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Royal Mail: profit & privatisation

by sourcingfocus.com

               

In a release today half-year operating profits for Royal Mail reached a total of £144 million, the report also confirmed the companies move towards privatisation, saying: “Obtaining external capital is a key part of the transformation process as we become a more parcels-focused business and make the investment in technology to do so.”

Reports released over the weekend had raised expectations that the release of half-year results would stimulate the public services’ move towards privatisation if clear profits were displayed.

In the release today, parcel revenue, which represents almost half of the total group’s mail, had increased by 13 percent, while a range of stringent cost cutting measures have helped to improve overall profits. Royal Mail has also moved to compete in online shopping delivery, signing Amazon as a customer and partnering with Chinese based ZJS with an eye on expanding into overseas markets.

The turnaround within Royal Mail has been sizeable given that the group had posted a loss of £41 million in the half year to last September. The postal service has also seen sustained years of poor results and negative headlines relating to poor service.

The delivery of increased profits by the Royal Mail had been a key condition of the go-ahead of the company’s planned floatation next year. The publication of strong profits is expected to further boost investor interest surrounding the Royal Mail.

While the group has been boosted in recent years, the road towards profitability has seen job cuts, sorting centre closures and opposition towards the move towards privatisation from postal unions.
In reaction to the publication of the report, Dave Ward, the deputy general secretary of the Communication Workers Union, said that a move towards privatisation would damage the service through competition, adding: “We don’t want competition at any cost. Closures, bullying, cost cutting and privatisation will destroy the industry. We’ll stand up to protect it.”
The current success of Royal Mail in transforming its services, taking on large clients and competing with rivals after a sustained slump has seen government support placed behind the companies bid for floatation.

Michael Fallon Minister for Business said: “These results from Royal Mail are encouraging, showing how Royal Mail staff and management together with the Government’s reforms have put the company on the road to sustainable health and long-term viability. Parliament decided, via the Postal Services Act 2011, to inject private capital into the company in order to secure the future of the universal postal service. The structure and timing remain open, but Government is committed to doing that to ensure the ongoing viability of the company.”

The Royal Mail included a statement underlining the need for Whitehall to sign off on the privatisation however the government is already believed to be planning to promote the group to potential buyers during 2013.

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