Royal Mail share price: Group misses quality of service targets

Postal operator points to “very challenging industrial relations environment”

Royal Mail share price: Group misses quality of service targets

Royal Mail Group (LON:RMG) has missed its annual regulatory target for First Class mail, the postal operator has disclosed. The company, which now faces a potential fine by industry regulator Ofcom, as cited the “very challenging industrial relations environment” as one of the reasons.

Royal Mail’s share price has jumped in London in today’s session, having added 2.39 percent to 626.02p as of 14:37 BST, outperforming the benchmark FTSE 100 index which currently stands 0.13 percent higher at 7,711.30 points. The group’s shares have added more than 48 percent to their value over the past year, as compared with about a 4.3-percent rise in the Footsie.

Royal Mail misses targets

Royal Mail announced in a statement today that it had missed its annual regulatory target for First Class mail, delivering 91.6 percent the next working day, against a target of 93 percent. The company’s overall performance for Second Class mail meanwhile was 98.4 percent, as compared with the 98.5-percent annual regulatory target range.

The postal operator blamed the outcome on a string of factors, including “a very challenging industrial relations environment”. The FTSE 100 group reached a pay and pension deal with the Communication Workers Union earlier this year following months of negotiations and threats of industrial action.

“Royal Mail is asking Ofcom to take these issues into consideration.  It will be for Ofcom to decide,” the company said. City A.M. noted in its coverage of the news that the regulator was ‘concerned’ that the postal operator had fallen short and would now consider whether to slap it with fines of up to 10 percent of ‘relevant turnover’.

Analysts on postal operator

The 16 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 480.00p on the shares. As of May 4, the consensus forecast amongst 18 polled investment analysts covering the privatised postal operator advises investors to hold their position in the company. 

Royal Mail is scheduled to update investors on its full-year performance on Thursday.

As of 15:06 BST, Friday, 11 May, Royal Mail share price is 629.00p.

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