Bottom Line: Hard work starts now results are delivered

Marion Dakers
VINCE Cable is right: it’s probably too soon to be booking losses on behalf of the taxpayer for the Royal Mail share sale.

The stock rose yet again yesterday, with investors impressed by a set of results that delivered but did not beat forecasts.

However the Royal Mail’s bankers handled the float, at least the maiden earnings report has gone well, with no surprises big enough to prompt re-ratings from the City’s scribblers.

Panmure Gordon kept its target at 610p, while the more pessimistic UBS stuck to its “sell” rating and 450p goal. The froth of the initial float has yet to clear enough to give analysts, let alone the business secretary, a coherent picture of where the shares are heading.

Meanwhile, the Post Office, which remains in state hands and separate from the Royal Mail, was yesterday promised a further £640m of public money to modernise its branches – underscoring the government’s determination to keep a strong postal network, at some expense. Royal Mail has its side of this expensive bargain to keep.

And there are other costs looming. In amongst the profit and revenue growth, Royal Mail’s “people costs” rose three per cent to £2.32bn, even as other operating costs were slashed.

Industrial action that looms – even before these expenses are properly tackled – was flagged by Cable yesterday as a reason for accepting a seemingly low IPO price.

Royal Mail’s maiden results delivered, but investors should join him in looking to the longer term for the firm’s real prospects.

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