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Royal Mail predictions: 7-day parcels, 5-day letters, GLS sold off

09 Sep 2020, 13:14

https://tamebay.com/2020/09/royal-mail- ... d-off.html

With news out ahead of Royal Mail’s AGM today, it looks like many of our previous tentative Royal Mail predictions are likely to come true. Certainly they’re looking a lot more likely with every day that passes.

Royal Mail announced that parcel volumes are up 34% (177 million more parcels) and parcel revenue up 33.1% year on year. However, addressed letter volumes (ex. elections) is down 28% (1.1 billion fewer letters) with letter revenue down 21.5%.

The problem is that delivering parcels costs more and the mix shift from handling more parcels and fewer letters increased costs in the period by £85 million. On top of that, costs related to COVID-19 (elevated absence, social distancing, additional protective equipment and other costs) were £75 million in the first five months.

Even with people costs being reduced by slashing management and other savings, Royal Mail are confident that they will make a material loss this financial year 2020-21 and will not become profitable without substantial business change.

With all this in mind, Royal Mail say that they are considering three main objectives:

Retain the USO (Same price to deliver across the UK)
Consider demand for a seven day a week parcel service
Retain a next day letters service during the business week
“These findings tell us that the best way to ensure the Universal Service continues to meet our customers’ needs is to rebalance our service model more towards the growing parcels market, particularly urgent parcels and urgent letters. We are currently exploring what a rebalanced Universal Service might look like. We remain committed to the universal, affordable “one price goes anywhere” nature of the USO, but we would like to deliver the items that customers want more often, not less. To do that we need a regulatory system fit for the future rather than the past.”
– Royal Mail

Royal Mail Predictions – What it means for you
I know more than a few online retailers who would rejoice at the thought of parcels being delivered seven days a week but there’s a kicker on the letters side with the hint that Saturday letter deliveries could be dropped. Frankly I don’t know too many people that would cry if their credit card bill was delayed until Monday if it meant their online purchases arrived on Saturdays and Sundays.

Royal Mail are also facing a deeper crisis and that’s a break up with the most likely outcome being to spin off the profitable GLS arm. Recently Czech billionaire Daniel Kretinsky, through his Vesa Equity Investment SARL business, upped his stake in Royal Mail to become their biggest shareholder (approx 13.1%). It’s thought that he could be interested in seeing GLS spun off and with his shareholding he’s got a decent influence on any such decision.

This is all pretty much going down the route we predicted back in June when we mooted a potential sale of GLS and revamped USO, so there are no real surprises. The news and hints from reading between the lines today are just an indication that things are bubbling away in the background and the only real question is how long it will take for, what looks like, the inevitable to happen.

Royal Mail tells unions to modernise or die: Loss-making firm wants to focus more on parcels and less on letters

09 Sep 2020, 13:19

https://www.thisismoney.co.uk/money/mar ... e-die.html

Royal Mail has warned union bosses it will never make a profit again unless they back plans to modernise the business.

Chairman Keith Williams is spearheading a battle to turn around the 500-year-old postal service after coronavirus accelerated a shift away from letters to parcels.

In a trading update, the loss-making firm revealed it delivered 1.1bn fewer letters between April and the end of August than in the same period last year.

But its delivery vans took 177m more parcels to front doors as the lockdown sparked a boom in online shopping.

Shares soared by 25 per cent, or 43.7p, to 218.3p as the dramatic increase in parcel deliveries pushed up revenues by £139million.

Royal Mail now wants to focus more heavily on parcels and less on letters.

The shake-up also includes axing around 2,000 managers to lop £130million off its annual wage bill, as well as getting rid of 'old, outdated ways of working'.

This includes introducing automatic clocking in and out for postal workers instead of handwritten sign-in sheets, and getting rid of old sorting machines.

Warning of a 'material loss' this year, Royal Mail said that the unit 'will not become profitable without substantial business change'.

But it is struggling to secure the backing of its two unions – the Communication Workers Union (CWU), which represents frontline postal staff, and Unite, which represents management.


Royal Mail is in dispute with the CWU which has threatened a national strike over changes to working conditions.

This has plunged the group into crisis and contributed to the departure former chief executive Rico Back, who was ousted this year with a £1million pay-off.

Meanwhile Unite is battling plans to lay off around 2,000 of its 9,700 management staff. Royal Mail insisted that the discussions with the unions have made 'good progress', but a full agreement has still not been reached.

In a statement before its annual meeting with shareholders, which was yesterday, it said: 'Too many parcels are sorted by hand and we are failing to adapt our business to fundamentally lower letter volumes and holding on to outdated working practices and a delivery structure that no longer meets customer needs.'

Royal Mail, which has axed its dividend for next year, added: 'It is disappointing that we have not yet been able to reach agreement. Without these changes, we cannot achieve essential improvements.'

It also appealed to Ofcom and ministers to reform the obligation requiring it to deliver post anywhere in the country for the same price. It said the decline in the letters business means this is not financially sustainable.

Royal Mail tells unions to modernise or die: Loss-making firm wants to focus more on parcels and less on letters

09 Sep 2020, 18:11

I don't think Royal Mail actually get it modernisation works only if you invest and grow the business which they seem loathe to do. Alot of the so-called modernisation that RM has introduced over the years has not worked as they thought because the senior management don't have a clue about the job and focus more on the theory then the practice.

Royal Mail tells unions to modernise or die: Loss-making firm wants to focus more on parcels and less on letters

09 Sep 2020, 19:21

If GLS did get split off from RM, RM could just revert back to using each countries equivalent of RM which would leave GLS screwed

Royal Mail tells unions to modernise or die: Loss-making firm wants to focus more on parcels and less on letters

10 Sep 2020, 15:46

Historically GLS has been " the" revenue generator for Royal Mail Group. If one sets aside the fact that the employees in this arm are on poor terms and conditions...and overworked ...the question to be asked is is "Why oh why oh why are we considering selling off the profitable part of the business ?". It just doesn't make sense to me ! ! !

It is unlikely that a sell off of GLS will improve the working conditions and terms and conditions of our colleagues in middle Europe ???

Royal Mail tells unions to modernise or die: Loss-making firm wants to focus more on parcels and less on letters

10 Sep 2020, 16:25

Why oh why oh why are we considering selling off the profitable part of the business ?". It just doesn't make sense to me ! ! !


It's not the business that would look to sell GLS but the major shareholders.

The business is worth more in assets than it is on paper (share price).
That's what asset strippers look for in a company

Selling GLS would quickly return a great deal of cash to the business that the shareholders would expect to hoover up before selling up and moving on, they don't give a damm what that does to the long term viability of the business.

That's capitalism for ya....

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