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Royal Mail share price dives as transformation behind schedule

By Chris Dawson November 21, 2019 - 10:02 am

The Royal Mail share price dived this morning when they unveiled bumper profits and increased revenues. There are several factors that contribute to this, an admission that they are behind on their transformation plan, a predicted decline in letter volume of between 7% and 9%, the need to invest more due to industrial relations with their workers biggest Union and the potential to make a loss in the next financial year.

“Our transformation is behind schedule. We are investing more because of the industrial relations environment, the General Election and Christmas, to underpin our Quality of Service at this key time. This is likely to impact our productivity for the remainder of the year. When combined, revenue and cost headwinds could possibly result in a break-even or loss-making position for the UK business in 2020-21. We maintain the ambitions associated with our Journey 2024 plan as set out in our full year results in May.

People are posting fewer letters and receiving more parcels. We have to adapt to that change. The challenging financial outlook in the UK means now, more than ever before, we need to make the changes required – and accelerate them – to ensure a successful UK business. We remain committed to investing £1.8 billion in our transformation. We want to change, working with our unions, but we can only do so through an affordable resolution. We have changed many times before. We will do it again.”
– Royal Mail

The reality is that whilst Royal Mail remains the UK’s largest carrier, they are way behind other couriers both on service and opening hours. In today’s world where the likes of Amazon, Hermes, and other carriers deliver seven days a week as standard, Royal Mail still operate a six and a half day service. Consumers can’t collect parcels other than at restricted delivery office opening times, or pay extra to have parcels left at a Post Office – even Royal Mail owned ParcelForce have no hesitation at dumping undelivered parcels at a local Post Office for collection without additional cost.

This opens up the problem of Royal Mail’s industrial relationship with the CWU and workers – they don’t want change, don’t want to deliver in the evenings and weekends when consumers are at home so are objecting to any changes Royal Mail might want to make. Whilst letter volumes are significantly declining, the Union is a staunch supporter of the Universal Service which requires Royal Mail to deliver to every address in the UK (at the same price – no surcharges) every day except Sunday.

It wasn’t all bad news for Royal Mail, GLS (the business unit that Rico Back led before becoming Royal Mail CEO) saw revenue boosted 14.1% with profits up 16.9%.

So far today, the Royal Mail share price has dropped 17% from £2.31 down to £1.91, the lowest it has ever been since the company floated on the stock exchange. The question one might start to ask, is how low does the Royal Mail share price have to fall to leave them open to a hostile takeover?

  • SAM
    3 weeks ago

    I do not even look anymore WHY did I buy so many of these, total disaster…maybe the grand kids will make use of them in time, unless Mr Corbyn Nationalises it.

    Perfect example of their poor service was having lunch at a bar in Falkirk on Sat, and the SORT centre is over the road, people had to stand in the rain in a single line around the block outside to get all the parcels they had missed in the rain with one GO as slow as you can Post worker in a cubicle dealing with them one at a time. Some of the post workers still think it is the 1980s.
    So much potential so badly run.

    • Nick
      3 weeks ago

      @Sam,

      It’s the same at my local sorting office. One staff member is pretty good, but the other two move so slowly that people queuing up look at each other in joint despair.
      I have a sneaking suspicion that when staff get too old and doddery to work in “sorting”, they get put onto front desk duties.

  • Alan P
    3 weeks ago

    Why don’t you work for them at the frontline and get an experience of it is like you muppet. These individuals are working at to the best of their ability given the tools they are given. No fault of their own. Have some respect for these poor employees who are only complying to conditions and jobs they are obliged to carry out. No fault of their own. Everyone of these folks are trying to make a living to support their families. Maybe you should try working just one day. Grass isn’t always greener sunshine. Be grateful as not everyone has the choice or freedom. Pathetic. Mr Bill Gates in the making. Write in to the Royal Mail with your fantastic ideas and solutions then Mr Expert. Remember there is always someone smarter than you! Humble yourself mate.

  • Ifellow
    3 days ago

    I do worry about royal mail the ever growing burden of chinese mail that they dont get paid for must affect the bottom line. Wish they declared the numbers.

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