK industries," Mr Brabeck-Letmathe, an Austrian, said.

"It would isolate the UK economically. Every company would be forced to re-evaluate the implications of investing in the UK. It would no doubt have an impact on its ability to supply European markets."

The warning, ahead of a likely referendum on Britain's EU membership in 2017, echoes the views of many of the multinational business leaders gathered in Davos.

Prime Minister David Cameron told Sky News on Thursday that he did not believe the Government's stance on EU membership was jeopardising inward investment, saying that companies had been "voting with their feet".

He said: "The argument I make with these business leaders is that the best thing for Britain would be to secure our place within a reformed European Union.

"Simply saying 'let's hope this issue goes away, let's hope that Europe sorts itself out', without doing anything, won't work.

"We need to get in there, change Europe, make it work better, make it more competitive, make it more flexible - help make Britain more comfortable with its membership, have that referendum and then settle this issue."

Mr Brabeck-Letmathe, who also chairs the parent company of Formula One motor racing, said the EU and its single currency had been "an incredible success".

"The EU is full of failures and weaknesses like any large institution, but its achievements are greater. We have to work to strengthen the internal market."

He suggested that the trading bloc's governing mechanisms required reforms such as shrinking the number of EU Commissioners.

"The current system is not an efficient way to run it," he said.

In addition to his corporate roles, Mr Brabeck-Letmathe has also been a leading advocate of water stewardship in large companies, and unveiled new measures this week aimed at improving global water sustainability.

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Samsung Sees First Profit Fall For Two Years

Samsung, the world's biggest maker of smartphones, has reported its first quarterly fall in profit for two years.

The South Korean firm said the drop was due to a one-off employee bonus, a stronger currency and slowing sales of high-tech phones.

Operating profit for the last three months of 2013 was £4.68bn, down 18% on the July-September period.

It was a 6% decline from the previous year's figures.

Net profit rose 3.7% year-on-year but slowed significantly from the third quarter's 25.6% rise.

It said increased returns from its chip manufacturing unit failed to offset the reduced profitability of the Galaxy series of smartphones.

"Amid macroeconomic uncertainties such as a strong Korean won and increased concerns over possible quantitative easing tapering in the US, our earnings were lower than what the market expected," Samsung's Robert Yi said.

The quarterly profit drop was hit by a "negative currency impact" of £390m and the £440m employee bonus to mark the 20th anniversary of a marketing strategy.

Chairman Lee Kun-Hee laid the groundwork for the company becoming the world's biggest electronic firm. It has amassed large cash reserves in recent years.

And unlike key rivals such as Apple, Samsung owns its own manufacturing facilities.

But the company also warned of potentially lacklustre results continuing this year.

"For the first quarter it will be challenging for Samsung to improve its earnings as the weak seasonality of the IT industry will put pressure on demand for components and TV products," a company statement said.

The latest earnings result ended the company's long run of record quarterly profits on the back of surging sales of its Galaxy products.

The mobile division posted a quarterly operating profit of £3bn, down 2.8% from the third quarter.

"While the number of people buying smartphones is still increasing, it's getting harder for Samsung to tap new demand for its high-end handsets," HMC Investment Securities analyst Nho Gen-Chang said.

"So Samsung will have to lower prices to sell them, which will in turn decrease its profit margins," Mr Nho said.

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Screwfix.com Screw-Up Gives Mega Bargains

Canny online shoppers have found bargains galore on a DIY retail website, after a computer glitch slashed the price tag of expensive items.

Screwfix.com suffered the internet screw-up, which saw a swarm of customers buy a variety of valuable hardware and tools at the reduced cost of just £34.99.

Shoppers landed power tool bargains, and it is understood even expensive ride-on lawn mowers because of the inadvertent price drop.

Happy customers took to social media to spread the word of the pricing glitch before the website was shutdown over "technical issues".

Some shoppers apparently visited their local Screwfix stores on Friday morning to ensure they received purchases before a potential delivery recall.

In a statement given to Sky News, Screwfix said: "Last night a number of customers visiting the site experienced a technical issue which resulted in some products being displayed at obviously low prices.

"The issue has now been resolved and everything is back up and running as normal.

"We have reviewed all transactions and those customers affected are being contacted today and issued a refund."

But the company indicated that those who had dashed to shops early on Friday would get to keep their haul.

"This does not affect any customers that have already received a delivery or collected their goods.

"We sincerely apologise for any inconvenience caused," the firm said.

According to solicitor Maung Aye, from law firm Mackrell Turner Garrett, there is no recourse for shoppers who have not yet received their items.

"In a situation where you have paid for an item at a lower price and the shop has only realised after you have paid for and taken the item - ie where the contract is complete - the shop has sold you the item and you are not under any obligation to pay the difference or return the item," Mr Aye told Sky News.

"However, this will not necessarily be the case for those whose goods have not yet been dispatched or collected as the contract may not have been completed and the store can therefore retract their offer of sale."

