Neil Woodford invests in Royal Mail

Prominent fund manager takes stake in newly privatised firm after share price falls to 'attractive' levels

 Royal Mail van and postman
Royal Mail shares have fallen significantly from their peak in January and are now priced 'attractively', Neil Woodford said

Neil Woodford, one of Britain's best-known fund managers, has bought shares in Royal Mail for his new fund, Woodford Equity Income.

The fund manager said recent falls in the share price had made the company "attractive". Royal Mail shares peaked at 615p on January 15 but have since fallen significantly, trading at about 412p this morning. They floated at 330p last autumn.

Royal Mail shares now account for about 1.5pc of Mr Woodford's fund.

In a fund update for July, Woodford Investment Management said: "We added several new holdings to the fund, the largest of which was Royal Mail.

"Since its IPO [flotation] last year, the shares initially performed very strongly but have since come back to more attractive territory. This is fundamentally a very attractive, cash-generative business. It has its challenges, not least the competitive threat in profitable, densely populated areas. But it has its opportunities too, such as slowly working to bring its cost base into line with its competitors."

The fund manager pointed out that there was scope for Royal Mail to improve its profit margins, which stand at 4.6pc, compared with 8pc-10pc for most of its peers.

"We have been impressed by the management team and believe it is well-placed to capitalise on the long-term opportunity to deliver a better service to its customers and generate sustainable shareholder value," Woodford Investment Management said.

In a trading update last month, Royal Mail warned that parcels revenue for year was likely to be lower than previously expected.

Other fund managers have sold their shares in the company recently. George Godber and Georgina Hamilton, who manage the successful Miton UK Value Opportunities fund, bought the shares on the first day of trading at 425p but sold, at prices of 560p and 525p, when the company issued the significant profit downgrade in late May. Threadneedle said it remained a supporter of the company, however.