Royal Mail Chairman plans to purchase 51 percent of company
Allan Leighton, the chairman of Royal Mail, has told senior ministers that he wants to purchase 51 per cent of the state-owned business on behalf of staff.
Leighton is proposing to borrow more than GBP 2bn from the City to fund the partial privatisation, which would see the shares held for the benefit of Royal Mail’s 200,000 employees in an Employee Share Ownership Trust.
He believes that he can bulldoze through opposition to privatisation from trade unionists and some Labour politicians if Royal Mail’s staff are the beneficiaries of the deal.
Leighton is confident that the group’s results, which will be unveiled this week, will show that it can generate sufficient cash flow to finance the GBP 2bn debt. He has also identified valuable assets – such as a European parcels business, GLS, worth an estimated pounds 1bn – which could be sold to reduce the borrowings rapidly.
Royal Mail will disclose that it generated operating profits of GBP 530m last year, up from GBP 220m in the previous year. This is well ahead of earlier estimates and means that the group’s 200,000 employees will each receive a special bonus of just over GBP 1,000.
“The results will show that we’re worth around GBP 4.5bn,” said an executive. “That represents a massive turnaround.”
When Leighton launched a three-year recovery plan in 2002, Royal Mail was losing more than GBP 1m a day.
The group will also announce that its delivery performance, as measured by Postcomm, the regulator, has been on target for eight months and was its best for a decade over the past three months. It will also disclose that for the first time in many years it has been delivering more than 92.5 per cent of first class letters the next day.
The one major snag with Leighton’s privatisation ambition is that it appears to fly in the face of a statement in Labour’s general election manifesto that it had “no plans to privatise it” and that it “wants to see a publicly owned Royal Mail fully restored to good health”.
However, the Government has promised to launch a review of the impact on Royal Mail of the introduction next year of full competition in the postal market. Leighton and his chief executive, Adam Crozier, are convinced that this could provide the new trade and industry secretary, Alan Johnson, with a justification for selling half of the business.
Yesterday, there were mixed signals about how rapidly Johnson would press ahead with the review. A government member said: “Johnson is in no hurry, this is not at the top of his priorities.”
By contrast, Royal Mail was told last week that the review could begin imminently and would take just a few short months. Johnson is a former general secretary of the Communication Workers Union, which represents postal workers, and is a former postman.
Crozier’s most controversial statement this week will be that the business needs an extra GBP 2bn of investment to modernise its delivery network. “The French are spending billions over the next few years and we have ancient kit compared with the Dutch and the Germans,” said an executive.
Leighton and Crozier are anxious that the forthcoming review should allow them greater flexibility in the way they charge for services. They want to cut charges for business customers and raise them for domestic users.
