Member Info for Hounddog10

RG Postie. Yes, I have always thought that the letter box is really an anachronism now. RM should team up with some domestic parcel locker producer and push sales/installation of domestic parcel lockers. Do a PR campaign. Not for the locker sales but RM efficiency. They could tie it to energy efficiency (letter boxes not very good for home insulation and better blocked up).

Also ties to a wider point that there is now a big drive for locker pick up at supermarkets etc. Would need at least a couple of million lockers nationally to make a difference. So will take some time to install but parcel delivery will also change. Perhaps delivery to the home will become a premium service.

Deadline is 6 months on AIM but most get it out by end April or before. Yes, a bit worrying. We know the 2022 results - it is is current trading.

They are past the normal date. Last two years 31 March. Before that (except COVID year) has been even earlier. Looking a little ominous if they do not get something out soon.

Anger. You may well be right. I don’t know enough about the special administration route to know whether you can go into it earlier (or in a more solvent state) than you would do for normal administration. However, I assume that if the IDS directors were to try to enforce an administration on the RM UK operations it would have to be a special administration given USO requirements.

Oligarch. Yes, I think IDS could well be better off with RM UK in administration as it will help to protect the recoverability of the £900m. IDS is by far the biggest creditor of RMGL. We tend to look at matters at a group level but insolvency law bites on an individual company level.

As for fines & infrastructure I would be almost certain those are entirely contained in the UK operation (RGMSL). IDS plc and the intermediate holding company (RMGLS) are just that - holding companies. They do not appear to have any operational assets or liabilities.

I had a look at this because I was a bit puzzled that IDS seems to be threatening a fairly immediate administration and, for the moment, I think the RM UK operations are solvent (at least for about a year so long as trading does not sharply deteriorate). As far I am aware you can’t put a solvent company into administration.. It has to be in trouble as the point of administration is to try to sort it out so that the company can carry on. However, I think the manner of the inter company lending in the group makes it more urgent for the IDS directors that RM UK sorts itself out..

I have not mentioned the c£900m undrawn loan facility. Bizarrely, I cannot work out from the disclosures which company is entitled to draw on this facility - IDS or RMGL. I would expect it to be IDS as the covenants apply to the whole group - but some disclosures are missing/conflicting to be certain.

This is quite detailed but useful to know. Until 2021 the immediate company under Royal Mail plc (now renamed IDS plc), being the ultimate Topco, was Royal Mail Group Limited (RMGL). RMGL contained (and still contains) all material elements of RM operations in the UK. In addition, it had/has a few UK subsidiaries which didn’t/don’t do very much (the most important one, I think, holding vacant land RM is selling to developers). However, crucially it also owned Royal Mail Investments Limited. This was the UK company that held the GLS operations as it owned Global Logistics B.V., a Dutch holding company, which in turn owned/owns the various component companies of the GLS subgroup operating in many different companies.

In 2021 there was an internal restructuring whereby Royal Mail Investments Limited (renamed RMGLS Limited) was flipped up to be the intermediate holding company under IDS plc and so it became the owner of RMGL, it’s former parent company. As outlined before, RMGLS already owned the GLS subgroup but now also became the owner of all RM operations through owning RMGL. In other words the group structure became that rather than RMGL owning all RM/GLS operations, RM and GLS operations now sit side by side within the group structure. This was designed to separate the two sides of the business.

Within this is the issue of the Eurobond money. IDS has two Eurobonds each for £400m+, one due 2024, the other 2026 and totalling almost £900m. These Eurobonds, issued some time in the past, are borrowings/liabilities of IDS plc and the money was previously lent down into RMGL presumably for capex for both the RM and GLS sides of the business (plus probably GLS acquisitions). The inter company lending did not reflect the terms of the Eurobonds and was at call. In other words IDS can demand it’s money back from RMGL immediately. At March 2022 RMGL had negative current liabilities of around £500m (within that £800m cash). Both amounts will have deteriorated significantly since. RMGL (being the RM business) therefore lives on at the discretion of the IDS directors not calling the £900m owed.

The IDS directors have fiduciary duties to IDS, the company. They have no fiduciary duties to the group - that is an accounting concept not a legal one. Therefore, it seems to me that they have a legal duty to safeguard the collection of the £900m lent inter company to RMGL and if they see RGML’s solvency position deteriorating through losses such that it might not be paid would be obliged to act (call administration). As noted above RMGL no longer owns the GLS side of the group so no salvation there.

Quite a lot of trades in the first ten minutes this morning. Unusual.

dab808. I think your point on letters is very relevant. Letters, particularly with the April price rise, are now so noticeably expensive that people will make efforts to cut down. If you look at the DVLA, for example, postal costs are one of their bigger costs - and they are trying to push everything into apps.

