Royal Mail expected to announce profits of 'up to £400m'

[Iva bigredbag]

Why don't we just admit it to ourselves, we will be privaitesed. No matter what the union ballots us.It will happen , This government wants it .So we made 3 to 4 hundred million pounds profit. Moya and the rest of them will get a nice little earner. Us the workers will get naff all.Always the same every year.

Yes and we might as well all just give up and let them walk all over us !, Seriously with that kind of attitude, we are all f*uc*ed. The reason why we all have a decent pay packet at the end of the week is because the union fought for it, so please drop the give in and die attitude, and start standing up for your job.

[clashcityrocker]

It is but it's a bit of a false argument.
This isn't Google or Facebook with a couple of hundred employees,very little overheads and the ability to churn large turnover into large profit.

But if you can't generate a large profit what incentive is there to invest several billion pounds?
Who in their right mind would be happy with a 0.01% return on their investment if they could just stick it in a low interest account and earn 100X that?

[fishtank]

But if you can't generate a large profit what incentive is there to invest several billion pounds?

No-one is going to invest several billion pounds of their own money in the company.
Any (unlikely)investment post privatisation will be in the shape of commercial loans leveraged against the company itself.
That's how "external capital" works.

[UnhappyGremlin]

If we have made this level of profit, then WHY do we need 'outside investment/capital'?

First of all you have to ask yourself if the "profits" are real.
Accountants can play games with figures. Assets/depreciation/capital costs being deferred. None of it is real.

Secondly although it looks like a big number it is peanuts as a return for the amount of turnover.

Thirdly where exactly is the profit made?

Well, they also played the same game when it came to RM making losses. It was just clever accounting. They always do it, they make finances look the way they want in order to operate in the manner they want.
In this case though, I think the profits are real, and aimed at making the company look good to a private investor or for the IPO.
RM has never made a big profit in relation to turnover, the most was in and around £1.5bn, but that was on a turnover of about £13bn to £14bn. But as we all know, if you can cut approx. 20% off staff costs, then that would be about £1bn extra profit.
A lot of equipment we use was bought and paid for a few years ago and stored, meaning that we made a loss/broke even or made a small profit then, and now with that expenditure gone, a profit now.
My basic point was, and still is, if, as they are apparently going to claim, we're making £300-£400m profit, then their argument for needing privatisation in order to access external money is moot. Even if they want to invest £2bn over 5 years, they'll have that in profit in about the same time if they can manage to sustain the current state of play, and it isn't like they would invest the lot in one go, is it? Any money they want/need to invest can be generated from within, with zero need to borrow. It would just require a bit of foresight and planning, which is why the RM board want to borrow, because they don't have the ability to do what is required.
As far as where it's made, GLS provide a fair bit, PF too(and in the future I'd expect there contribution to rise, until they're sold off), and as recently announced 567 times by MRM, DSA/Access Mail (£80m profit).

[itllnottouchyou]

Let say we used 25% for bonus.

100 millions is divided for Colleagues = 100,000 staff that could be enough for 1 grand bonus for every worker. So what the problem Royal Mail.

so what is the f****ing problem Royal Mail

[dvbuk55]

Let say we used 25% for bonus.

100 millions is divided for Colleagues = 100,000 staff that could be enough for 1 grand bonus for every worker. So what the problem Royal Mail.

so what is the f****ing problem Royal Mail

The problem is nobody gets rich giving it away. It isn't all about profit from the product of course - think about the assets available to dispose of.

[janitor]

Well by the time the sale goes through, they probably would have already sold all the assets.

[halfull]

so can moya tell me why we need external capital when we are making 4oomillion profit in a single year??

[clashcityrocker]

But if you can't generate a large profit what incentive is there to invest several billion pounds?

No-one is going to invest several billion pounds of their own money in the company.
Any (unlikely)investment post privatisation will be in the shape of commercial loans leveraged against the company itself.
That's how "external capital" works.

Obviously we move in very different circles but:
Somebody is going to have to stump up some cash when they buy the thing.
There will always be a certain amount of risk attached to that investment.
Why not just put your cash somewhere risk free?

[OnAFlyer]

so can moya tell me why we need external capital when we are making 4oomillion profit in a single year??

Because she, and many other people involved in the sell off are going to walk away with a very tidy sum of cash.

You have to remember Royal Mail means nothing to them, they come and go and relieve the business of large amounts of money whilst they're at it. We're the ones that will feel the effects (as members of the public not just employees) long after they've gone.

[dvbuk55]

Somebody is going to have to stump up some cash when they buy the thing.
There will always be a certain amount of risk attached to that investment.
Why not just put your cash somewhere risk free?

