Royal Mail (RMG Stock) share price slides on losses of £1million a day

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After releasing its full-year figures in May, Royal Mail’s share price continued to slide, falling from the FTSE100 in June, with little sign of respite since hitting an 18-month low at the end of last month.

Today’s first quarter update did little to boost enthusiasm for the shares, after the Royal Mail part of the business reported an 11.5% drop in revenue from one year to the next.

This is partly due to tougher comparisons last year, with the reopening of the economy compared to last year leading to lower volumes, while the end of PCR test kits free covid led to a drop in deliveries here as well.

Compared to 2019, there was further improvement, with domestic parcels rising from 242m to 276m, an increase of 14%, increasing revenue by 15.6% to £843m.

The international parcels business was the big drag, falling 44% to 37m, while revenue fell to £169m from £207m in 2019. Addressed letters also saw a sharp drop and continue to be an area that is not expected to improve, with revenue there. down 12.9% compared to 2019.

The slowdown meant the business tipped towards an adjusted operating loss of £92m, while the outlook deteriorated on fears that this trend would continue. Where there is a lack of flexibility to make operational changes.

Yesterday’s vote to strike Royal Mail staff, even though the company is losing £1million a day, makes the need for operational changes to better compete with Amazon, FedEx and UPS more urgent.

To that end, Royal Mail bosses have warned the company could be split in two unless unions agree to certain changes to working practices.

Since Royal Mail was privatized in 2013, it has always been the elephant in the room when it comes to modernization. The pandemic has brought the need for reform to the forefront, and while it’s understandable that Royal Mail staff want their pay to keep up with inflation, failure to strike a deal will only make matters worse. longer term things. future of the company.

The problem for Royal Mail, as it has always been, is that the letters part of the business is largely a loss leader, while the parcels business, which is becoming an increasingly activity, is again limited by a lack of automation. This limits the ability to scale as Royal Mail seeks to compete with its agile peers.

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