Royal Mail: new name incoming but same woes remain

Royal Mail’s (RMG) latest trading update is a litany of woes. Divisional revenue is down by 11.5 per cent, its cost saving plan has stalled, it is losing £1mn a day, retail trends are weakening, and parcel and letter volumes are still in decline. As such, it has reported an adjusted operating loss of £92mn for the first quarter. 

The poor performance of the group’s UK service is partly offset by GLS, which delivers parcels internationally. GLS achieved revenue growth of almost 8 per cent, and banked adjusted operating profit of £94mn, in line with last year. GLS expects to deliver high single digit percentage revenue growth across the whole year, and operating profit of between €370mn (£315mn) and €410mn. 

The contrasting performances of the two divisions has resulted in a significant rebrand, with the group changing the name of its holding company to International Distributions Services. It said it would consider separating Royal Mail and GLS unless “significant operational change” was achieved in the UK. 

Management has used Royal Mail’s poor performance as ammunition against planned industrial action. Thousands of postal workers voted to strike over pay earlier this week. The company said strikes would “only damage [its] ability to continue to offer everyone at Royal Mail a job” and that the breakdown in industrial relations had thwarted its £350mn cost saving scheme. 

On 18 July, a separate union called off plans for 72 hours of strike action by Royal Mail managers following new proposals on jobs, pay and conditions.

Last IC View: Hold, 299p, 19 May 2022