UK's Royal Mail heads into Canada as part of overseas expansion

[postareale]

https://www.telegraph.co.uk/business/20 ... ks-abroad/" onclick="window.open(this.href);return false;

Royal Mail has bought a Canadian parcel delivery business as the former state-owned business continues its plan to break in to new markets.

It has bought business-to-business parcel company Dicom Canada for C$360m (£213m) on a debt and cash-free basis from US private-equity group Wind Point Partners.

Dicom operates across all of Canada but is focused on the eastern provinces of Ontario and Quebec, which make up 57pc of the country’s economy.

The addition is being made through Royal Mail's Global Logistics Systems (GLS) subsidiary and will be funded under existing borrowing arrangements.

Dicom has 28 depots and last year generated total revenues of C$233m. RMG said it expects the acquisition to boost earnings in the current financial year.

Rico Back, who took the helm at Royal Mail in June, said buying Dicom followed the company’s growth strategy through “targeted and focused acquisitions to capture higher growth segments outside Europe”.

He added that Dicom had a similar business model to GLS, which is described as “a growth engine” for Royal Mail.

The FTSE 100 company is suffering from a structural decline in the number of letters being sent, with changes such as online billing a major contributor to this.

The company also faces the burden of “universal postal system”, which requires it to deliver to every UK address six days a week at a standard price.

Competitors do not face such a burden, allowing them to pick and choose contracts that are less onerous.

The change in the structure of the postal system means that there is a greater focus on parcel delivery than letters, driving the strategy for Royal Mail to look abroad.

Last year GLS was responsible for a third of of the company's £581m of adjusted operating profits after transformation costs, as the business undergoes a radical shake-up that includes improving its distribution network, upgrading IT, slimming down its property portfolio and shedding staff in the face of intense competition.

The acquisition - which does not require regulatory approval to go ahead - received a subdued reception from investors, with Royal Mail shares edging up 0.7pc to 451.2p on the news.

[k979aaa]

Who is the biggest share holder in Dicom?

[rambo1]

If this is the avenue royal mail are going down ,the only thing keeping us posties in a job, is the USO. Letter delivery is loss making. Parcels account for most of our profit with GLS accounting for almost a third. Eventually royal mail will say no, we don't deliver letters anymore , we are solely a parcel delivery service company now. Think about how many jobs would go.

[TrueBlueTerrier]

https://ca.reuters.com/article/idCAKCN1LJ0JS-OCABS" onclick="window.open(this.href);return false;

Reuters) - Britain’s Royal Mail Plc (RMG.L) expanded into the Canadian market on Monday with the purchase of parcel delivery firm Dicom Canada for C$360 million ($275.7 million), adding to a series of recent bets on markets in Europe and North America.

Royal Mail vans are parked in the Leytonstone post office depot in London, Britain early July 6, 2017. REUTERS/Russell Boyce
Britain’s former postal monopoly has been struggling with a fall in letter volumes and has invested heavily in foreign markets under the Global Logistics Systems (GLS) brand since its privatization in 2013.

The purchase of Dicom from private equity firm Wind Point Partners adds to a growing North American operation which already covers eight U.S. states and follows the appointment of GLS boss Rico Back as Royal Mail’s new chief executive in April.

GLS had initially focused mainly on Europe but has begun to look further afield.

“This acquisition is in line with GLS’ strategy to grow through targeted and focused acquisitions to capture higher growth segments outside Europe,” Back said on Monday.

GLS accounted for a third of Royal Mail’s 2017-18 adjusted operating profit after transformation costs, up from 29 percent a year earlier, the company said.

It served 212,000 customers last year in a network that takes in 37 European states and 660 delivery depots.

Dicom Canada, which offers ground-based parcel, freight and logistics services, operates a network of 28 depots and works with partners to provide pan-Canadian logistics services, Royal Mail said.

Fiona Cincotta, a senior market analyst CityIndex, said the deal and the continuing investment in GLS could be a game-changer for Royal Mail shares, which have drifted lower since a flying start following its initial public offering in 2013.

Company shares rose as much as 1.3 percent in morning trade and stood at 452.4 pence at 1010 GMT. The shares were priced at 330 pence in the flotation five years ago.

“Royal Mail, which has been cutting its UK operations aggressively over the last few years, surprised the market with (the deal) news,” Cincotta said.

“It will give Royal Mail... a foothold in Canada, which is expected to be earning money for the company from the off.”

The deal was funded through existing borrowing facilities and will be earnings and cash flow accretive in the financial year ending March 31, 2019, the company said.

($1 = 1.3056 Canadian dollars)

[k979aaa]

If this is the avenue royal mail are going down ,the only thing keeping us posties in a job, is the USO. Letter delivery is loss making. Parcels account for most of our profit with GLS accounting for almost a third. Eventually royal mail will say no, we don't deliver letters anymore , we are solely a parcel delivery service company now. Think about how many jobs would go.

Just awaiting the pay off they don't want to grow the business I guess time will tell but till then who knows!

[oypostie]

Who is the biggest share holder in Dicom?

Moya Greene