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Royal Mail shares close below privatisation price for first time

16 Nov 2018, 17:29

https://www.ft.com/content/622f4790-e8a ... b8afea6ea3

Royal Mail’s shares closed below their privatisation price for the first time on Thursday after the company reported that profits more than halved in the six months to September.

The postal group said revenues had fallen at its core UK business and it had failed to hit productivity and cost savings targets.

Its share price closed at 325.8p — down 6.5 per cent on the day and below the 2013 initial public offer price of 330p.

Pre-tax profits dropped to £33m in the six months to September 23, against £77m in the same period a year before — a decrease of 57 per cent. 

However, overall group revenue increased by 1 per cent on an underlying basis to £4.9bn, as the company’s international parcels division, GLS, made up for lower sales in the UK, where revenues fell 1 per cent to £3.6bn.

Royal Mail’s struggle to squeeze more efficiency out of its vast network, along with a worse than expected decline in the number of letters sent by Britons and higher labour costs at GLS, were factors behind a damaging profit warning in October.

Image

The company needs to improve productivity in order to offset the costs of a wide-ranging labour settlement struck this year, which averted the threat of nationwide strikes in Britain. Along with a pay rise and a new pension scheme, management also pledged to reduce working hours.

Chief executive Rico Back, in the role since June, said productivity performance in the second half of the year would outshine the 0.2 per cent deterioration recorded in the first six months, which was well below an annual target of 2-3 per cent.

Most of this would come through changes to the way mail is handled and processed, rather than job cuts, Mr Back said.

“We have 90 per cent of our letters automated but only 10 per cent of parcels,” he told the Financial Times. “The trials are designed to cope with increasing volumes in parcels through increasing automation.”

“Today’s release offered no real new information on the outlook for Royal Mail following the profit warning,” wrote analysts at Investec. “We are no closer to establishing how long the current review of UK productivity measures and initiatives will take . . . or to understanding the new management team’s long-term strategy.”

Investors will have to wait until March for more details, when the company holds a capital markets day setting out its vision for the next five years.

Although profit margins shrank at GLS, which has been a bright spot for Royal Mail in recent years, concerns about the group’s ability to keep increasing its dividend will have been soothed somewhat after the interim payout rose from 7.7p to 8p. 

Image

The disappointing half-year performance caps what has been a turbulent year for Royal Mail. 

After an agreement with the Communication Workers Union staved off the threat of industrial strife, in the summer Royal Mail shareholders mounted one of the biggest investor revolts of its kind in UK corporate history over excessive boardroom pay. 

Royal Mail’s preferred measure of earnings — adjusted operating profit before transformation costs — was down 25 per cent to £242m in the half-year period. The metric excludes expenses from a long-running modernisation programme.

The company reconfirmed its lowered annual earnings target of £500m to £550m, compared with the £694m it made in the previous financial year.

Royal Mail shares close below privatisation price for first time

17 Nov 2018, 18:27

More porkies told. Certainly don't get 90% of my mail through css mech mail, don't know bout anyone else?

Royal Mail shares close below privatisation price for first time

18 Nov 2018, 13:52

rambo1 wrote:More porkies told. Certainly don't get 90% of my mail through css mech mail, don't know bout anyone else?


No way, not on any single day in the last 5 years. Automation is a bit of a dream in this industry. Technology hasn't yet got to the point where it can process the sheer volume of letters, and the sheer volume of packets, while also replacing the human element of identifying and allocating each of those things to their respective areas. By the time it does, technology will probably have rendered our industry defunct.

Royal Mail shares close below privatisation price for first time

19 Nov 2018, 08:02

Greedy, greedy bastards when £500 .million profit is not enough for the suits in the city. Totally disgraceful. Bunch of subhuman who put family's on the headline so that their dividends go up by a few pence. The union needs to get back to being more militant.

Royal Mail shares close below privatisation price for first time

19 Nov 2018, 18:39

rico's only been in charge for a few months. if he was a premier league manager he would be down the road by now. :Very Happy

Royal Mail shares close below privatisation price for first time

19 Nov 2018, 18:55

It's looking increasingly likely that this could be the week when we see our shares drop below £3 each.

Royal Mail shares close below privatisation price for first time

19 Nov 2018, 19:22

is it deliberate? stop people cashing in before chrimbo?.....mebbies :Very Happy

Royal Mail shares close below privatisation price for first time

19 Nov 2018, 19:45

rambo1 wrote:More porkies told. Certainly don't get 90% of my mail through css mech mail, don't know bout anyone else?

It says 90% of letters.
Possibly.

Royal Mail shares close below privatisation price for first time

19 Nov 2018, 19:46

I wouldn't say it's deliberate, but it is overblown imo.

But the RMG share price has always had a habit of massively overreacting to bad news, or even just indifferent news.

