Bumper profits ready Royal Mail for flotation

ROYAL Mail is expected to reveal that annual profits have almost doubled this week as it gears up for a £3bn flotation.

Analysts expected the state-owned delivery business to report an operating profit of between £300m and £400m tomorrow, with sales boosted by increased consumer spending on online shopping.

Royal Mail is also expected to shed some light on proposals for an initial public offering, which is the government’s favoured proposal, although union action has presented a potential stumbling block. The Communication Workers Union, which represents the majority of Royal Mail’s staff, is considering industrial action as part of an effort to put off investors.

The government hopes to win workers over by offering staff at least 10 per cent of Royal Mail’s shares at a discount, although business minister Michael Fallon has said that if unions continue to stand in the way, a private equity sale may be considered.

A year ago, Royal Mail said operating profits reached £211m as sales hit £9.5bn. This was substantial progress on the £39m operating profit of a year earlier, when sales were only slightly lower.

For the most recent financial year, profits have been boosted by more business from delivering online purchases, with shoppers spending around 12 per cent more online in 2012 than in the year before, although rising stamp prices will also have contributed.

Members of the public as well as Royal Mail staff and City investors are expected to be given the opportunity to buy shares, as the government attempts to recreate the public share ownership culture of the 1980s ahead of selling off its stakes in RBS and Lloyds.