Just because Royal Mail is in a fit state to be sold doesn't

[TrueBlueTerrier]

Just because Royal Mail is in a fit state to be sold doesn't mean it should be

http://www.guardian.co.uk/business/nils ... rce=feedly" onclick="window.open(this.href);return false;


Royal Mail is making great strides as a state-owned business run at arm's length so there is no pressing reason to sell now

Royal Mail's full-year profit numbers were intended to be read as the first draft of a flotation prospectus. Chief executive Moya Greene was in full warm-up mode. "Our strategy is delivering," she declared, as operating profits rose from £152m to £403m.

In business terms, her claim is fair. Royal Mail is quite clearly in a fit state to be sold, if the government really is committed to this unpopular policy. The huge deficit in the pension fund has been towed away by the state and the scheme has an £825m surplus. The regulatory freedom to crank up the price of stamps has done wonders for that division's profit – the volume of letters fell 8% last year but revenues rose 3%.

Looking ahead, a one-third share of the UK parcels market is an enviable position, as home shopping booms. And, yes, operating profit margins are rising, to 4.7% across the group, but there should still be plenty of room for improvement. Deutsche Post, for example, achieves 8.6%.

The unanswered question is why Royal Mail needs to be sold. The old argument was that only the private sector could provide the necessary capital and management clout to overhaul the business. That idea looks out of date, now that Royal Mail is generating a heap of cash and modernisation has proceeded. The free cash inflow was £334m last year, net debt was reduced from £1.19bn to £906m and there has been no major strike during Greene's three years at the helm.

By stealth, the government's position appears to have mutated into the claim that only the private sector should provide capital to the Royal Mail. That's a political judgment and it's out of tune with opinion polls, which show consistent public opposition to a sale. The majority's instincts are correct. Royal Mail is making great strides as a state-owned business run at arm's length from government. There is no pressing reason to sell now. Just because it's possible doesn't mean it's desirable.

[Budfrog]

Absolutely spot on.

[UnhappyGremlin]

.....and there has been no major strike during Greene's three years at the helm.

Not yet.
Agree with the article as a whole.
There is no NEED to sell it, the Government want to for a quick buck. Which will backfire. Guaranteed.

[Budfrog]

I suppose from Greene's perspective it's a bit of a Catch 22. If the profits didn't improve no one would want to buy RM and if they increased there would be a clammer to retain the business as a national asset.

Most analysts looking at the situation objectively know that with the right management in situ there are not many arguments against keeping the business in public hands save for the short term injection of funds into the treasury which will be dwarfed by the longterm benefits.