Letters slump delivers profit plunge for Royal Mail

Post by **postareale** » 19 May 2019, 18:47

https://www.telegraph.co.uk/business/20 ... oyal-mail/

Letters slump delivers profit plunge for Royal Mail

Royal Mail is expected to unveil a 40pc slump in shares next week

Jack Torrance
19 MAY 2019 • 7:00AM

Royal Mail is expected to deliver a dramatic slump in annual profits this week, capping off a torrid year in which its stock market value was more than cut in half.

Analysts expect the former state postal monopoly to report underlying pre-tax profits of £342m on Wednesday, down 40pc on last year, as it continues to battle a plunge in letter volumes and higher costs in its European parcels arm GLS.

An efficiency drive by new chief executive Rico Back fell flat in the first half of the year, forcing the company to issue what one analyst described as a “shocking” profit warning that sent its shares off a cliff in October.

The Government was criticised after the shares rocketed past the 330p they floated at when Royal Mail was privatised in October 2013. But having peaked at 631p last May they are now worth just 236p.

Royal Mail’s staff were each handed £2,000 stakes in the company as part of the float but could not sell them for five years without being hit with a tax penalty, meaning many saw the value of their stock plummet weeks before they were due to sell up.

The 7.7pc stake still held by employees has lost about £280m of its value since the share price peaked last May.

Royal Mail suffered one of the UK’s largest ever shareholder revolts in July, when 70pc of investors opposed its pay report over the decision to hand Mr Back a £5.8m “golden hello” to break his contract as head of GLS.

Orna Ni-Chionna, the head of its remuneration committee, admitted it was “embarrassed” by the rebellion after being hauled before MPs in October.

She told the business select committee: “Obviously, that was a huge disappointment and a shock to us. We were lulled by the fact that we thought we’d explained it well. That is the mistake that we made.”

In December The Sunday Telegraph revealed Royal Mail’s financial woes had also sparked concern at Ofcom.

The communications regulator warned that a failure to boost its productivity could threaten the sustainability of Royal Mail’s Universal Service Obligation; its legal guarantee to deliver to anywhere in the country for a fixed fee.

A group of hedge funds is betting on Royal Mail’s stock market value continuing to tank. Around 5pc of its stock is on loan to short sellers including Alliance Bernstein and Blackrock, which borrow the shares and then sell them, hoping to cash in after they fall.

It has also gone through three chairman in less than nine months. Peter Long was forced to stand down in September after his other role chairing beleaguered estate agent Countrywide began to take up too much of his time.

He was succeeded by Les Owen, who will make way for former British Airways boss Keith Williams this week.

City analysts have warned that Royal Mail’s policy of paying progressively higher dividends could be under threat.

But Mr Back insisted in November: “We have given guidance that we have a progressive dividend policy, we’ve had that policy since 2013 and that policy remains in place.”

Yamr1 · Post by **Yamr1** » 19 May 2019, 18:51

Letter slump
Packets booming
Alot more money in packets

Post by **SpacePhoenix** » 19 May 2019, 21:27

I wonder that % of the slump in letters is a result of the GDPR regs

Celgar · Post by **Celgar** » 19 May 2019, 22:23

I was under the impression that the Capitals Day announcement was going to something more positive even if it was only positive in the eyes of the chief executives. If the announcement is only going to be that our profits have collapsed then RM truly is in the **** and heading towards a change of ownership.

PS Is the Blackrock shorting company the one connected with George Osbourne ?

Post by **rambo1** » 20 May 2019, 15:03

Yamr1 wrote:Letter slump
Packets booming
Alot more money in packets

Actually, margins in packets are pretty tight. Add to that the amount of time it takes to sort, transport and deliver, compared to letters and the future is actually not quite as rosy as you may think. We all know packets are going up and up. So is the overtime bill to get them delivered. We also know that letters aren't dropping as fast as they report, least not on my delivery.
I'm fortunate enough to be planning on leaving the business in three yrs time, if there's a business to leave that is.
Progressive dividend? We've heard thay before many times by many companies....only to be cut, which will happen here too. 11% dividends just don't happen, if the big guys thought rmg will pay the dividend they say and not cut, they'd all be piling in and lifting the sp. This is not happening. Sub £2 is not out the question ( and I can't believe I'm writing this) if profits are down by as much as rumoured, and the divi is cut in half.

worktotime · Post by **worktotime** » 20 May 2019, 17:56

same s**t different day , zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz.

mailroyaly · Post by **mailroyaly** » 20 May 2019, 18:34

So if we are a private company where profit rules we should stop all deliveries to places that make the company a loss like every other delivery firm!!

