Annual profits rise to £324m as the government prepares to sell the 497-year-old postal service
Royal Mail has reported a 60% increase in pre-tax annual profits to £324m, as the government prepares to sell off the 497-year-old postal service in the most ambitious privatisation since British Gas in 1986.
The company, which ministers hope to float on the London Stock Exchange within a year, said its pre-tax profits in the year to the end of March increased to £324m from £201m a year earlier. Sales, which were boosted by a 30% rise in the price of first class stamps to 60p, increased by more than £500m to £9.3bn.
Moya Greene, the chief executive, said: "Our strategy is delivering. The transformation of Royal Mail is well under way."
Speaking publicly about the privatisation plans for the first time, she said a sale of part of the business would allow Royal Mail to "combine the best of the public and private sectors".
She promised that the sale would not affect Royal Mail's universal service obligation to deliver to every address in the UK six days a week for the same price. "We are honoured to provide the universal service to more than 29m addresses across the UK," she said. "[It] can only be changed by a vote in both houses of parliament."
Greene pleaded with her staff, who have rebelled against the sell-off plans, to "continue to drive our business forward as we seek to realise our collective objectives".
"These are times of significant change and we are asking a lot of our people," she acknowledged.
The Communication Workers Union (CWU), which represents postal workers, has vowed to fight the sale, which it says will lead to a "worse deal for customers, staff and thousands of small businesses dependent on the Royal Mail". Dave Ward, CWU deputy general secretary, said the positive results were "more compelling evidence of why Royal Mail should be kept in the public sector".
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| Royal Mail privatisation is pushing ahead as profits are up. |
"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."
Michael Fallon, the business minister, has warned the union that the world's oldest postal service could be sold to sovereign wealth funds or other foreign buyers if the CWU continues to fight its flotation. He said the government was "committed" to the sale and Tuesday's results were "another encouraging step" towards it.
The business secretary, Vince Cable, said there was "no alternative" to privatisation, and Royal Mail still faces a "fundamental threat" from email, texts and social media.
Greene, a Canadian who joined Royal Mail three years ago from Canada Post, said she has held discussions with a number of "high quality investors" in Canada and the US and said it would be "foolhardy" not consider the sale of the company to foreign buyers. "The IPO [initial public offering] market in the past few years has been quite unpredictable," she said. "It would be foolhardy not to consider other options."
She said she was disappointed with the union's "philosophical" stance against privatisation. "They believe government ownership should continue even though it fell into a very deep hole," she said.
Greene said that before Royal Mail embarked on its transformation plan, the company was "20 years behind" postal services in other countries.
She indicated that Royal Mail workers will face further rounds of redundancies as the company "has to be sized appropriately for the [declining] traffic we have to process". She declined to state how many more jobs are likely to be lost, but said more than 50,000 have been cut over the past decade.
Staff are due to collect 10% of the shares in the company, which could be worth £1,500 for each employee, when it is privatised.
However, the union said the government could not "buy off" postal workers with the vague offer of shares in the privatised company. "That's not going to cut the mustard," said Billy Hayes, general secretary of the CWU. "Our members don't want £1,500 if it is going to result in depressed terms and conditions and another five streets on a delivery."
Greene said profits would have been as high as £440m accounting for "transformation costs" of redundancy payments and other costs in reshaping the business, which is switching its focus from letters to parcels.
"Just over three years ago, our core UK business had significant cash outflows [ie was making losses]," she said. "Now, despite the challenging UK economic conditions, UKPIL [UK Parcels, International and Letters] contributes the majority of group operating profits."
She said the boom in online shopping had boosted the company's parcel business, to account for almost half of revenues. The number of parcels delivered last year increased by 70m to 1.4bn.
However, she said the letters business was suffering a "structural decline". On average 58m letters are sent every day, compared with 63m in 2011-12.
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Article source : http://www.guardian.co.uk 
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