Royal Mail’s lack of CEO has “disappointed” Liberum, with the right appointment “crucial” to the successful implementation of its deal with the Communication Workers Union (CWU).
Analysts at the brokerage said there is still time to mitigate the risk of making the wrong appointment by hiring a CEO with an appropriate record in delivering restructuring of a unionised business.
Liberum also notes that the appointment of Martin Seidenberg to the group CEO means the separation of Royal Mail and Dutch counterpart GLS is now unlikely.
Revenues at Royal Mail are also of concern, with the analysts adding that: “Outside the exceptional boost to parcels revenues from the pandemic, Royal Mail has not grown revenue by more than 1% in any year since privatisation.”
“Another concerning, but not surprising, element of the first quarter was the implied trend in UK parcels pricing. For UK domestic parcels, both volumes and revenues declined by 9% year-on-year,” the broker said.
“This indicates that price/mix was flat, despite widespread inflationary pressure across the UK. In our view, any business that does not have the ability to raise prices in the current inflationary environment is not only in trouble in the short term (given the likely margin squeeze), but also in the long term.”
Liberum kept its Sell rating on the sock, with an unchanged target price of 180p.