Royal Mail Group is in better shape than it’s letting on

[TrueBlueTerrier]

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When Royal Mail Group (RMG) published its annual results last week, shares fell by 10%. I’ve read plenty of analysis since then, but none of it really gets to the heart of the matter. What’s going on here?

Looking at Royal Mail’s results presentation, I noticed something funny straight off the bat. It was completely out of kilter with how most publicly-quoted companies present themselves.

It was a masterpiece in pessimism – an exercise in stripping out any silver linings and replacing them with gloomy clouds.

But I think that the company’s odd tactics are part of a carefully calculated plan. And I strongly suspect that these clouds will pass.

Why would Royal Mail highlight this?

When you read a company results statement, the first thing you normally see is what management considers its ‘highlights’ for the reporting period.


This is the stuff the company hopes a journalist will pick up on and present to the masses. That’s why there’s always more than a bit of positive spin on them.

But not so in Royal Mail’s case. In last week’s release, you could term the summary introduction as lowlights, not highlights.

The introductory message included: “We are facing a couple of headwinds. The competitive environment on the parcels side is more intense”, ie parcels, the one area of the business that’s experiencing any growth, is getting hammered by competition.

And they go on to lament the position of the dwindling letters business: “without timely regulatory action, direct delivery could undermine the economics of the Universal Service and our ability to generate… margin”

In plain English, that means RMG may have to consider dropping its commitment to deliver everywhere in the UK at a uniform price.

It’s saying that it needs the regulator to step in and change the rules of engagement. Without help, it’s going to find it difficult to make a profit.

And what sort of profit is Royal Mail aiming for? It’s laid out in the first paragraph: “single digit revenue growth”.

Single digit revenue growth. Not exactly full of the joys of spring, are they?

No wonder investors got the jitters.

[Brain Fury]

The writer says that RM is doing better than it's letting on but doesn't provide any evidence. Similarly he doesn't do anything to show that the threat to both parcels and letters revenue isn't true. He can only say that most companies talk up their prospects to support the share price. I hope he is right but in the long term I fear he isn't.

[fmrPOSTIE]

Royal Mail cannot just dump the USO either. Reporter knows nothing !

[Lincox]

Another five years of Tory control should see the end of the universal service.

[Ahebban]

Another five years of Tory control should see the end of the universal service

that long?

[Lincox]

Probably not. They,ll get rid of the rest of the shares and bobs your uncle.

[Pat Ostman]

Royal Mail cannot just dump the USO either. Reporter knows nothing !

they can dump it as they go down....... And trust me they are, as any private company that treats their employees and customers with so much distain inevitably does. It's just a matter of time if things do not change.

[blackadder]

Another five years of Tory control should see the end of the universal service.

think you find that it was everyones best mate tony blair who killed royal mail off by opening it up to uk mail, tnt, etc etc

[TrueBlueTerrier]

Another five years of Tory control should see the end of the universal service.

think you find that it was everyones best mate tony blair who killed royal mail off by opening it up to uk mail, tnt, etc etc

You can add the dark puppet master to the list as well. I have been convinced for years that Mandelson was the power behind the throne, Blair was just a stupid naive patsy.

[fishtank]

Another five years of Tory control should see the end of the universal service.

think you find that it was everyones best mate tony blair who killed royal mail off by opening it up to uk mail, tnt, etc etc

If you want to be pedantic it was the signing of the Treaty on European Union at Maasticht by John Major in 1992 that set the ball rolling on the introduction of competition in state owned monopolies.

Of course if you want you could go back to the Treaty Of Rome in 1957, The Marshall Plan 1948, Treaty of Versailles 1919, The French Revolution, 1066, etc,etc.....