Post Office profits surge as government prepares for privatisation‏

The Royal Mail has increased its operating profits by more than half, from £152 million to £403 million, since March 2012, strengthening the government’s conviction towards privatising the company.

Operating profits are up from 1.7% to 4.4%, generating a £334 million profit for the state-owned company. Since 2010, when a modernisation of the company was implemented, the Royal Mail has reduced itself by 30%, heavily cutting its costs.

The improvements have been achieved through higher revenues brought in through online packages surging in demand along with the increase in the price of stamps, while the company cut costs across operations.

Letter revenues in the company rose 3% despite the fact that their total volume fell 8% last year. Parcels on the other hand have increased 13% with the increasing tendency towards shopping online, an operation which now accounts for 48% of the company’s revenue.

“We are well positioned to continue to benefit from the structural change to e-retailing, which is driving increases in parcel volumes, and to manage the decline in letters,” said Moya Greene, chief executive of the Royal Mail.

As with Lloyd’s Banking Group and the Royal Bank of Scotland, the UK government is planning to privatise the Royal Mail this financial year, in a deal that could be worth £2-3 billion, by floating Royal Mail shares on the Financial Times Stock Exchange (FTSE).

British business secretary Vince Cable has made the case for privatisation, saying: “They’re going to need very large sums of capital if they’re going to compete against the email which is taking away much of their business and invest more in parcels which is the growth business.”

Patrick Corby