Surge in profits pushes Royal Mail towards sell-off

Wednesday 14 November 2012 11:00

Hitting Britons with stamp price rises of almost 40 per cent helped Royal Mail to post a 12 per cent jump in half-year pre-tax profits to £115m yesterday, marching the postal giant closer to privatisation.

The profit surge came despite a continuing decline in the number of letters in the postman's daily sack, down 9 per cent to 6.8bn in the six months to 23 September.

The group instead cashed in on its May increase in stamp prices when the cost of a first-class stamp rose from 46p to 60p. The company, which delivers online behemoth Amazon's goods, also continued to benefit from Britons' surging levels of online shopping: revenues at its parcel businesses grew 4.6 per cent to £2bn.

The better figures will help the Government as it aims to start selling or floating at least part of the business by its scheduled date of autumn 2013.

Royal Mail said: "This is the second consecutive year of profit growth in the first half at group level. All our main businesses are profitable."

Its "universal service" letter division, where postmen deliver to 29 million homes a week, remained in the black after returning to profit in the last full year. A loss of £41m in the six months to September 2011 was converted into a £99m profit.

The Government has hired UBS to start working on a sale of the business, the most high-profile privatisation since John Major sold off Britain's railways. The postal group has hired Barclays to work by its side.

But potential investors may be wary that Royal Mail's "people" costs – hiring and firing – rose slightly to £2.5bn in the six months.

Chief executive Moya Greene, whose £1.1m pay packet last year made her one of Britain's best-paid public-sector officials, appeared to warn of more job cuts to follow the 42,000 posts axed since 2002. She said: "Our modernisation programme involves painful, difficult change."

Previous cuts have been made through voluntary redundancies, but that promise has been extended for just one year. Greene said: "We have started discussions with the CWU [Communication Workers Union] to reach an agreement."

A key reason for the reversal in Royal Mail's finances was the Government's take over of its giant pension fund, which saw £28bn of assets transferred to the state.

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