Royal Mail share price jumps as group updates on agreement with union

Postal operator’s GLS division acquires Spanish express parcels delivery company

Royal Mail share price jumps as group updates on agreement with union

Shares in Royal Mail Group (LON:RMG) have jumped in early afternoon trade as the company unveiled details of its agreement with the Communication Workers Union (CWU) on pay and pensions. In a separate development, the postal operator’s General Logistics Systems (GLS) inked a deal to buy a Spanish express delivery company as it continues to expand its international footprint.

As of 12:29 GMT, Royal Mail’s share price had gained 2.13 percent to 479.50p, outperforming the FTSE 250 index which currently stands 0.22 percent higher at 20,287.83 points. The group’s shares have added some 14 percent to their value over the past year, as compared with more than an 11-percent rise in the Footsie.

CWU agreement

Royal Mail unveiled details of its agreement with the CWU, noting that the parties had committed to work towards the introduction of a collective defined contribution scheme for all employees, with a defined benefit cash balance scheme to sit alongside it. The two parties had been at odds over the postal operator’s plans to close its defined benefits scheme and replace it with a cheaper alternative.

Royal Mail noted that the ongoing annual cash cost of pensions will continue to be around £400 million.

The parties have further agreed on a five-percent increase in pay from October 2017, with the rate to apply throughout 2018-19, while October 2018 will see a one-hour reduction to the working week, subject to completion of trials and implementation plans for a range of initiatives. From April next year, employees will receive a two-percent increase in pay and a further one-hour reduction to the working week from October, subject to successful implementation of those initiatives.

Royal Mail further updated investors on its recent trading, noting that it now expected to deliver adjusted operating profit before transformation costs for 2017-18 of at least £680 million.

GLS buys Spanish firm

In a separate statement, Royal Mail announced that its GLS division had acquired Spanish express parcels delivery company Redyser Transporte, with the deal to further enhance GLS Spain’s domestic offering.

The total consideration paid for 100 percent of the shares in Redyser is €16.5 million (approximately £14.5 million). The acquisition comes after last year, GLS inked a deal to buy a US overnight delivery company operating in the Pacific Northwest.

As of 12:46 GMT, Thursday, 01 February, Royal Mail share price is 469.10p.

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