Royal Mail in the Dragon’s Den
Postal & Logistics Consulting Worldwide (PLCWW) asks questions surrounding the partial sale of Royal Mail. The UK government has indicated it wishes to sell off a 49% stake in Royal Mail. Investors and businesses around the world have now started looking at this opportunity.
What will they want to ask Royal Mail before deciding whether to pursue the opportunity of taking a 49% stake? We have pulled together the key 10 questions we would ask if we had them in the Dragon’s Den?
- How would I get my investment back? If I needed the cash in future how can I exit the arrangement?
- What exactly do you need a cash injection for, and what return on investment would that cash give to the Royal Mail Group?
- What is your dividend strategy?
- What controls on the business will remain with the 51% shareholder ie the State?
- How do you expect to control or cap cash calls from your pension funds?
- How many of a) your senior managers and b) all your employees to you expect to hold shares? Will your senior managers be buying shares themselves?
- What are your profit and volume and cash flow projections for the next 5 years?
- What certainty do you have over the regulatory regime for the next five years, particularly in relation to price control?
- What are your future plans for your GLS parcels subsidiary, given it contributes such a disproportionate part of your profits?
- Will the Trade Unions cooperate in your future change programmes, given their opposition to this share sale and the fact that the benefits of change will flow back to shareholders?
No doubt we can all think of other questions to ask, but an investor would surely need comforting answers to the vast majority of the above questions to consider an investment seriously?
The real question for all potential investors is why? What will a minority stake in Royal Mail do for my long term business strategy? Can I leverage higher returns elsewhere in my business or do I get above average returns from taking the risk in investing in the old state monopoly?
Please comment below…
Excellent article but maybe we should stretch the thinking even more.
Many of the financially successful Postal organisations around the world have adopted a “full service” company approach with Electronic and Financial products sharing equal prominence with the more traditional physical (mail and parcel) products. Coupled with postal “Trust Credentials” this could be quite attractive to non-postal financial investors. Financial and Electronic product companies might be encouraged to bid. 12,000 high street retail premises and dominance in UK eCommerce delivery could well be of interest. So maybe some “more fundamental” questions would be useful !!
A thought provoking article. I would add a couple of more questions:
1: What is the risk of industrial action and would the government provide security of investment for a defined bedding in period?
2: Would the brand stay unchanged, i.e. Royal Mail or would the ‘Royal’ need to be dropped?
It would indeed be valuable if electronic products and12000 retail outlets were part of the deal but Post Offices have been excluded, they remain in public hands.
First and foremost the government has at least recognised that there are more than one business model in the group i.e. leaving Counters separate. The next step is to divide Letters from Parcels and sell parcels 100% including the “jewel in the crown” GLS worth now say a £1 billion +..Parcelforce…£300M?
It would help reduce the government debt?!
Then there is one USO provider with no baggage which can concentrate on the declining letter market……..i.e. go digital?