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UK to sell remaining stake in Royal Mail

LONDON: The UK government has announced the sale of its remaining 30 percent share in Britain's Royal Mail this year as part of a £4.5 billion plan to reduce public sector debt.

Current value of the stake is £1.5 billion, based on a share price of 526 pence, and when sold will complete a privatization program that began in October 2013 and raised £1.7 billion.

Royal Mail Magna Carta 1A day after the flotation that saw 10 percent of the shares going to employees, the Royal Mail stock price rose to 455 pence - valuing the company at £4.55 billion and leading to charges the government had undersold it.

Of the remaining stake, Conservative government finance minister George Osborne said: "It is the right thing to do for the Royal Mail, the businesses and families who depend on it – and crucially for the taxpayer." He added that reducing the country's public debt would deliver lasting economic security: "For as everyone knows, when it comes to living within your means, the sooner you start the smoother the ride."

As part of his latest budget cuts, Osborne also announced the UK Department for Transport will sell land adjacent to London's King's Cross railway station that has a current book value of £345 million.

Moya Greene Royal Mail CEOIn May, Royal Mail reported a 2014 pre-tax profit of £400 million on revenue of £9.42 billion. Total investment increased from £617 million to £658 million during the period as net debt fell from £555 million to £275 million.

CEO Moya Greene (right) commented: "We have delivered operating profits in line with our expectations. Our continued focus on efficiency resulted in a better than expected UK cost performance, offsetting lower than anticipated UK parcel revenue. At the same time we have delivered a large number of innovations at pace as we transform our business."

The company said parcel delivery volume in the UK covering business-to-consumer (B2C), consumer-to-any-recipient (C2X) and business-to-business (B2B), will grow at four percent per annum in the medium term. "However, we estimate that the impact of Amazon delivering an increasing number of parcels using its own delivery network will reduce the annual rate of growth in our addressable market to around 1-2 per cent in the short term."

The fastest areas of growth for UK parcels traffic is expected to be clothing, footwear, toys and sports equipment.

In March this year, the company launched a shopfront on Alibaba's Tmall Global e-marketplace. The platform will offer 300 million Chinese consumers the opportunity to buy British products and have them delivered by Royal Mail's Parcelforce Worldwide service.

Related: Employees to get more Royal Mail shares.

 

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