Should you keep your shares

[JessPJames]

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ROYAL Mail [LON:RMG] celebrated its 500th birthday last week. We believe the modernisation taking place at the company leaves it well placed for the future, and the shares are well worth holding on to for the long term.

Profit in the post
The world may have experienced rapid technological change during the past five centuries, but the job of delivering the mail the last mile to someone’s front door is largely unchanged.
It still requires someone to take a bagful of letters along a local route where no two doors are the same. It may sound simple but, if you try to cut costs by using zero hours contractors, it just won’t work.
The cost savings will evaporate when the extra time required to deliver each letter is multiplied across an entire mailbag, and quickly turn into losses.
Room for improvement
Royal Mail has been around for a long time, and in any business of that age there is room for improvement. The main focus for chief executive Moya Greene has
been the sorting offices and middle management.
The strategy has been to invest in new technology to help full automation of the sorting offices and at the same time trim middle management. When the company floated in October 2013, the aim was to improve profit margins from around 4.5pc to 7pc by 2018. That might not sound like much, but Royal Mail generates £9.2bn in revenue a year, so every 1pc is worth about £100m in operating profits.
At the interim stage, adjusted pre-tax profits fell 16pc to £240m, from £287m, an underwhelming performance but the reason for the profit decline was the cost of 3,000 staff leaving the business in the first half.
Costs from the voluntary redundancy programme more than doubled to £94m in the first half and are expected to rise above £180m for the full year.

[teesdale]

With numpty directors just handing out more failing projects to those below its just managed decline. Just shutting buildings has extended Royal Mails life span, but failure to change the way we work quickens the rot. Recovery in China and lying about how good the new packet machines are to the public, may increase the share price one last time, after that its downhill.