Royal Mail faces strike action as profits rise expected

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Royal Mail faces strike action as profits rise expected to pose further questions about sell-off this week

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Royal Mail is expected to report on Wednesday that half-year profits have risen by a modest 5.6 per cent, but the figures could be overcast by the threat of industrial action.

Union bosses, who are due to meet on Monday, have until Wednesday to decide whether to go ahead with a strike over pay and terms, meaning the action could be announced on the same day that Royal Mail issues the first results since its recent flotation.

Royal Mail shares closed at 538p on Friday, up from the 330p float price.

The large rise has sparked claims that the privatisation was botched and Royal Mail was sold on the cheap.

Analysts said the firm was likely to play down its profit rise to avoid fuelling claims that it was under-priced.

The figures are expected to show interim profits were £133million, up from £126million last year.

Turnover is expected to be around £4.47billion, up from £4.35billion.

Last week leading bankers from a host of City institutions – including Goldman Sachs and UBS – were told by MPs they had ‘failed the taxpayer’ for advising the government to sell shares at 330p each. Shares last night closed at 539p, down 6p.


UBS, which was one of the banks that worked on the privatisation, also told investors this week to ‘sell’ the stock.
It said the upcoming results could show a slow-down in the parcels business.

Royal Mail expects its parcels arm to grow strongly in the coming years, offsetting the decline in traditional post such as letters.

But UBS warned: ‘We would expect to see some weakness in parcels due to tough comparatives, pricing increases and a slowdown in e-commerce growth.’

Investec analysts said the results ‘will also contain some one-time exceptional items associated with the listing, together with pension reform credit’.

The analyst firm added: ‘The other main expected news should be the financial detail of the much anticipated labour agreement with the Communication Workers union (assuming that a deal is reached shortly).’