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Royal Mail shares stumbled on Thursday, as the postal delivery firm outlined its new restructuring plan that could cost 2,000 jobs.
Royal Mail shares
RMG,
dropped 10% as the company said it expects to be loss-making this year and not to pay a dividend. The job cut plan by the FTSE 250 component is part of an effort to save £130 million a year.
The midpoint of the various scenario analyses the company provided is for an operating loss of £350 million, which is worse than the £83 million loss consensus. Analysts at Berenberg point out the savings from the job cuts won’t occur in the current fiscal year, and there isn’t a plan to sell or spin off the European business, GLS, any time soon.
“Fundamentally the company has been too slow to adapt to the shift from letters to parcels. It is possible to imagine an alternate reality where Royal Mail floated in 2013, quickly saw the structural growth opportunity for parcels from online shopping, adapted and invested accordingly and is now a thriving business at the nexus of a rapidly growing e-commerce market,” added Russ Mould, investment director at AJ Bell. “Instead, due to issues like poor industrial relations, uneven management and inefficiency, it remains a bit of a dinosaur.”
On the other hand, he notes the widespread argument it was privatized too cheaply is clearly undermined.
The broader FTSE 100
UKX,
slipped 0.5%, after the heavy losses on Wednesday on worries over the spread of coronavirus. Catering company Compass Group
CPG,
which has several major U.S. clients, dropped 5%.
Major U.K. investment firms advanced, with Hargreaves Lansdown
HL,
and Schroders
SDR,
posting gains.
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