RM shares surge as up to 2,000 Whistl delivery jobs at risk

[TrueBlueTerrier]

Royal Mail shares surge as up to 2,000 Whistl delivery jobs 'at risk'

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Shares in Royal Mail surged more than 3pc higher after rival delivery firm Whistl suspended door-to-door delivery operations in Manchester putting up to 2,000 jobs at risk.

Nick Wells, chief executive of Whistl, wrote to staff informing them that their jobs were ‘at risk’ after private equity investors LDC failed to back an expansion of the end-to-end, or “E2E”, service, where the company sorts and delivers letters to the door rather than paying Royal Mail for the "last mile" service.

In a statement, the company said: “Following the announcement from LDC that it would not proceed with the proposed investment to fund further rollout of E2E we have now commenced an extensive review of the viability and potential for the rollout of an E2E postal delivery service in the UK.

“To stem the losses from the operations we have taken the difficult decision to suspend the current E2E service during the review process and all mail will now be delivered through our long-standing downstream access service until we have concluded the review.

"As part of this extensive review, we will begin consultations with the relevant employees who are affected by the suspension of the E2E service, and with their union representatives, with a view to identifying and exploring viable proposals to secure the continuation of this service."

Whistl, was formerly known as TNT Post UK, and processes around a quarter of mail in the UK. Whistl is owned by Dutch operator PostNL and had been in talks with LDC, the private equity arm of Lloyd's Banking Group, to fund a major expansion.

LDC took the decision not to invest in the Whistl project due to the "ongoing changes in UK postal market dynamics and the complexity of the regulatory landscape".

Royal Mail shares have now risen to their highest level in the past 12 months, and are still well above the 330p price at which they floated on the stock market in October 2013.

The UKs largest postal service suffered a setback when regulator Ofcom in December of last year rejected claims that rival services, such as Whistl, were "cherry picking" lucrative urban letter delivery.

Gert Zonneveld, analyst at Panmure Gordon, said: "Whistl's announcement shows it is very difficult to set up a delivery service in urban areas in the UK that makes a profit, the vast majority of the cost is in that last mile of delivery."

[SW17]

Can't say I'm not surprised, to fund a declining industry is suicidal and very high risk, who remembers when orange phonebooths where put up everywhere to compete with BTs Just at a time when mobile phones where taking off, they didn't last long either, must be something to do with the colour.
What will be interesting now is all the revisions that have and are taking place as these have all been based on lower workloads in the Whistle areas?

[wacko74]

There was one trade today buying over 558,000 RMG shares... looks like someone is confident the business (and SP) is going in the right direction.

[datasaint]

There was one trade today buying over 558,000 RMG shares... looks like someone is confident the business (and SP) is going in the right direction.

Or they want to give that impression, then when the price hits their target they dump and sell.

[wacko74]

Well ever since it came down from its post ipo high RMG has been a yoyo share for the shorters constantly buying in and out, this is certainly the biggest RMG trade in a very long time but I suppose at them volumes this buyer might be quite happy to dump it after only a modest further rise.

[chrisj]

I wonder how many of the top bosses at Whistl will have bought loads of RM shares ahead of the news of suspending E2E deliveries?

These guys are bankrolled by Hedgefund and I bet they would have made a killing from RM share price rising so rapidly. It will go back down, of course but they will have been in there...

[wacko74]

What makes you so certain the SP will go back down Chris?

As things stand I see no reason why it won't hold steady within a few points of its current value.

[chrisj]

Because letters are still in decline - DSA actually worked for TNT; they have soon found out that the final mileage on letter deliveries is not profitable. We are only doing marginally well because of how large network, performing the dual-role of letters and parcel in one-go and from economies of scale.

TNT or Whistl might now concentrate their efforts and money into the parcels industry - and that is where the real profitable competition is, and where RM will continue to lose some business to TNT and many others.

So the share price will soon come down - anything above £4.50 will be a bonus.