Royal Mail shares close below privatisation price for first time

20 Nov 2018, 01:32

Knowing absolutely nothing about shares, how low can royal mail shares go to? We will be lucky to get 2 pound a share

Royal Mail shares close below privatisation price for first time

20 Nov 2018, 15:56

Analysts in the financial market are predicting 2.50 a share at its lowest. Nobody really knows what the forecast will be, but I wouldn't be hedging a return of 6.31 back in may any time soon.

Royal Mail shares close below privatisation price for first time

20 Nov 2018, 18:30

Duesouth wrote:Analysts in the financial market are predicting 2.50 a share at its lowest. Nobody really knows what the forecast will be, but I wouldn't be hedging a return of 6.31 back in may any time soon.


Some analysts, not all. In particular Liberum, not sure what their beef is with RM.

The FTSE 100 on the whole is continuing to fall so that obviously accounts for some of the falling confidence, along with the historical seasonal lower price at this time of year. And RM went against the market on the whole and saw a small gain today.

I think (and there is a reason why I'm a postman) that the bad news has now been received and had its effect. And minor fluctuations aside the price will slowly rise as we approach the busy period and go into next year. Not sure if anyone read the Half-year Report but there were some points of optimism in my opinion, it was quite a sober read but it identified the situation with an ageing workforce, and mentioned the PDA actuals as part of the cost-cutting strategy.

But as you say, who really knows......
Last edited by mickeymacca on 20 Nov 2018, 19:01, edited 1 time in total.

Royal Mail shares close below privatisation price for first time

20 Nov 2018, 18:59

Furthermore Rico Back purchased the best part of £500,000 worth of shares in the last couple of days.

Although that's probably small change to him.........

Royal Mail shares close below privatisation price for first time

21 Nov 2018, 17:51

mickeymacca wrote:Furthermore Rico Back purchased the best part of £500,000 worth of shares in the last couple of days.

Although that's probably small change to him.........

he must know something we don't then :wink:

Royal Mail shares close below privatisation price for first time

21 Nov 2018, 22:30

TrueBlueTerrier wrote:https://www.ft.com/content/622f4790-e8aa-11e8-8a85-04b8afea6ea3

Royal Mail’s shares closed below their privatisation price for the first time on Thursday after the company reported that profits more than halved in the six months to September.

The postal group said revenues had fallen at its core UK business and it had failed to hit productivity and cost savings targets.

Its share price closed at 325.8p — down 6.5 per cent on the day and below the 2013 initial public offer price of 330p.

Pre-tax profits dropped to £33m in the six months to September 23, against £77m in the same period a year before — a decrease of 57 per cent. 

However, overall group revenue increased by 1 per cent on an underlying basis to £4.9bn, as the company’s international parcels division, GLS, made up for lower sales in the UK, where revenues fell 1 per cent to £3.6bn.

Royal Mail’s struggle to squeeze more efficiency out of its vast network, along with a worse than expected decline in the number of letters sent by Britons and higher labour costs at GLS, were factors behind a damaging profit warning in October.

Image

The company needs to improve productivity in order to offset the costs of a wide-ranging labour settlement struck this year, which averted the threat of nationwide strikes in Britain. Along with a pay rise and a new pension scheme, management also pledged to reduce working hours.

Chief executive Rico Back, in the role since June, said productivity performance in the second half of the year would outshine the 0.2 per cent deterioration recorded in the first six months, which was well below an annual target of 2-3 per cent.

Most of this would come through changes to the way mail is handled and processed, rather than job cuts, Mr Back said.

“We have 90 per cent of our letters automated but only 10 per cent of parcels,” he told the Financial Times. “The trials are designed to cope with increasing volumes in parcels through increasing automation.”

“Today’s release offered no real new information on the outlook for Royal Mail following the profit warning,” wrote analysts at Investec. “We are no closer to establishing how long the current review of UK productivity measures and initiatives will take . . . or to understanding the new management team’s long-term strategy.”

Investors will have to wait until March for more details, when the company holds a capital markets day setting out its vision for the next five years.

Although profit margins shrank at GLS, which has been a bright spot for Royal Mail in recent years, concerns about the group’s ability to keep increasing its dividend will have been soothed somewhat after the interim payout rose from 7.7p to 8p. 

Image

The disappointing half-year performance caps what has been a turbulent year for Royal Mail. 

After an agreement with the Communication Workers Union staved off the threat of industrial strife, in the summer Royal Mail shareholders mounted one of the biggest investor revolts of its kind in UK corporate history over excessive boardroom pay. 

Royal Mail’s preferred measure of earnings — adjusted operating profit before transformation costs — was down 25 per cent to £242m in the half-year period. The metric excludes expenses from a long-running modernisation programme.

The company reconfirmed its lowered annual earnings target of £500m to £550m, compared with the £694m it made in the previous financial year.
How much does it cost to run all these vans we have? In Germany they have electric powered bikes,the same in Jersey so why not here and just get T a couple of part time drivers in afternoon to deliver extra large parcels,it must be costing millions more than bikes plus it takes much longer walking around than cycling,it’s also. Bad For the environment which I would of thought Royal Mail where obliged to reduce carbon footprint

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