Here is another take on the RMG share plunge today from the Financial Times:
https://www.ft.com/content/f67a5268-c58 ... 264d1c4647
Investors take fright at Royal Mail profit warning
UK postal service cites missed productivity and cost-saving targets
Michael Pooler
Royal Mail’s share price sank by almost a fifth after the UK postal service warned that core profits would be more than 20 per cent lower this year because of missed productivity and cost-saving targets.
Improving productivity was one of the pillars of a wide-ranging settlement with trade union leaders earlier this year, which ended an industrial dispute that had threatened nationwide strikes.
Under the deal, Royal Mail committed to reducing working hours in exchange for changes to work practices. But the FTSE 100 company said on Monday afternoon that the improvements were “taking longer than expected” to deliver.
Adjusted operating profit before transformation costs — which strips out expenses from a long-running modernisation programme — is now forecast to come in between £500m to £550m in 2018-19. That compares with £694m in the year ended March 25.
The share price initially fell 19 per cent, though it later pared back some of the losses to finish the day 18 per cent down at 391.4p, valuing the company at £3.91bn.
Royal Mail explained that productivity growth at its core UK business was “significantly below plan” at 0.1 per cent in the first half of this financial year, compared to a full-year target near the upper end of 2-3 per cent. Another contributing factor was a bigger than expected decline in letters, with new EU rules on data protection reducing the volume of junk mail.
Royal Mail sends message to investors with focus on parcels
Royal Mail also reduced its cost savings target from £230m to £100m this year, adding that it was “implementing a range of short-term cost measures”.
“We are conducting an assessment of the efficiency and productivity opportunities under the [labour] agreement,” the group said.
Some analysts have voiced doubts about whether Royal Mail’s productivity initiatives would be enough to offset the additional costs of a shorter working week.
The profit warning is another headache for Rico Back, chief executive, just four months into the job. Royal Mail was already trying to mend fences with investors, who protested over executive pay at the annual meeting this summer.
It may possibly need to cut investment
Mr Back said that a positive note was that UK parcel volumes and revenues were up 6 per cent in the first half of 2018-19.
While the source of the problems is Royal Mail’s main UK business, the group also revealed that even GLS, its international parcels business, was feeling pressure. Rising labour and other costs meant that profit margins were being affected more than anticipated at GLS.
Rob Byde, an analyst at Cantor Fitzgerald, said: “Many of these trading trends have been signalled in recent updates and therefore we are somewhat surprised at the more than £100m downgrade to consensus forecast operating profit. The statement on productivity and costs suggests the easy wins are now in the past.”
Daniel Roeska, a Bernstein analyst, said the company “must choose between [the] dividend and its future”.
“It may possibly need to cut investment,” he wrote in a note to clients. “This may safeguard dividends in the near term, but by reducing profitability in the long-run damage put strategic pressures on the dividend.”
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A very interesting comment,
"The profit warning is another headache for Rico Back, chief executive, just four months into the job."
Face it Rico - it's time to move from Zurich, Switzerland to London, UK!
, to be honest there where peoples names mentioned on 64 k a year and I haven't even heard of and what do they do for the company and for 1 or 2 days a week . its disgusting imo .