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Isle, Q1 results out 20th July which will give an idea how things are going for Royal Mail Group. Regarding the Royal Mail part of the group, no I'm not talking about a profit after paying shareholders, I'm talking about the money left at the end of the year after all costs including staff wages are met. If 9% pay rise is given this may wipe out any profits, some of which, as part owner's of the company, shareholders would hope to receive. I'm excluding profits created by GLS because if that were used to subsidise a pay rise at RM that would mean Royal Mail workers profiting off the backs of GLS workers. I know, shareholders profit off the backs of Royal Mail workers, but that is an accepted norm of the economic system currently prevailing in our country.
AS, the next few weeks/months are going to be fascinating, and currently everything written on this board re. how the CWU dispute will pan out, is speculation fed by bits and pieces of news interpreted by the readers. One thing that can't be disputed is how far apart the opposing positions are suggesting a resolution won't be easily attained.
AngerSharkz, i think Thomson is probably talking about wages, pensions and other benefits when he talks about the costs of labour, and I should have written 29-40% more expensive, but still a disparity which significantly affects rm's competitiveness and which must be tackled by working more efficiently. I don't believe he wants a strike, but there are many examples from the past of businesses declining because unions believed they were immune from fundamental economics. i.e. if the business isn't making a profit then wage demands can't be met, and a 9% pay rise would push us into that position; £40m x 9% = £360m. Revenues are likely declining with the covid boost over, and general economic conditions stifling consumer demand. Due to inflation the value of parcels may be increasing, but volume is declining and it is units posted which make RM money. The CWU demand a fair pay rise, but life is not fair, the economy is not fair, just a reflection of the truth. I do believe that Thomson sees this as THE moment that it has to be sorted out and will dig his heels in, a moment in time that will determine the future of RM. CWU and management are poles apart and I'm anticipating a very ugly dispute unless CWU make serious concessions on labour flexibility, in return for which they may get 6% wage increase.
No one has yet posted the terms of the new offer to UNITE, but I'm sensing that Thomson views the CWU as a very different animal and will negotiate accordingly.
AS, Thompson's perspective is that working practices must change to reflect that RMG's focus and operating structure must follow what customers want, and the emphasis is parcels. Hard to disagree because the changes in demand, parcels v letters, are clear and unarguable facts, and a successful business must have the freedom to adapt and accommodate these changes. Without significant change RMG's future will be under threat because competitors are far more nimble and have far lower costs, with their labour costs being up to 40% cheaper. This is a pretty stark figure, a disparity which he believes can be offset by restructuring targeted at the growing parcel business, rather than declining letters.
More than anything this article gives additional insight into what Thompson's vision is for the future, and his absolute commitment to achieving it. CWU should be careful what they wish for, and how they go about protecting their members. An inflation based pay rise will wipe out royal mails side of the groups profits, forcing prices up and further reducing their competitiveness, an obsolete business model that just consumes itself and has no winners. Thompson witnessed the miners strike, and is well aware that the only union man who did well out of it was Scargill, who still resides in his London apartment paid for by the NUM.
Telegraph article without signing in:
https://www.msn.com/en-gb/money/other/royal-mail-union-offered-c2-a32850-a-week-for-staff-to-push-one-button/ar-AAZDZ0H?fromMaestro=true
Article makes Simon Thompson's views clear on why changes in working practices need to happen. He seems absolutely committed to these changes and ready to fight for them. CWU appear to be equally committed to their position. My conclusion is that a quick negotiated agreement won't happen and strike is guaranteed.
Thanks isle, yes, CWU should be more careful this time.
AS, must say I haven't really considered DK's position in the current mess that is RMG. He is a successful businessman and as such will be wanting to lower his average price, and the current 5% return is attractive. Doubt if he would bid for the whole company though, managing RMG appears to be a conundrum nobody has managed to achieve, and the risk attached has the potential to make a very rich man become a beggar.
Big stakes being played for with CWU, With an estimate of £40m being the cost/saving of each 1% of the CWU pay deal, so potentially a massive hit to future profits. UNITE deal will be chickenfeed in comparison, and how the negotiations between RMG and the 2 unions are conducted will reflect this. CWU current stance may have an element of posturing at the moment, if they demand 9% prices would have to increase significantly, undermining RMG's competitiveness, although this could be mitigated by the fact that all competitors have similar cost pressures. We still don't know the new offer to UNITE, but I feel that RMG's negotiations with the CWU will be a lot tougher. The wage demand is one thing, the change in lifestyle imposed on posties by the new working conditions is potentially even more onerous. There will be a lot of horse trading re. pay rise v conditions. I'm leaning towards RMG workers joining their CWU brethren and going on strike at the end of July.
