Related Articles
Analysts at JPMorgan said it “remains unclear how the company will afford its expensive labour”, while at Liberum they said the changes were “necessary, but far from sufficient”
() shares were little moved on Thursday as analysts and investors shrugged off a conciliatory announcement statement from the company that was met with a supportive response from its main trade union.
The postal group’s board assured Parcelforce’s role in the group and committed to working with the union in developing new products and services to try and increase efficiency in the UK business.
READ: Royal Mail to axe 2,000 jobs as coronavirus hits postal volumes
After last week announcing plans to axe 2,000 management jobs by the end of the current financial year, interim executive chairman Keith Williams said this remained subject to consultation with unions.
“The need for change has been recognised in our union agreements for a number of years, but – to be blunt about it – progress has been too slow,” he said in an open letter to staff.
“We want to engage with the CWU to make change happen. As we have always said, this will mean more technology, fewer jobs and changes to the way we work. But we can give you the reassurance that we believe this is achievable over the next two to three years within the spirit of our existing agreements with the union.”
Williams said the group also plans to work with the regulator, government and other stakeholders on the forthcoming review of the Universal Service Obligation (USO) of letter delivery to make changes to ensure it is “future-proofed” with the sharp fall in letter volumes in recent years.
Leaders of the CWU union hailed the commitments from management as a “massive” achievement.
Analysts at JPMorgan Cazenove said the company “appears to have given the union a ‘seat at the table’ on all decision making and has agreed to stop any executive action”, working together now to identify short-run cost savings in talks that are intended to conclude by the end of July.
“The more supportive tone from the trade union is welcomed. Whether this will translate into a positive long-term agreement is unclear,” the analysts said as they trimmed their share price target to 145p from 148p and reiterating their ‘underweight’ rating on the uncertain UK turnaround after updating their forecasts for the coming years.
JPMorgan predicts the group’s central guidance scenario points to circa £500mln of losses this year, with trading worsening through the year as physical shops begin to reopen before the next year sees a material improvement, despite expecting it to remain cash flow negative.
As for the longer term outlook, the new mechanised parcel hubs are essential to being able to process parcel volume effectively but as the first isn’t due to come online until early 2022 and the second around 2023, “Royal Mail’s parcel efficiency will likely remain poor for some time yet”.
“Longer term, it remains unclear how the company will afford its expensive labour as the cross-subsidisation from letters continues to fade,” the analysts said.
Analyst at broker Liberum said: “Agreeing to talk is positive, as is the aim to conclude at least part of the talks within a month.
“Some issues will clearly take longer to resolve, and may extend to potential changes to the Universal Service Obligation, which may require new legislation. Another necessary, but far from sufficient, step on the road to recovery.”
Investors seemed to think little had changed, with the shares up there quarters of a penny to 173.1p.
Source link
