The UK government plans to privatise the state-owned Royal Mail service later this year. The Royal Mail will be privatised via an initial public offering, with employees able to purchase up to ten percent of the service’s shares, provided they hold them for at least three years following their purchase.
While a state-owned service like the Royal Mail may not seem like the ideal target for investors, the heavily unionised service has attracted attention from investors, both of the retail and institutional variety. Part of this appeal is due to the changes made by the Royal Mail in the last five years in an effort to increase profitability.
Unlike many other state-owned mail services, the Royal Mail is profitable. As part of a large-scale modernisation plan, the service closed over 30 percent of its centres in an effort to reduce costs. At the same time, it’s invested heavily in delivering parcels and products from some of the UK’s most popular online retail outlets.
Analysts have predicted that investors may be put off by a gradual decline in the amount of letters delivered by the Royal Mail, with many letters replaced over the last decade by email. Despite this, a growth in other deliveries – and in premium delivery services – has increased the Royal Mail’s revenue from its services.
The service has also been aggressively campaigning to win back business that was lost to private sector competitors in the last decade. The company’s new source of capital will be useful in expanding its service network and allowing it to maintain a greater link with European online shopping markets.
While public-to-private offerings have a mixed record in the UK, the Royal Mail’s sustained growth and significant revenue from parcel deliveries make it a solid investment for people interested in owning part of the country’s heritage.