But if we are a public service regardless of loss then this announcement is irrelevant because public service comes first over profit!!

Which are we then because we can't be both?

Post by **rambo1** » 20 May 2019, 19:20

mailroyaly wrote:So if we are a private company where profit rules we should stop all deliveries to places that make the company a loss like every other delivery firm!!

But if we are a public service regardless of loss then this announcement is irrelevant because public service comes first over profit!!

Which are we then because we can't be both?

Take the USO out of the equation and profits would rise if, and its a big if, we kept the business. Also the union would kick off with the amount of job losses. VR is the way to go or the business will go tits up and everyone will lose their jobs and thats an awful lot of cwu subs money too.

Smiller · Post by **Smiller** » 20 May 2019, 21:29

I will never fathom out as our profits are falling people are using postoffice Van's to go home with costing thousands of pounds. Ludicrous.

datasaint · Post by **datasaint** » 21 May 2019, 13:51

Profits are falling because competition is growing and the rivals workforce is cheaper, their operation relies more on machines and it has a modern approach to business.

RM has a massive expenditure on staff, a shed load of sites delivery offices and mail centres which are outdated and not needed, and they can't be as progressive with change rightly or wrongly because of the union.

Basically the whole company is going to need a radical overhaul if it wants to remain competitive.

Celgar · Post by **Celgar** » 21 May 2019, 15:55

Smiller wrote:I will never fathom out as our profits are falling people are using postoffice Van's to go home with costing thousands of pounds. Ludicrous.

That has been stopped now in our DO except for the posties doing the two collections in the evening. I agree it is a perk though and should never have been started in the first place. I think sometimes it happened because yards couldn't accommodate all the additional vans from P&L walks or larger sized vans.

Celgar · Post by **Celgar** » 21 May 2019, 16:14

norm wrote:Profits are falling because competition is growing and the rivals workforce is cheaper, their operation relies more on machines and it has a modern approach to business.

RM has a massive expenditure on staff, a shed load of sites delivery offices and mail centres which are outdated and not needed, and they can't be as progressive with change rightly or wrongly because of the union.

Basically the whole company is going to need a radical overhaul if it wants to remain competitive.

A lot of it isn't RMs fault at all although that isn't to say they should make a far better job of running the company.
The main problems are an unlevel playing field due to unfair competition rules, the DSA regime where half the revenue is given to the competitors, and issues such as Hermes until recently paying their drivers way below the minimum wage.
Your comments are largely inaccurate in that staff are paid a fair wage at best and RM uses the machines and similar systems to other companies.

Celgar · Post by **Celgar** » 21 May 2019, 16:22

SpacePhoenix wrote:I wonder that % of the slump in letters is a result of the GDPR regs

It's highly likely that the GDPR is the main reason for the most recent slump in letters and particularly in flats. I don't think anything else has happened recently to have an effect. Cheers to our 'friends' in the EU.

citypostie · Post by **citypostie** » 21 May 2019, 18:47

It's all coming together for the people at the top. Not long now until they say they can't afford the uso anymore or the company will collapse. Tough choice for a government/regulator relax the uso and let royal mail make more from DSA or say no dice and possibly let the company go tits up with all the job losses and uproar around the country which despite people slagging the company off there would be if it actually happened

26l34 · Post by **26l34** » 21 May 2019, 20:26

Having started at RM via Angard in January having been with another parcel delivery firm (and having worked on an off as a casual for RM for many years) I'd say norm's right. So much of the sorting and scanning at my old place was automated and pretty much everyone earned minimum wage, even on nights. My mail centre's primitive in comparison when it comes to parcels, generally it hasn't changed much in a decade, and even casuals like me are on a good wage once we've done 12 weeks. Rather than blame the union and engage in a race to the bottom though I'd like to see government introduce a genuine living wage and hit companies that exploit the use of zero hours contracts which would force up wages at the competition and create a more level playing field for RM to compete on.