Royal Mail share price subdued ahead of trading update

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Shares in Royal Mail Group (LON:RMG) have fallen into the red in London today, ahead of the company’s trading update tomorrow. The results will come as the postal operator faces the possibility of a strike after a trade union rejected the group’s latest pension proposal.

As of 10:23 BST, Royal Mail’s share price had lost 0.82 percent to 397.70p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.19 percent higher at 7,392.51 points. The group’s shares have lost more than 21 percent of their value over the past year, and are down by some 13 percent in the year-to-date.

Royal Mail is scheduled to release a trading update tomorrow and Hargreaves Lansdown said in a recent note that it expects declines in letters to be offset by improved European sales and an improving parcels environment.

“While letters may be in long term decline, the growth of e-retailing is providing a significant boost to parcels,” the analysts noted, adding, however, that “the decline in letters means that overall revenue growth is hard to come by”.

Proactive Investors meanwhile reported that analysts at Liberum had trimmed their earnings per share forecast for the postal operator for fiscal year 2018 by 13 percent to 35.2p, compared to 44.1p the previous year.

Royal Mail’s trading update will come against the background of an ongoing pension row, after the Communication Workers’ Union (CWU) rejected the group’s newest offer. CWU deputy general secretary Terry Pullinger told City A.M. that ‘the mood music’ was that “the talks on pension are over”.
“We are heading for dispute, I don’t think there is any doubt about it,” he pointed out, adding that “there will be industrial action within Royal Mail if things don’t change”.

The comments came after on Friday, Royal Mail unveiled a new pension proposal, offering employees a choice between a defined benefit or contribution pension scheme, in an effort to reach an agreement with trade unions. The company had previously signalled that its current defined benefit scheme is unaffordable beyond next year.

As of 10:53 BST, Monday, 17 July, Royal Mail share price is 397.87p.