Royal Mail rebrand & position to split company after losses

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A Royal Mail rebrand has been announced, with the company to be renamed International Distributions Services plc to reflect the group structure of two separate companies (Royal Mail and GLS), although this should have no impact on Royal Mail and GLS brands but this might not last long… it’s positioning to spin off one or other businesses.

In the event that significant operational change within Royal Mail in the UK is not achieved, the Board will consider all options to protect the value and prospects of the Group, including separation of the two companies.

– Royal Mail

The Royal Mail rebrand was announced alongside their later results and they report revenues down 11.5% year on year in the first quarter with an operating loss of £92 million for the first quarter of the 2022-23 year. They said that this reflects inflexibility in the cost base to adjust to lower volumes and disappointing performance on delivery of further efficiencies.

One can’t be help think back to the last Royal Mail rebrand when they chose the name Consignor, a move that went stunningly badly and didn’t last very long. That time it was in an attempt to have an umbrella brand for Royal Mail, The Post Office and Parcelforce and the name was universally met with derision.

Royal Mail’s woes aren’t just purely income related, their Progress on Pathway to Change also stalled, creating £100 million risk to £350 million of benefits identified for FY 2022-23; other cost saving programmes on track, albeit with headwinds from recent increases in absence due to COVID-19.

They said that Q1 performance emphasises the need to act now to make the most of their new infrastructure, find more flexible ways of matching resource to workload and ensure Royal Mail has a more agile and sustainable relationship with the CWU… announcing the need for better relationships with the CWU couldn’t have worse timing seeing as a mandate for strikes arrived with the results of the CWU ballot yesterday.

GLS, normally the darling of Royal Mail results, saw their volume declined 3% year on year in the first quarter but revenue growth of 7.8%. Operating profit of £94 million was broadly in line with prior year.

So now it’s time to place your bets and figure out which Royal Mail businesses will be sold off. It’s likely and simple that GLS is being ear marked as the one to be sold, in which case watch for execs positioning themselves to jump ship with the profits.

Selling GLS doesn’t mean that Royal Mail couldn’t also be broken up and sold piecemeal.

Parcelforce is still tied quite closely to Royal Mail but quietly over several years, Parcelforce and Royal Mail parcels have become somewhat separated to the massively loss making letters businesses. So could parcels be split from letters and flogged off and perhaps leave loss making letters to effectively go bust and force a government rescue?

Whilst GLS delivered a solid performance in the first quarter, the performance of Royal Mail was disappointing with an adjusted operating loss of £92 million resulting from of a decline in parcel volumes post the pandemic and a lack of progress in delivering efficiencies.

The pandemic boom in parcel volumes bolstered by the delivery of test kits and parcels is over. Royal Mail is currently losing one million pounds per day and the efficiency improvements which are needed for long term success have stalled.

We can however be a long-term success story. We have advantages in scale and reach and a strong balance sheet and asset base which are the foundations for a successful future. We need to act now in moving to that future in the interests of all stakeholders, employing those advantages to the maximum.

– Keith Williams, Chair, Royal Mail Group

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