Angersharkz, as I implied, Mr T. could appear to be incompetent, a reckless gambler or both, with the collateral damage of the CWU now knowing how he plays his cards, weakening his position in negotiations with them. So far everything that has happened has been predictable and thus hopefully anticipated and prepared for by the company. If he's caved in then he's had it, because that is not a reasonable backup plan. I think his reputation would be better served if he hasn't offered enough to avert a strike by UNITE. Hopefully we'll know soon what the offer to UNITE is which will be very illuminating. This could be his Maggie v scargil moment and he's decided to take on the union. Think I read somewhere that his father was a miner.
I thought UNITE ballot was now about striking on 20-22nd July, ballot result in on 19th? CWU strike ballot result in also on 19th July. Not sure how many concessions can be given to UNITE without CEO making himself look like a weak fool whose cunning plan failed. Not a good look for a CEO and would destroy the aura of toughness he is trying to project to the CWU. There must be something in the new proposals put to UNITE otherwise it wouldn't have been put to the membership but I think it's questionable whether it will be enough. CWU will be watching how this plays out carefully.
Isle, don't think he's for turning. He may have believed there was a tiny chance UNITE would accept their offer, but realistically always had this path of a new offer planned. Will be interesting to see how much is in the new offer to make UNITE put it to their members.
Royal mail have made new proposals to Unite who are putting the proposals to their members and will ballot members from tomorrow until 18th. Work to rule has been suspended, strike may still happen depending on outcome of ballot.
I was expecting the market to give some sense of the direction of travel this week, but the sp has just moved sideways on low volumes and narrow range.
Angersharkz, UNITE vote for strike action was announced on 29th June and sp fell 15p to 268p despite the fact that it was nailed on that they would vote yes to a strike. The CWU will vote to strike and the effect will be many times more damaging than UNITE's action. SP has already touched 258 a couple of times. Anticipation of the dividend may create support. Official Govt. retail figures for June come out towards end of month which could have an effect. My guess is around 240 before exdiv date.
Regarding Olli's question, re: can the buying dept. of Blackrock lend shares to their selling dept. ?
I also had this suspicion and thinking that the Buy was another way of giving additional leverage on the share price to Blackrock.
JB discovered the trade type to be TNCP which is defined as 'Non Price Forming Transactions and Non Price Contribution to Discovery Indicators' , suggesting the 5.66m Buy is not allowed to affect the sp, and the trade data isn't allowed to be included (by the broker?) to calculate where the supply curve and the demand curve intersect when setting the price.
So, now that Blackrock own these shares in a separate buying department, do the conditions attached to the buy still apply? If this is the case then when Blackrock decide to sell these shares the broker can't allow their sale to affect the sp, ie. they can't be used to drive the sp down. The conditions attached to these shares would then be voided on completion of the sale. This would make sense to me because otherwise there would be a huge conflict of interest .
Equally I wouldn't be surprised if there were ways that transfer of stock from Blackrocks buying to selling dept. could be hidden, or if the conditions attached to the buy were immediately voided and did not apply to their future sale. It's all very dubious and a struggle to find definitive answers.
Angersharkz, thanks for the info. We do know blackrock's short position is 19,024,400 shares, and on the 4th July they bought 5,663,000 shares.... so a proportionately significant buy. Could this be the preparation for another assault on the current sp of 267.7 ?
Just done a quick sum, which I hope is correct, please check and point out any errors.
Total RMG shares = 956,000,000
Blackrock short = 1.99%
Number of shares in Blackrock short = 956,000,000 x 0.0199 = 19,024,400
Number of shares in the Buy = 5,663,000
= 29.8% reduction.
I'm either very wrong, or this is a huge reduction in the Blackrock short position. If it's the former, you won't hear from me for a while.
Angersharkz,
you make a good point, It stood out like a dogs b******s . And yes to your other questions.
JB, surely yes, I was watching the ticker and the trade had no impact on the sp. which would be bizarre if it were just a normal buy. Just found this:
'price discovery involves finding where supply and demand meet. In economics, the supply curve and the demand curve intersect at a single price, which then allows a transaction to occur. '
The trade isn't allowed to affect the sp or any data which may be used to determine the sp.