Government looks set to retain Royal Mail stake

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Ministers bruised by the squabble over the Royal Mail privatisation appear in no hurry to start selling the state’s remaining 30 per cent stake as the postal operator prepares to announce steady earnings growth next week.

Analysts expect Royal Mail to report on Thursday full-year operating profits of between £617m and £698m before transformation costs for the year to March – up from £598m last year.

The 180-day lock-in period, which prevented the government from selling more shares after last October’s flotation, has expired. But ministers have no plans for further sales.

An early sale would enable taxpayers to benefit from the rise in Royal Mail shares from the 330p flotation price to the current 571p. At that level, the government’s stake is worth £1.7bn – up £700m.

However, any slip-ups would risk fuelling the furore over the company in advance of next year’s general election.

Vince Cable, the business secretary, and Michael Fallon, the business minister, have been grilled three times by MPs on whether the sale was underpriced. A National Audit Office report said it could have achieved better value.

The government floated 60 per cent, and gave 10 per cent free to the workforce, but the shares rose by more than a third on day one, leading to claims that taxpayers had missed out on £750m. Ministers rejected claims they could have achieved a higher price, saying the sale was overshadowed by a strike threat and fears of a US debt default.

Robin Byde, analyst at Cantor Fitzgerald, said he thought the government could hold on to its stake for two or three years. “I don’t think there will be any desire to attract more attention,” he said.

A business department spokesperson said: “Like any shareholder, the government keeps its holding under regular review.”

Mr Byde forecast a £680m operating profit before transformation costs. “This is a function of growth in parcels, letter volume decline slowing a touch, and cost-cutting.”

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