Royal Mail shares plummet as strike over new tech looms

ROYAL Mail shares crashed 10% as it faced another row with unions that threatens to debilitate a shake-up overseen by chief executive Rico Back.

Despite a decent trading update on the back of a strong Christmas and a boost in business from the general election, the company remains at war with staff. The Communication Workers Union objects to attempts to overhaul working practices and wants the working week reduced from 38 hours.

Royal Mail wants to introduce new technology that would better measure productivity. At present workers clock in and out by hand, a practice the Mail wants to end, in line with most large companies.

Back said: “We are disappointed that the CWU has issued a timeline for a ballot of its members for industrial action. We stand ready to invest £1.8 billion to modernise and grow in the UK. We want to reach agreement with the CWU but cannot afford to delay this essential transformation any longer.” Royal Mail controversially floated in 2013 at 330p, a price that looked far too low as the shares rocketed, making fortunes for City investors and advisers.

Today the stock fell 19p to 170p, leaving the business valued at £1.7 billion, compared to £4.5 billion the day after the stock market launch. In the nine months to December 31 revenues rose 3.7%. Letters fell 1.5%. The international division is on the up, with strong growth in Germany, Belgium and eastern Europe. Profits for the year are expected to be between £300 million and £340 million. The City now thinks Royal Mail’s dividend is at risk, another reason for the plunge in the shares.

Helal Miah at The Share Centre said: “Investors are getting increasingly concerned that Royal Mail’s once attractive dividend has now reached unsustainable yield levels in the region of 8-9%. A correction to the dividend looks likely in the near future.” Royal Mail said the outlook for the next year is “challenging”.

Richard Hunter at Interactive Investor, said: “Royal Mail’s hope must be that it can begin to display some material progress as opposed to strategically clutching at straws. Investors may have been hoping for brighter news in this update, but it has failed to materialise once more.” The Royal Mail won a court battle to prevent a Christmas strike but seems unlikely to prevail this time.