Analysts at UBS have downgraded Royal Mail PLC (LON:RMG) to ‘sell’ ahead of possible strike action later this year with the delivery giant and its workers “a long way apart” on the key issues of pay and pensions.
A ballot on whether to strike or not could happen next month, according to Dominic Edridge, if a mutually agreeable resolution can’t be found in those two areas.
A September ballot could see Royal Mail workers potentially walk out over the key Christmas period.
Given that the company makes around £15mln in profit during that holiday season, it could be a very expensive strike for Royal Mail.
“There is the chance of a negotiated settlement given the proposed time scale is for a ballot in late September (with further talks planned for the end of next week),” wrote Edridge in a note to clients this morning.
“However, it also means that strikes could happen over the crucial Christmas period.”
The UBS analyst acknowledges that there aren’t too many alternatives for sending letters, but thinks that even the possibility of industrial action might lead to customers looking at other delivery firms for their parcels.
On top of the downgrade, Edridge cut his price target to 390p from 410p.
That’s slightly below where the shares find themselves at today; they’re currently 0.3% in the red at 397p.