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New Royal Mail boss has chance to push the envelope


To be fair to the Royal Mail PLC (LON:RMG) its reputation for losing things pales into insignificance compared to your average airport.

That being said, it does seem rather careless when it comes to retaining chief executives.

I don’t know if it sponsors a football club but it should do because it seems to go through bosses at about the same rate as the average footie club.

Moya Greene, the Arsene Wenger of Royal Mail

Royal Mail floated on the stock exchange on October 15, 2013 at 330p with Moya Greene in charge. She had previously been in charge of Canada Post for five years but jumped ship to the Royal Mail in 2010.

She stuck it for eight years and although she won few popularity contests, especially with the Communication Workers Union (CWU) and those who get het up over excessive executive pay (she earned £1.5mln in 2013), she arguably knocked the company into some sort of shape.

Even in 2013, people could see the challenge posed by parcel delivery firms to the profitable part of its business, while the letters side of the business was constrained by the requirement to charge the same amount whether a letter is sent from Land’s End to John O’Groats or from number 32 Acacia Avenue to the house next door.

That requirement seems less of a burden now nobody except your Aunt Madge and utility firms send out letters.

However, throw in a hefty final salary pension scheme obligation and a bolshie workforce and the task facing Greene was undoubtedly a difficult one.

She stepped down in 2018, after which it all started to get a bit post-Arsene Wenger for Royal Mail.

Back was not the future

The interestingly named Rico Back succeeded her. He was a German who lived in Switzerland so people were probably not expecting a happy-go-lucky charmer, although some decent chocolate at Christmas would’ve been nice.

He carried on living in Switzerland so he was well ahead of the curve on this whole remote learning “how do you unmute the microphone?” management by Zoom thing.

Germans are well used to the concept of working hand-in-hand with union representatives for the mutual benefit of the company, which makes it a bit of a surprise that he made such a hash of his negotiations with the Communications Workers Union.

Financial results were nothing to write home about either – not that people write home these days – with profit before tax in the 52 weeks to 2020 sliding to £161mln from £212mln two years earlier.

By the time of the publication of the 2019/20 financial results, Back was gone having achieved what many people thought was impossible, namely attracting more ire over his pay packet than was directed at Moya the Annoyer.

Around 70% of shareholders voted against his pay package, which included a £6mln “golden hello” for leaving the company’s European subsidiary General Logistics Systems. He was paid a basic annual salary of £640,000, which was 17% more than his predecessor got.

Well, I hear the cost of living is very expensive in Switzerland.

To put that into perspective, only 64% of shareholders voted against the controversial pay package of erstwhile Persimmon boss, Jeff Fairburn, who trousered a £75mln bonus after the government’s “Help to Buy” scheme effectively made his task of hitting profit targets easier than shooting fish in a barrel.

Alternatively, you might want to consider the average pay of postal workers represented by the CWU union at the time of his appointment, which was £22,500 a year.

News of his departure was accompanied by the announcement that no bonuses would be paid for executive directors for 2019/20. Around £25mln was instead set aside for cash awards for front-line staff, in recognition of their role during the coronavirus pandemic.

New boss’s track and trace experience might come in handy … then again …

When Back left, the shares were trading at around 170p, since when they have doubled, thanks largely to booming demand for parcels deliveries in lockdown Britain; in its recent interim results, the group revealed that revenues from the parcels delivery business had exceeded revenues from letters for the first time.

This upsurge was achieved under the steady hand of Keith Williams, the chairman who sat in as interim chief executive, with Stuart Simpson acting as interim chief executive officer of Royal Mail (UKPIL), the group’s parcels, international and letters business.

Simpson presumably found today’s announcement that non-executive director Simon Thompson would be the new chief executive a bitter UKPIL to swallow as he is now off.

Thompson is a former chief product officer at Ocado Group PLC (LON:OCDO), a gig that looks good on his CV given that the grocery delivery technology company has become such a UK glamour stock that it is certain to be snapped up by a foreign company at some point in the future.

Thompson also spent a short while managing the UK’s coronavirus test and trace app, an appointment that is likely to feature in white 6-point font on his CV.

So, does Thompson’s time at Ocado mean the Royal Mail will start delivering Corn Flakes with your morning junk mail?

Probably not. The business remains hamstrung by the requirement to keep the universal pricing system for letters, while competitors can focus on the profitable parts of the letter delivery game (probably using non-unionised staff on lower salaries).

That being said, the e-commerce revolution does present the group with an opportunity to transform the business and with the company having recently reached a framework agreement with the Communication Workers Union (CWU) on the strategy and future direction of Royal Mail, operational change, pay and job security, there is a decent chance some of the age-old millstones around the group’s neck will be cast off.

It will be interesting to see the union’s response to the new man’s salary of £525,000 a year and a pension allowance of 13.6%. His one saving grace might be that compared to his predecessors’ trough snuffling, that doesn’t seem so unreasonable.

What on earth is in store for 2021 ………

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