Somebody will have to stump up the cash BUT will they know they are stumping up? Do you know where your pension nest egg is invested - does anyone in any pension scheme - investors invest, but not with their own money?

[doorstepped]

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Royal Mail expected to announce profits of 'up to £400m' as it cashes in on online shopping boom

By This Is Money Reporter

PUBLISHED: 15:10, 19 May 2013 | UPDATED: 08:39, 20 May 2013

Comments (27)

Royal Mail is expected to unveil a huge jump in annual profits this week as it clears the way for a £3billion stock market flotation later this year.

Profits could almost double at the state-owned business as it should report a surplus of between £300million and £400million, up from the £211million it made in operating profits last year.

It is cashing in on the online shopping boom and the performance is expected to encourage the Government to press ahead with a privatisation later this year despite opposition from unions, the Sunday Times reported today.

It comes after a decade of cost-cutting which has seen employee numbers at the Royal Mail Group fall by around 50,000 to 150,000.

After four straight years of losses, the core postal business - which delivers the six-days-a-week service to 29 million addresses - returned to the black in 2012 under the leadership of chief executive Moya Greene.

Revenues stood at £4.5billion last year.

The potential path to privatisation has been helped by the Government's decision to take on Royal Mail's £37.5billion pension liabilities.

The preferred option is believed to involve the public buying shares alongside City investors, in an echo of the 'Tell Sid' campaign that pioneered the public sale of shares in British Gas in the 1980s.

At least 10% of the shares have been earmarked for the workforce, although it is not known whether staff will get them for free.

In its half-year results in November, Royal Mail reported that its UK parcel revenues were up by 13 per cent, with parcels representing 47 per cent of total group revenue.

Revenue from letters was 2 per cent higher following an increase in stamp prices earlier in the year, although letter volumes fell by 9 per cent.

The amount of marketing mail increased, accounting for around half the daily postbag. The daily UK mailbag fell by four million over the year to 54 million items.

Ms Greene said at the time that Royal Mail was climbing out of a 'very deep hole', with all parts of the business profitable.

[JP1]

£300m from the turnover is actually quite good. Revenue is about £8bn.

In 2012 the profit margin was 2.2%. This sounds really low, and of course Moya tells us this is really bad. Because, for example, UPS worldwide profit margin is about 7%, FedEX about 3%, TNT 6% etc. And this is worldwide or European margins where situations are very different (more opportunity for economies of scale, cheaper operating costs elsewhere, lower wages etc.). In a UK only context, Royal Mail's profit margin is similar to Sainsbury's, and Sainsbury's is considered to be a very successful supermarket with a good profit margin.

If Royal Mail have made £300m or £400m, then that 2.2% will be higher, especially since we haven't had a pay rise this year.

But 2.2% in our context isn't that bad. We have a much bigger workforce to pay, and wages that are mostly higher than the competition, and we also have the universal service obligation which means even a single letter has to go up a long track to cottage for example. Any private company would either charge loads for same thing, or just send it off to us as downstream access.


I struggle to see why a profit making business, that is providing a public service, and decent jobs to thousands of people is going to be privatised. It is purely a ideological reason because this government wants to see a smaller State. I know Labour made plans to privatise Royal Mail too, but at the time, it was making a loss, so there was more reason to get rid of it.

But if it's sold now, what will happen is the government might see a big boost of £2bn or so, as well as achieving their ideological goal of minimising State interference. But if the long run, we lose out. At £300m profit a year, it doesn't take too long to make £2bn. That's money directly to the Government, after Royal Mail have spent their bit on necessary things. And this is money that is consistently coming in year after year as long as Royal Mail remains consistent. Whereas £2bn will be blown straight away.

A privatised Royal Mail might be £300m per year too. And yes, some of this would be due in tax. But nowhere near as much. And the business will probably try to avoid tax too, just like almost every big business. And at the same time we will see a more expensive service for everyone and poorer working conditions as the incentive to make more cost cutting methods to increase profits is made much bigger.

There's a shortsightedness to the Government, because you only get 5 years to prove yourself and try to get more votes. So the people who have the same ideology as the Government will back them and vote them back in in 2015.

[DB1100]

I like the bit about the shares,I bet not all the staff will have to pay for them,just us the P.B.I.

[Pinky 1]

It comes after a decade of cost-cutting which has seen employee numbers at the Royal Mail Group fall by around 50,000 to 150,000.

After four straight years of losses, the core postal business - which delivers the six-days-a-week service to 29 million addresses - returned to the black in 2012 under the leadership of chief executive Moya Greene.

All hail Moya