Can anything halt Royal Mail’s decline?
Bigger than expected decline in letters volume sends shares tumbling 18%
Royal Mail shares have fallen to their lowest-ever level after bigger than expected declines in letter volume raised fears about the long-term viability of the former state-owned monopoly.
The postal service blamed new GDPR data protection rules introduced last year for a sharp reduction in marketing mail-outs that led to an 8% fall in letter volume.
Rico Back, the new Royal Mail chief executive, also blamed business uncertainty for letter declines, at a time when fears of a no-deal Brexit are seen as the main reason for companies holding back spending.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
The accompanying downward earnings revision saw Royal Mail shares plummet by as much as 18% yesterday morning before recovering slightly. They have more than halved in value since peaking at 631p a year ago. In December the company was demoted from the FTSE 100 and is now valued at well below the 330p price at which it floated.
The slump has “wiped tens of millions of pounds” off the 7.7% stake that remains in the hands of postal workers, who were given the shares when it was privatised in 2013, says The Daily Telegraph.
City A.M. says “there are further clouds on the horizon as the number of letters sent through the service is set to fall by more than previously forecast next year”, according to the postal service's trading update.
In a bid to streamline the business, Royal Mail launched a big cost-cutting programme last November that included a plan to share more costs between its letters and parcels businesses, but a deal with unions brokered last February has failed to improve productivity.
This has prompted City investors to suggest the company should contemplate radical options as part of any turnaround plan.
Analysts at Liberum said: “The hope must be that more radical options are being contemplated, requiring further time for planning and consultation.”
But Nils Pratley in The Guardian writes the “worry for investors is that the board has been asleep, or distracted” since the Communication Workers Union deal was agree, describing a “sense of drift at the top”.
Rico Back was due to update the City on the progress of his turnaround plans in March but that has now been pushed back to May, a move Liberum said was “disappointing... given the importance of understanding management’s long-term strategy to turn the business around”.
All of this comes against the backdrop of a continuing decline in the volume of letters in the UK.
Nicholas Hyett, Equity Analyst at Hargreaves Lansdown told Sky News: “Royal Mail’s gone out of its way to say that's down to wider uncertainty, and the introduction of new privacy laws under GDPR, rather an uptick in companies using email rather than paper.
“Whatever the cause, we suspect those mailings are gone for good,” he said, leading to wider questions about whether the former state-owned postal service can do anything to reverse its business fortunes.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
Today's political cartoons - November 23, 2024
Cartoons Saturday's cartoons - qualifications, tax cuts, and more
By The Week US Published
-
Long summer days in Iceland's highlands
The Week Recommends While many parts of this volcanic island are barren, there is a 'desolate beauty' to be found in every corner
By The Week UK Published
-
The Democrats: time for wholesale reform?
Talking Point In the 'wreckage' of the election, the party must decide how to rebuild
By The Week UK Published
-
Street without post for six months after dog bite
feature And other stories from the stranger side of life
By Chas Newkey-Burden Published
-
Who will be the next Duke of Edinburgh?
Speed Read Prince Charles reportedly reluctant to hand over his father’s title to youngest sibling
By Kate Samuelson Published
-
Queen supports Black Lives Matter, senior royal aide claims
Speed Read Official says race is ‘hot conversation topic’ in Royal Family after Sussexes’ ‘racist royal’ allegation
By The Week Staff Last updated
-
Prince Andrew ‘delayed family holiday’ to party on Jeffrey Epstein’s private island
Speed Read
By The Week Staff Published
-
Prince William ‘angered Harry by asking Diana’s brother to halt marriage to Meghan’
Speed Read New book claims the younger Royal was ‘furious’ about other family members being dragged into row
By Gabriel Power Last updated
-
Prince William and Harry charities reported for ‘inappropriate use of funds’
Speed Read Anti-monarchy campaigners’ allegations against royal brothers to be investigated by Charity Commission
By James Ashford Last updated
-
Prince Andrew’s ‘good works’ website deleted amid mounting pressure over Epstein inquiry
Speed Read Duke facing fresh calls to speak to US authorities following arrest of Ghislaine Maxwell
By The Week Staff Last updated
-
Meghan Markle claims her wedding ‘made £1bn for Britain’
Speed Read Duchess claimed royal household failed to protect her from ‘aggressive attacks’
By The Week Staff Published