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Good news from Royal Mail this morning, at least for ecommerce merchants. Whilst the CWU have said they are preparing another ballot for strike action, having been blocked from the last strikes in the run up to Christmas in the High Court, Royal Mail have declared they are fed up with waiting for the Union to come to any agreement and are going to push ahead with the Royal Mail transformation plan and new robot sortation depots roll out to enable them to deliver parcels next day.
The aim is to get a parcel hub up and running in Warrington, another for which they’re sorting out the lease in the Midlands and will also exploring options for a third hub. The hubs form part of an extension to Royal Mail’s UK delivery network that will see the company introduce a second delivery for next day parcels and larger items and that’s essential for rushing ecommerce deliveries to your customers.
However, the plans to push ahead with the Royal Mail transformation come with a health warning – if the CWU get another strike ballot the new depots, despite automation, won’t do much good if parcels don’t arrive or even worse if postal workers continue to collect from you but then leave them piled up in the depot and don’t load them on trucks to the delivery offices at the other end. Clogging up automated depots will likely be an attractive target if they Union decides it impacts workers. Using your parcels to do this could be a key goal and much worse than simply not collecting giving you the option to use an alternative carrier.
Using an alternative carrier is in fact what a number of merchants decided to do with just the threat of strikes last year which Royal Mail say reduced parcel revenue growth by approximately 0.5 percentage points. Far from being totally reliant on Royal Mail for deliveries, merchants have options for all but the very smallest and lightest items and Amazon Logistics is waiting in the wings to snag more delivery contracts for items sold online.
With that in mind, in today’s trading update, Royal Mail confirmed profit is expected to be £300-340 million for the 2019-2020 financial year, but warned the city that ongoing industrial relations environment and delays to the delivery their transformation plan, when combined with continuing economic uncertainty, increases the likelihood that they’ll make a loss in 2020-21. Naturally this hasn’t done much good for their share price which has bombed this morning.
On the 6th of February 2019 Royal Mail’s share price was £2.80, £2.22 on the 6th of January 2020, but today at the time of writing it’s currently at £1.69 having lost another 10% of it’s value so far this morning.
“We had a busy Christmas season, which coincided with a General Election for the first time in almost a century. We achieved a high quality service for customers across the UK due to additional investment and, more importantly, the commitment and dedication of our people – I thank them for all their efforts.
Overall, our recent trading performance has been broadly in line with our expectations. We confirm adjusted Group operating profit is expected to be £300-340 million (before IFRS 16) for 2019-20.
We are disappointed that the CWU has issued a timeline for a ballot of its members for industrial action. We stand ready to invest £1.8 billion to modernise and grow in the UK. We want to reach agreement with CWU; but we cannot afford to delay this essential transformation any longer. So we are proceeding with key national trials and local initiatives, to improve our customer offering and grow the business, whilst maintaining good quality jobs and delivering a sustainable Universal Service.”
– Rico Back, Group Chief Executive Officer, Royal Mail plc
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