Member Info for Commonsense5

Mr oligarch - don’t know if your question is serious or not !? The dividend is coming out of group profits - the cost of capital return to shareholders. What has not been mentioned for sure is that dividends as we stand going forward will probably struggle to be 20p.

I think either in the next two / three weeks and sooner rather than later for all sides I think but unions / bod agree OR there will be long term fall out or Royal Mail - and GLS will have gone

You know my thoughts - either gives a rally in the shares. Thankfully we had a pretty sensible week - 10% off the bottom of so which boads well.

With respect anger it would make it more efficient

If fundamentally unions and maybe government looks at a business making £780m operating profit and thinks there is cash to pay union demands as they do AND the government is saddling Royal Mail still with 6 days a week forced letter delivery amongst other points then the structure alone simply masks the issue and there is less pressure to sort it out by virtue of the businesses being together.

If the numbers are black and white it would be obviiis to all that efficiencies and improvements HAVE to be found.

Mr Oligarch
It doesn’t matter who funded by backs and dividend those were returns given to share holders.
The union pay deal point is more robbing peter to pay paul, the profits of JLS should not be subsidise the costs of Royal Mail.I know that the chairman believes very strongly about this principal.
There are many other examples where within the same group the profits of division a fund the development growth of division b. Typically both divisions are run on the same terms and culture.
However most people including the chairman do not believe it is right to take profits from gls to plug the holes in Royal Mail.
My main point is simply to highlight the difference between share holder returns and cross subsidisation of a business that needs to become more eficcient

Agree scamp

The board has a fundamental duty to … GLS stakeholders too in all this . GLS employees listen to Royal Mail unions essentially asking to be paid 10% more … from GLS profits !! This can’t go on. It will ultimately stifle GLS, the jewel

Thx scamp

Guys / Gals - what is the actual latest on whether there will be or won’t be a strike ? Unions seem to say there is a window for discussion - are we in that window ?

Any help gratefully received

Don’t forget as price will fall accordingly, however

My thesis is it will be back above 300p comfortably within the month.

Analysts will still be doing their numbers on GLS valuation = more than share price especially after it goes ex today !

My thesis is it goes ex well but let’s see

Mr anger some well funded unions have a max £70 a day

I know some do some do and some don’t

Mr anger

I think you are right but GLS gets spun off either way now - I see they are one of the sponsors of dortmund - tells me big ambition - on linked in this am

I think he will want value and spinning off has to be the best way - I think this will be hard to reverse now and maybe as I said earlier - inevitble and this is just the excuse ..

Mr Anger

I wouldn’t assume a listing for GLS - big PE deal OR a trade partial both as likely if not more than a listing. Such a spin off maintains any strategic relationship via a residual holding for RMG. However you imagine the benefit from an employee incentive perspective for GLS - massive.

It would also be impossible for unions to then be asking for inflation pay rises as the company obviously would not be able to pay it. Everyone needs to be realistic. If we pay people 40% already over the market then a seismic shift has to happen from a cost restructuring perspective. Union bosses should be looking after jobs for the wider team rather than trying to milk every penny and then failing which will be the only result.

So bring on the split. Expect more and more analyst comments which will drive special sits big buyers.

Rare we disagree mr anger but spinning off GLS would make Royal Mail wake up to the reality - even if sorted now unions are back next year and year after. There is only one big holder in Royal Mail - what do we thing he would like ? I think I know. Spinning off GLS now post these union discussions is the ONLY possible scenario. Arguably this spat is just the excuse for it anyway. It is only fair on GLS employees importantly.

Royal Mail has to stand on its own two feet and this is the only way. The unions have caused it. Everyone has to ‘change’ working practises the question is from what ?

I saw earlier a comment about RM employees and ‘frontline’. I fully fully fully get that during Covid they were front line getting test kits in particular to everyone. However, there is a thesis that actually it isn’t that ‘frontline’ compared to many other sectors such as nurses etc in fact I know a few postman who do it for lifestyle. What I don’t know is how the overall rate today all in including pensions compares to say an Amazon worker equivalent ? Can anyone help. Please don’t take this commment as being as disrespectful as some may read, that isn’t intended. Just asking a sensible question - Amazon v Royal Mail as they may be the ultimate discussion in the union discussion.

@isleworth

Sorry if not clear

Just saying royal mail is hard to value - it owns £4bn of assets is one metric for valuation - I am saying on vacations levels let’s just call it £1bn NOT £4bn. Only a true nutter would value Royal Mail at £4bn - I am only half nut !

@ isleworth I never said £8bn ?

@ isleworth but to help others

To create value the following needs to happen … by the way this is exactly what Glaxo just did with their Haleon business; shareholders in GSK now have a new share in Haleon. Such a transaction is not rocket science. My suspicion of the idea of spinning off GLS will have already had well advanced planning with several investment banks - RMG will be near ready to press the button.

As an aside I would ask ourselves … if you were a senior GLS employee what would you make of what is going on at Royal Mail. Not very motivating whichever way you cut it. A GLS spin out is not just for shareholder value BUT for pure old fashioned employee motivation - quite important. If RMG want this asset to shine then cut it free, there can be no doubt now.

Back at the ranch, hard to talk share prices as that is just a number that drops out but 290p is £2.75bn mkt cap. RMG will retain I am sure say 60% of GLS and assuming a value of say £3bn for GLS, they will simply give current holders in RMG x number of new shares in the business to hold directly. The price / value of RMG will fall as the disposal ‘goes Ex’ exactly as you get the new shares in GLS so your loss is more than balanced by a gain. . To repeat the strategic important alliance can continue between the two companies by virtue of Rmg being the biggest owner of GLS. Alternatively, RMG could sell a 40> stake in GLS to private equity or a niche trade operator OR place it with instititions. In either of these latter scenarios RMG would receive funds which would be returned to shareholders via a special dividend. Global private equity has a lot of money still and a £1.2bn investment by one of those would be straight forward in a good growing company. In this scenario RMG could sell say 75% even this retaining only 25%.

On this last example of 75% sold off and 25% retained

We would would get £2.25bn cash return
RMG would hold a 25% stake in a business worth £3bn so carry an investment worth £750m
And then have Royal Mail which as per my previous mails would be say £1bn. So £1bn + £750m + £2.25bn = £4bn of value (v £2.75bn now)

Reality is Royal Mail is worth more than £1bn given £4bn of assets and GLS could be worth £4bn not £3bn.

@ mr iselworth

Most commentators have GLS conservatively at £3bn but let say £2.5bn. The question is what is ROyal mail is worth. ROyal mail was making £500m operating profit. It has just been loss making. They need to get the cost savings through on union discussions BUT I think finger in the air it should make £250m a year operating. Hence put that at even 4x which would be heavily discounted at £1bn OR put £125m on 8x. Who knows. Those two combined would be £3.5bn v £2.75bn now so 380p say. Still net cash on balance sheet ex options. Either way +25% min from now. Royal Mail itself net assets appears to be £4bn so valuing at £1bn looks very very cheap indeed.

From a pure share price perspective … would be interested in other views

My take is

Scenario 1. Unions strike - GLS gets spun off - share price rallies - probably 400p min
Scenario 2. Pay deal agreed - share price rallies - maybe 25% towards 400p

I think only two options here

One big bulge bracket firm saying GLS worth £3bn, and Royal Mail assets of £4bn … all you need to know I think