Royal Mail Share Discussion Threads

[outlawinvestor] 24/9/2019 12:38

BUZZ – Royal Mail: Liberum downgrades, says ongoing dispute bodes ill for business

* Brokerage Liberum downgrades the postal company to "sell" from "hold", maintains price target of 185 pence
* The ongoing dispute with Royal Mail's workforce poses significant problems, even if industrial action going into the peak season can be avoided - Liberum
* Brokerage says the dispute signifies a breakdown in co-operation between management and staff, which bodes ill for business as usual productivity improvements
* "The recent share price strength is completely at odds with the deteriorating industrial relations picture and weakening macro outlook" - Liberum
* Liberum says the valuation is 'wholly unreflective' of the structural challenges faced by co
* 3 of 15 brokerages rate the stock "buy" or higher, 7 "hold" and 5 "sell" or lower; their median PT is 240p - Refinitiv data
* Last week, Royal Mail received formal notice from union CWU that it intends to ballot its members for industrial action...
* Stock is down 19.15% so far this year

[creditcrunchies] 24/9/2019 12:35

dropped probably due to Labour conference, I guess working a 4 day week affects profitability plus the same old re-nationalisation rhetoric.

[muffinhead] 24/9/2019 09:53

superb post Lefrene

illustrates how antiquated letters really are

[wilc42] 23/9/2019 15:58

Why today.

[creditcrunchies] 19/9/2019 08:38

the unions act without Labour party guidance based on past practices with clause 4 reforms about to be reversed by the party say hello to mass strikes and union muscle for the next decade.

[careful] 18/9/2019 20:59

Would the CWU embarrass Jeremy with a disruptive strike with an election due before Christmas?

[lefrene] 18/9/2019 20:38

grahamite2, as in so many things 'it all depends'. But first compare the cost of trunking, contracted traction (44 tonne artic) is typically a little over £2 a mile plus perhaps demurrage payments and perhaps a fixed minimum charge for short distance work, so for ease round it up to a generous £3 a mile.

Take a typical 400 mile round trip, the lead contractor will be getting something in the order of 24p per letter and I know from experience that a single deck trailer can carry average 250,000 letters (varies between 235k and 274k depending on how fully the yorks are loaded), and I believe the trunker gets 40% of the stamp value or 24p of a 61p 2nd class stamp ie £60,000 for the load. The lead contractor will then hire a haulier to deliver the load, typically the load will be from the likes of a utility company's mailing centre, going to an RMG distribution centre. A generous £3 a mile one way would attract happy hauliers, who will just get paid for the outward trip (£600), and be left to themselves to find a return load from some other business if they so wish. So the lead contractor pockets £59,400!

Those 250,000 letters then have to be distributed by RMG. They will have arrived ready sorted by the utility company by postcode into little grey plastic boxes. The mail in trollies (49 to a single deck trailer) known as 'Yorks' will first be moved into smaller lorries, a 17 tonner will hold 28 'yorks' and a 7.5 tonner 15 'yorks'. They will go to Postal centres in towns and cities up to approx a radius of 50 miles of the distribution centre, likely 4 vehicles and drivers. Each of those will likely generate 4 vans, so by now 20 vehicles are involved with 20 drivers, each van if carrying an equal share will have 15625 letters to distribute. Quite possibly another 3 small vans will be required per large van to further distribute just over 5000 letters each. By now 60 vehicles and drivers have been necessary to get the mail to local offices where they get sorted for final delivery. Then quite likely involving several more vehicles in the final street delivery. A 1000 letters to each last mile van would require another 5 vans to bring our total number of vehicles in this cascade to 300, of course by this stage those vehicles are also carrying other post. But it illustrates the enormous manpower and number of vehicles required for final delivery, for 37p per letter against the trunker who is getting 24p, for one large vehicle and one driver.

To be fair some of these utility contracts are unlikely to be paying the 61p full 2nd class rate, but it illustrates the huge disparity between the costs involved in final delivery, and the comparatively trivial cost of the long distance haulage. Just 1p a letter for a full single deck trailer would generate £2,500, an absolute fortune in general haulage terms.

By coincidence I was talking to a former haulier earlier today, he told me that container work was now £2.60p a mile plus demurrage of £25 an hour after 2 hours.

The numbers above simply illustrate the huge disconnect between the cost of trunking, and whatever up to 300 vehicles and their drivers cost. The mileage of those 300 vehicles will individually be low except for the first 4 primary distributers, which most likely bring in loads in during the evening and their distribution load is the return leg to their local depot. However it's all man hours x 300, and may mostly be under 10 miles per van but x 300 vans is 3000 miles altogether. I simply don't have enough break down of fuel/manpower costs to work out if 37p a letter covers all the direct costs incurred, I leave it to others to speculate.

[zztop] 18/9/2019 19:22

Cannot see a strike.It would be madness

[petralva] 18/9/2019 18:37

I am surprised no ones thinking about shorting it, especially if it does happen?

[creditcrunchies] 18/9/2019 16:20

Sold my isa holding on Friday also sold half at 230 the other day on a limit sell in my SIPP but still got the other half in my SIPP left with an average of 198. If this gets hammered again I could end up dumping the lot at this rate.

[creditcrunchies] 18/9/2019 16:14

Back to the old strike routine again that'll smash any chance of a recovery on this stock

[grahamite2] 18/9/2019 14:01

lefrene, do you know the overall cost of the "last mile done at a loss"? Is it significant? You'd have thought this inequity - if it is significant - could be dealt with by a fairly simple change in the regulations applying to all carriers.

[lefrene] 17/9/2019 16:52

CC, they have the best conditions across the industry because they fought for them. The CWU needs to recruit in other mail/parcel carriers to create the same sort of level playing field that you get when buying diesel to fuel the trucks.

Perhaps if the UK gets cleanly free of the EU we might see the end of some unfair practices such as doing the 'last mile' at a loss, that subsidises the likes of DHL that are allowed to pinch highly lucrative trunking work. ie the Royal Mail is forced to give easy profits to the likes of DHL (German) and TNT (Dutch), and yet then has to subsidise their house to house deliveries.

[encarter] 17/9/2019 16:35

I agree CC but it's CWU that feeds them.

[neilyb675] 17/9/2019 12:05

My tip. Don't eat yellow snow.

[creditcrunchies] 17/9/2019 11:44

They said that about the miners look how that worked out the lot lost their jobs. The union reps got nice pay offs. Same with British Leyland. Just look at the competition nobody gets a better deal across the entire industry than RMG workers. My tip don't bite the hand that feeds you

[careful] 17/9/2019 10:09

An election before Christmas will boost letter volumes.

[careful] 17/9/2019 09:59

Too much science fiction.
AI will never be the force they are claiming.
Always eggagerated.

[zztop] 17/9/2019 09:53

Cannot fight technologySuper AI will destroy most jobsDrivingAccountingMedicalTrainsThey say super artificial intelligenceWill be the last invention humans make super AI will make them from then on

[ccraig69] 16/9/2019 20:18

I would guess a few will go and the rest will fall inline

[encarter] 16/9/2019 16:44

I'm sure plenty would like a nice redundancy package.

[petralva] 16/9/2019 11:03

Really......cc?
110000 employees just like that!
I doubt it!