It must be a bit galling for a chief executive to watch the share price go up after stepping down, but that is the reality today for Royal Mail (RMG) chief Rico Back, with the shares rising 6% to 172p.
Keith Williams will become interim executive chair while Stuart Simpson becomes interim chief executive. Executive directors will forgo bonuses for the year ended 31 March 2020, and roughly £25m has been set-aside for cash awards for frontline staff.
Russ Mould, investment director at AJ Bell commented, ‘German-native Back took over as CEO in June 2018 and while a plan to transform the business initially won some favour with investors, Royal Mail ran into trouble as targeted productivity improvements were not met amid wrangling with the unions.
‘Interestingly one element of the group’s recovery plan - the targeted transition from letters to parcels - may have been accelerated by the coronavirus crisis. Parcel volumes in the UK business were up 31% in April as more of us went online to shop with high street outlets and shopping centres closed.’
CORONAVIRUS IMPACT
From 30 March to 3 May revenues for UK parcels and International letters (UKPIL) fell £22m year-on-year and costs went up £40m driven by increased overtime and agency resource costs due to high levels of absence amid the introduction of social distancing measures.
The company suffered a substantial 33% fall in addressed letters which resulted in revenues falling 23%, partially offset by a 20% uplift in parcel revenues, on 36m extra deliveries.
Royal Mail insisted liquidity remained strong with around £1.8bn of resources and the ability to access the governments financing facility. The company will provide more detail on mitigation measures to reduce losses in UKPIL on 25 June after consulting with stakeholders.
On 27 March, the company cancelled the dividend and said its heavily disputed turnaround plan would take longer than expected.
