Royal Mail enjoys profits surge as flotation moves step closer

The result for the year to March 31 is more than double the £152m in 2012 – when there was one less trading week – as the state-owned firm benefits from the boom in online shopping and recent efforts to modernise the business.

Chief executive Moya Greene, who last year returned the core postal business to profitability after four successive years of losses, said it was a strong performance and that the transformation of Royal Mail was under way.

The core postal business, which delivers the six-days-a-week universal service to 29 million addresses, reported operating profits of £331m and improved its margin from 0.5 per cent to 3.9 per cent. Parcel deliveries now account for almost half of the group’s revenues of £9.3bn in the last year.

The performance is expected to encourage the Government to cash in on the turnaround by pressing ahead with a privatisation this year, despite opposition from unions representing postal workers and managers.

Business Secretary Vince Cable yesterday insisted there was “no alternative” to privatising the Royal Mail and said the organisation still faces a “fundamental threat” from email that meant it must be reformed in order to survive.

However, unions have warned that services will go into decline if the business is sold off.

The preferred option is believed to involve the public buying shares alongside City investors, in an echo of the ‘Tell Sid’ campaign that pioneered the public sale of shares in British Gas in the 1980s.

At least 10 per cent of the shares have been earmarked for the workforce, although it is not known whether staff will get them for free.

The Communication Workers Union (CWU) will this week start balloting Royal Mail workers on whether to boycott the post of rival companies in a move which could lead to millions of items being left undelivered.

Around 120,000 members of the CWU will vote from today, with the result due on June 19.

Private mail makes up 44 per cent of the daily postbag, so a boycott would leave 26m items undelivered each day, including energy bills, statements, and business mail contracts won by companies including TNT and UK Mail.

The ballot will also gauge opposition to the plans to privatise Royal Mail and backing for a campaign of refusing to co-operate with new efficiency measures.

Dave Ward, CWU deputy general secretary, said yesterday’s results offered more evidence that Royal Mail should be kept in the public sector.

He added: “Improved productivity and modernisation has played a role in these good results. Privatisation isn’t necessary and it would destabilise the workforce and the good progress being made.

“The support of the workforce is crucial to the success of the company.

“Price rises have also clearly played a role in the rise in profits. Fattening the goose in the short term may lead to volume decline as customers seek alternatives.

“One thing’s clear, under privatisation prices would rise further and services would be hit as private companies operate for profit, not for people.”

An initial public offering (IPO) is expected to value the state-owned business at £2bn to £3bn. It would be Britain’s biggest privatisation for 20 years.

Royal Mail has 150,000 staff and annual sales of £9.15bn.

The 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.

Yesterday, Ms Greene said that she had been meeting potential investors in Britain, the United States and Canada.

“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.

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