Royal Mail is set to unveil a sharp jump in profits this week, clearing the way for a sell-off of the business next year.Officials and bankers working on the sale say Tuesday’s figures are the crucial test of whether the business will be ready for a float in the third quarter of next year, which could raise £2bn, reports the Sunday Times.
The paper reports that the government has already sanctioned a roadshow of prospective investors after Christmas.
“That is the absolute key to the privatisation,” one banker involved in the process told the Sunday Times.
“If Royal Mail can show that the core business has turned the corner and has become attractive to private investors, we are on track for the sale.” Barclays is advising Royal Mail and UBS is assisting the government.
Royal Mail is one of Britain’s biggest employers. It has 159,000 staff and annual sales of £9.5bn, half of which comes from delivering parcels.
The core postal business made an operating profit of £23m, up from a loss of £120m last year.
In the last reported financial year, the group’s parcels businesses accounted for 48pc or £4.2bn of total revenues.
The demand for express delivery is growing, too – Royal Mail said the UK’s express parcels market is currently worth £5.8bn a year.
Last month Royal Mail Group announced it was investing £75m in Parcelforce Worldwide in a move it says will create 1,000 jobs and fuel a decisive shift away from delivering letters to servicing online retailers instead.
The delivery service, which is undergoing a radical modernisation effort, said the investment will fund a four-year expansion programme that will include opening new parcel processing centre in Chorley in Lancashire next summer and two new depots in Cornwall and Hampshire.
Moya Greene, chief executive, said: “Our £75m investment is part of Royal Mail Group’s strategy to grow its parcels businesses in the UK and overseas. Our strategy is to convert the rise in parcel volumes in to profitable growth. That means becoming a much more customer-focused company being run on commercial lines and investing in new, vital technology.”