Working towards a stamp of approval

THE Royal Mail is a much-maligned institution. It is under fire for diminished deliveries, deteriorating services, closing Crown Post Offices and losing millions of letters.

For chairman Allan Leighton and chief executive Adam Crozier, the high-profile businessmen who run it, the Press cuttings do not make pleasant reading.

But there is another way of looking at their stewardship. When the Leighton-Crozier team took control of the-then Consignia in March 2002 it was losing £1bn of taxpayers' cash a year, was riven with strikes and could not fulfil promises for first-class delivery. So frustrated was the Government that it even considered selling it to the Dutch post office.

When Royal Mail reports financial results later this week, it will be possible to see signs of transformation. The losses will become a £200m-plus profit for the first half, with the possibility of £400m for the full year.

Deliveries are down from two a day to one but at least Royal Mail will come closer to meeting some of its performance targets, although it will still be slightly off the pace for first-class letters.

The staff, generally considered to be among the most bolshie in post-Thatcher Britain, are calmer. They could be looking at an Asda-style £1,000 bonus this year as the shadow options scheme, put in place to incentivise 20,000 postal workers, starts to pay out.

Clearly, none of this is good enough alone. The Crown branch network needs sprucing up and losses still have to be eliminated without further wholesale closures.

But the reality is that it is seven Crown Post Offices - not half of the 550-strong network said to be under threat - which are facing extinction.

Moreover, a makeover is planned to make the existing down-at-heel Crown offices less miserable places to work in and visit.

There is a huge distance to travel before we have the kind of postal service we would like. But it is time we acknowledged that there has been a financial turnaround and improvements, albeit gradually, are taking place.

This is still far from perfect but it is a better outcome than predicted when Leighton took the reins.

Share laggards

THIS ought to be a good time for London shares. Interest rates are at or close to their peak.

Residential property prices have flattened out rapidly and have started to fall, making buy-to-let a less attractive option. And some of the country's better companies are throwing off a great deal of cash.

A key result comes from Vodafone. The mobile operator is doubling its dividend and expanding a share buyback scheme, bringing its repurchase plans up from £3bn to £4bn. This ought to be attractive for investors.

But there are lingering concerns about performance.

Profit margins were down in several major markets including the UK, Italy, Spain and Japan. But it is also worth remembering that Vodafone is in transition as it seeks to move customers to third-generation networks with their instant music downloads and the rest.

In some markets, notably Japan, 3G is more important because it has been slow out of the starting stalls compared to rivals. But with margins of 39.7% overall, down from 40.5%, this is hardly a crisis.

As goodwill write-offs fade away, Vodafone will be generating bucketloads of cash.

The mobile group is not the only company doing buybacks. Burberry is buying back £250m worth of shares after the fashion group produced another 25% jump in earnings. Across the stock market from BP to Next, buybacks are all the rage.

Yet Britain's share market remains in the doldrums compared to its overseas counterparts. It picks up all the bad vibes from Wall Street, but none of the positive messages from improving profits and rising dividends.

At some point there ought to recognition that it is possible to make money in the public arena as well as in private equity. Then the Footsie can throw off its psychological chains.

Growing doubts

THE big question for the Pre-Budget Report is what Gordon Brown is going to do about his 2005 growth forecast of 3% to 3.25% for 2005.

The British Chambers of Commerce is the latest organisation to question its accuracy, suggesting that output next year will expand at 2.4% against 2.6% in its previous forecast.

It talks of a soft patch for the UK economy in the middle part of this year. My suspicion is that in an election year the Chancellor will seek to blag it, counting on his past forecasting triumphs to see him through.