View from the dealing floor at IG. Find out more about financial spread betting at IG. The recently privatised Royal Mail has reported a half-yearly pre-tax profit of £233 million, up from £94 million in the same period last year. Contributing to this is a rise in revenue from its parcel business and a one-off windfall from its pension reform.

The majority of shares in Royal Mail were floated on the London Stock Exchange on 15 October– the government will continue to hold a 38% stake in the company. The UK’s Business Secretary Vince Cable appeared before MPs at the Business, Innovation and Skills Committee to deny that shares in Royal Mail had been sold too cheaply, after shares soared as much as 80% from an initial value of 330p.

Chief executive of the Shareholder Executive Mark Russell, responsible for overseeing state-owned companies, also weighed in, and revealed that both he and the government were surprised by the surge in the price of Royal Mail shares. ‘We did not anticipate the share price to move as much as it did,’ he said.  After the initial criticism that Royal Mail shares were valued too low, there were concerns that shares were perhaps even overpriced. The Lex column in The Financial Times noted: ‘this looks pricey relative to postal peers, even though Royal Mail has good scope for margin improvements.’ Shares were trading at 568p after the Royal Mail results were released, an increase of 6.6% from the previous day.

There are several reasons the company has given to explain the significant increase in pre-tax profits. 51% of revenue is now derived from its parcel business, although Royal Mail claim sales slowed down in the summer months because of the hot weather, and then lost business to competitors when strike action was threatened.

The Communication Workers Union announced their intention to strike as a response to privatisation plans, with a rolling programme of industrial action to start from the end of October. This was soon called off, and both parties agreed to work out a pay comprise by 20 November.

Royal Mail also noted that pre-tax profits have been boosted by a number of cost-cutting measures which have been implemented in the last year, including the closing of several mail centres across the country.

After being accused of missing targets by the regulator Ofcom recently, Royal Mail said that they were on track to meet targets for the current financial year for delivering first-class and second-class letters within the correct time frame.

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