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Non-EU Banks Slip Through Bonus Cap Loophole

By Mark Kleinman, City Editor in Davos

Major global banks such as Morgan Stanley and Nomura are benefiting from a loophole in new European pay rules that could leave British rivals at a big disadvantage.

Sky News understands that banks based outside the European Union (EU) are able to approve bigger bonuses for employees of their subsidiaries in the trading bloc without recourse to external shareholders.

That means Wall Street and Asian banks can instantly consent to variable pay for senior staff worth double the level of their salaries, the maximum permissible under the new EU cap.

However, Barclays, HSBC and other British banks will have to put the same measure to their annual investor meetings. Without approval, they will not be able to award bonuses worth more than 100% of salaries in any one year.

UK banks such as Barclays may be left at a disadvantage over bonuses

Sources said that banks including Bank of America Merrill Lynch and Goldman Sachs had formally discussed the issue at their group remuneration committees "to ensure appropriate corporate governance". Both had already given approval for the 200% cap, they added.

In practice, the UK banks will not be disadvantaged if shareholders back motions at this year's AGMs allowing them to pay bonuses at the higher level.

However, the fact that international rivals have already been able to give staff certainty about their pay from this year onwards was proving to be a valuable recruitment tool, bankers say.

Sky News has revealed in recent weeks the details of plans by Barclays, Goldman, HSBC and Morgan Stanley to raise base salaries through monthly or quarterly allowances for senior staff.

George Osborne, the Chancellor, is aware of the loophole benefiting non-EU banks, aides said on Friday.

Mr Osborne is fighting the ratio cap in the courts, and one senior Treasury official said that while the Government is confident that it has "a decent legal case", recent defeats to Brussels had left it only mildly optimistic about emerging victorious.

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AT&T Courts Europe Over £60bn Vodafone Bid

By Mark Kleinman, City Editor, in Davos

US telecoms giant AT&T is courting European regulators as it accelerates work on a possible £60bn takeover bid for Vodafone.

Sky News has learnt that Randall Stephenson, AT&T's chairman and chief executive, met the EU Telecoms Commissioner Neelie Kroes at the World Economic Forum in Davos to discuss his ambition to become a major player in the European market.

Insiders said that Mr Stephenson and Ms Kroes discussed a number of issues including the Commission's receptiveness to a potential takeover bid for a major European operator such as Vodafone.

The AT&T boss is also said to have held talks with Joaquin Almunia, the EU Competition Commissioner, in recent days, although an insider at the US company denied that they had "met formally" in Davos.

A combination of AT&T and Vodafone, which has been speculated about for months, would create a global behemoth in the telecoms sector with a market value of well over £150bn.

The talks between Mr Stephenson and EU politicians come as Vodafone prepares to hand over a £54.3bn ($84bn) windfall to its shareholders from the sale of its stake in Verizon Wireless to Verizon Communications.

The majority of that sum will be in the form of Verizon stock and the remaining $24bn in cash.

Vodafone and Verizon will both hold shareholder meetings next Tuesday to approve the $130bn deal, which was the largest announced corporate transaction in the world last year.

AT&T has yet to make an approach to Vodafone but has begun discussing options for financing what would be one of the world's biggest takeover deals in recent times.

City sources said that AT&T had been urged by some of its leading shareholders to delay an approach to Vodafone until after its US deal had closed.

Vodafone's sale of its Verizon Wireless stake is scheduled to complete on February 21. The UK company's shares will begin trading without the US mobile group's asset priced into them three days later, with investors receiving cash and shares on March 4.

Vodafone is to offer a free dealing facility for holders of up to 50,000 of its shares to trade their new Verizon shares.

Coincidentally, Mr Stephenson and Vittorio Colao, Vodafone's Italian chief executive, are both due to speak at the Mobile World Congress, a key industry conference, in Barcelona on February 24.

AT&T's board has not formally approved an offer for Vodafone but the regulatory, financing and legal work being undertaken by the US company suggests that an approach is likely this year.

Mr Stephenson has spoken publicly of the 'huge opportunity' in Europe to exploit the growth of mobile broadband across the Continent.

A takeover of Vodafone would give AT&T instant scale in major European markets such as the UK, Germany, Italy, Spain and Turkey.

Even after the Verizon Wireless deal closes, analysts expect Vodafone to be valued by the stock market at more than £50bn and possibly as high as £70bn, preserving its status in the ranks of the UK's ten biggest public companies.

Mr Colao has been examining strategic options for Vodafone's post-Verizon future, and he has already spent more than £6bn on the German cable company Kabel Deutschland.

He has also outlined plans for a £6bn network investment programme to take place over the next three years.

Reports have suggested that AT&T could pursue EE, the UK mobile group, as an alternative option to expand in Europe if a pursuit of Vodafone does not pay off.

AT&T declined to comment on Mr Stephenson's discussions with Commissioner Kroes, while Vodafone declined to comment.

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