City Link collapse only has 'limited' benefits for RM

[TrueBlueTerrier]

City Link collapse only has ‘limited’ benefits for Royal Mail, says UBS

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The collapse of troubled parcel-delivery firm City Link is ‘not a major positive’ for rival Royal Mail Group (RMG), according to UBS which kept its ‘neutral’ rating on the FTSE 100 group on Monday.
City Link, which entered into administration on Christmas Eve, is a smaller competitor of RMG in the UK domestic parcel market.

However, despite obvious market-share benefits, UBS believes that there will be a ‘relatively limited impact’ on RMG.

Analyst Dominic Edridge from the Swiss bank said: ‘One of the problems RMG has faced has been the growth in parcel market capacity (including DPD, Hermes, UK Mail and, especially Amazon). Assuming Citylink’s capacity disappears we believe this should offset the increase from Amazon – but not the others.’

Edridge also pointed out that City Link’s core market was the slightly larger and more premium parcels – such as next-day delivery items – as opposed to Royal Mail’s core business which is a ‘deferred product’.

As such, City Link’s collapse is likely to be more beneficial for ‘premium competitors’ like TNT Express, UK Mail and Parcelforce, he said.

The analyst also believes that RMG is facing the same problems as City Link – ‘whether the parcel industry can make money from the growth in e-commerce volumes, given the relatively low yield and drop density’.

UBS maintained a 438p target price for RMG’s shares, which were more or less flat at 424.92p by 10:39.

[aposter]

Drop density my arse . He needs to look at some of my loops

[Lounge Lizard]

Drop density my arse . He needs to look at some of my loops

So what's "drop density"? Us delivering to 92% of addresses each day while City Link only managed about 2% ?

[TrueBlueTerrier]

In this case drop density I think means the number of parcels per operator. Royal Mail is unfortunately quite low on this, mainly because we deliver more than parcels.