Royal Mail: return to sender It's been a bit like tracking a parcel through the various delivery hubs. Still, Royal Mail's much-discussed privatisation has chugged a big stage forward with confirmation that an initial public offering of most of the government's shares will take place within weeks. Key details are still missing - not least, precise size of the offering and flotation price. But Thursday's news was accompanied by updated trading information, a dividend policy statement, and useful footnotes on financing arrangements and industrial relations. All should help investors assess valuation. On trading, not a lot changes. First quarter 2013/14 revenues rose 3 per cent, compared with about 4 per cent growth in recent years, as UK parcel sales expansion eased slightly. The prediction that there will be no growth in UK parcel volumes in the first half (although revenues will be well ahead) is a tad worrying. Royal Mail blames hot weather's effect on e-retailing, but clearly price changes are also taking a toll (as the group admits). More happily, operating margins continue to creep up, to 5 per cent. That reflects by a bounceback at the GLS European parcels business, but the UK also edged forward. Assume, then, that revenues grow 3 per cent from last year's £9.1bn and apply a 4.5-5 per cent operating margin. Allow for about £900m of net debt. Using peer group multiples, a market pricetag of £2.5bn-£3bn seems realistic. Investors also need to assess risk factors. Labour disquiet is a big one. Union demands extend to operating constraints (on potential disposals, delivery route organisation) as well pay and pension conditions. So the worry is as much about longer term impediments that may flow from a labour deal as the immediate costs of any industrial action. Still, news that £200m would have been paid out in dividends in 2013/14 (had the company been listed throughout) hints at a yield in the 7-8 per cent range. That may offset a few doubts.