Feisty Moya Greene delivers Royal service for shareholders

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The Royal Mail is not a bad business, as investors clearly decided immediately it was floated.

The letter post may be shrinking – it fell 4 per cent in the first half of the year – but that is hardly unexpected. Shareholders are keenly aware that the management under feisty Canadian Moya Greene has the freedom to raise the price of first class postage stamps if things get really sticky.

But they are also aware that if the unions can be brought along there are enormous savings to be had as sorting offices are closed and mechanised. Indeed, this process will over time no doubt yield some important property development opportunities, some of them in city centres.

What is undeniable, however, is that online shopping is a growth area for the whole economy and now accounts for at least 10 per cent of retail turnover and rising.

Not all the income from online parcel delivery services will accrue to the Royal Mail. The biggest beasts in the online jungle like Amazon are looking at all kinds of different routes to the customer including secure pick-up boxes at Tube stations in London and across the railway network.

Nevertheless, there is a growth opportunity for the Royal Mail in parcels where revenues were 9 per cent higher, partly fuelled by price increases. Greene has the opportunity to exploit this both at home and overseas through General Logistics Systems, its European delivery business. It competes well with Continental giants like Deutsche Post, the owner of the DHL express delivery service.

What we know about Royal Mail from its centuries in the public sector is that it is over manned, offers second rate customer service (some of this may be down to the Post Offices, over which it has no control) and has been resistant to modernisation.

All that has the opportunity to change and make the Royal Mail a more dynamic business. The doubled profits in the first half of the year, a good dividend promise and the possibility that the Queen’s head could eventually end up in overseas hands have encouraged investors from across the globe to become involved. It has made Royal Mail a far more valuable company that anyone really envisaged.

That may be damaging to the politicians and the investment banks who misjudged the offer. But it will have shareholders, including the hedge funds who could decide a future merger, rubbing their hands.