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magazineRoyal Mail under threat from industrial action
Royal Mail (RMG) 226p
Gain to date: 14.1%
Original entry price: Buy at 197.95p, 27 June 2019
On 15 October the Communications Workers Union (CWU) cheered one of its biggest turnouts and yes votes for many years as 97.1% of its members agreed to strike.
Dates have not yet been announced, but many suspect that 29 November will be targeted. This is the so called ‘Black Friday sale’ weekend in the UK that coincides with the Thanksgiving holiday in the US.
The issue is that Royal Mail (RMG) wants to increase automation in the long term to improve productivity and offset an agreement with the union to reduce the working week to 35 hours from 38 hours today.
A further one hour reduction was due to kick-in from the end of this month, subject to the successful trial of productivity initiatives.
It now appears that the expected improvements may have not materialised or possibly that the CWU are trying to squeeze a better deal out of the bosses. Either way, the union has accused management of reneging on the deal.
One of the key supporting legs of our positive stance was based upon the company achieving at least some of its targeted 15% to 18% productivity improvements over the next five years to 2024.
If it goes ahead the strike will disrupt business at one of the busiest times of the year. More importantly in our view is that it also potentially dents credibility with clients in the long-term.
SHARES SAYS: A change in circumstances means now is a good time to take profit.
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