Royal Mail share price: Union calls for improved pay offer

A trade union has urged Royal Mail Group (LON:RMG) to make an improved pay offer to staff and resolve an industrial dispute as the group posted a rise UK profits. Analysts at Liberum meanwhile remain bearish on the stock following the update, citing concerns over long-term opportunities.

Royal Mail’s share price, which posted a hefty fall yesterday, has partially recovered this morning, having gained 1.41 percent to 495.30p as of 09:39 BST. The advance is largely in line with gains in the broader London market, with the benchmark FTSE 100 index having added 1.28 percent to stand at 6,131.02 points.
Trade union Unite called on Royal Mail’s management yesterday to “recognise the ‘invaluable’ role its members have played” in delivering a five-percent rise in the group’s full-year profits, by making an improved pay offer and resolving an ongoing pay dispute.

“With the UK part of Royal Mail making £608 million profit, it’s clear that the company can afford to reward Unite members for their hard work with an improved pay offer,” Brian Scott, Unite officer for Royal Mail members, said in the statement, adding that “a failure to do so will lead to the overtime ban and work to rule that our members are engaged in hitting deliveries to homes and businesses”.
The comments came after Royal Mail’s pay row with its Unite-represented managers intensified earlier this month, with nearly 5,000 staff ramping up industrial action after failing to agree a pay deal with the postal operator. The FTSE 100 company is also in pay talks with the Communication Workers Union which represents most of its workers.
In a separate development, analysts at Liberum reiterated their ‘sell’ rating on Royal Mail which yesterday unveiled that its reported profit before tax had slipped to £267 million in the 12 months ending 27 March, from £400 million in the prior-year period.
“The full year results were c.2% ahead of consensus at the profit before tax level, but in line with our forecasts,” the broker’s analyst Gerald Khoo said, as quoted by Citywire. “Transformation costs were higher than forecast in 2016, and management’s guidance points to a higher than expected outturn in 2017 too. We see downward pressure on consensus as a result, albeit with potential mitigation if a lower tax rate can be sustained.”
“We remain concerned about regulation, wages and pensions short term, and parcel trends that may be adverse to Royal Mail in the long term,” Khoo pointed out.
As of 08:59 BST, Friday, 20 May, Royal Mail share price is 496.25p.