I suspect RM management aren’t too bothered about price rises killing letter volumes in the medium/longer term. Price rise hikes help with short term revenue and volume reductions help with USO compliance.

I wonder what Eric meant when he said that some “big names, big people” would be attending the WK workshop. Strange wording if he is talking about Internal Shanta people.

Meanwhile, Dave is looking to keep up his dwindling membership by going further afield - to Screwfix! The link to the communications industry is well, um, er……

Apparently, the Screwfix employees have seen how the CWU are getting on at RM and want some of that for themselves.

https://www.cwu.org/news/weve-seen-the-cwu-fight-for-royal-mail-and-bt-members-now-we-want-this-union-in-our-company-say-screwfix-workers/

I think the penny has dropped somewhat with Dave &Co about the losses. He started off his recent communication to his members about looking into whether RM is really making a loss. I got the impression he now realised it was not a lie peddled by management. I think his hatred and mistrust of capitalism and his lack of understanding of company financing has led him to be dismissive of the losses. He will have to give up on banging on about the £400m to shareholders when shareholders will suffer more than that in losses in the next audited accounts. He is not left with much now.

There is likely to be a leg up on Q1 results next month which should be good. I think the excitement of a new operational mine and the prospect of significant cash flow is being tempered by the fact that we do not yet know about WK which will soak up a great deal of cash.

Notably Eric did not raise the dividend (I thought he would) and they doubled the Stanbic overdraft facility in January from $5m to $10m which perhaps is indicative that they are trying to free up as much future cash for WK as possible. Contra wise they did not fully draw down on the Stanbic $20m term loan facility seemingly taking only $17m of it.

Maximus. Yes, I have no doubt he has good information - he could be on the board if he wanted. Has to be a bit careful though given he is buying shares not to become an insider. The bigger question is whether IDS management has a good grip on the forward numbers. Their forecasting has been terrible recently. Eg will the stamp price hike stabilise letter revenue or crash letter volumes.

Anger. Certainly the City can/does panic but it is hardwired to go for fees and has a long record of pushing transactions, suitable or not, on companies. So I find it rather puzzling they are not bullish. I agree with you though Kretinsky is up to something and most likely it is a bid which one can only assume will then lead to an attempt to demerge GLS. As you say, he is not putting the money in without having a plan. I think it is because he is in a rather binary position because of the prospect of a Labour government which could be catastrophic for his investment. He cannot afford to just hope that the company will sort itself out over time.

Anger. True, they are not saying impossible but, as you know, these articles reflect a City view. The FT has said much the same in the past. If the City thought a demerger was easily possible then they would be stirring the pot to pressurise the company to do it. IB fees.

This is somewhat contrary to my own view - I thought a demerger was more or less inevitable. The political position may be due to the Tories precarious position and that the Tories may see any further RM controversy as electorally too toxic for no gain. Certainly the CWU and Darren Jones etc will be very vocal. Rather to my surprise the Tories have blocked Saturday USO reform - which might be an indicator.

Not very positive. Key points:
- Administration would require govt approval (no surprise)
- Practicalities and timeframe for any separation of GLS opaque (no surprise)
- if goes into administration then “politically” would be difficult to avoid putting cash in from GLS side
- JPMCaz reckons they are OK on covenants on the undrawn faculty for now (but they don’t need the facility yet and I would be much less sure by the end of the year)
- Analysts assuming £500m adjusted operating loss this year so higher than the £450m guided max
- pre-tax loss for 2023/4 of £279m, adjusted operating loss £182m

https://www.thetimes.co.uk/article/few-positives-in-a-second-class-stock-at-international-distributions-services-n8m0l3308

Seemingly, from the video clips the CWU has got an “expert” looking into RM’s financials to see if the company might go bust and Ward will report back. Would be interested to see what they come up with and how they spin it. Wonder who their expert is - is that A Furey I see beavering away in the background with a calculator?

Newdealz. Yes it would be much better to have some performance aspect to the work. No one wants Evri/Hermes work practices of slinging the parcel over the hedge but equally if there are freeloaders the company stagnates. I don’t think the workforce realises the difficult situation the company is in. I think they are OK for a year (difficult to be sure) but if reforms don’t go through now 2024 could be the crunch point.

I agree that the £200m buyback was not very wise but with an organisation of 160,000 employees £200m does not go very far. It could have done a £1,000 plus sweetener. In any event, I think it is clear that the dispute is much less about pay than it is about organisational change.

“ But the fundamental problem remains: senior management’s obsession with its ‘our business to run’ mantra”. There you have it. The CWU simply does not accept that.