“There will be a greater emphasis on how we connect customers, companies and countries through our domestic and international businesses. There will be a clearer focus on financial performance and management accountability.”
This was from Rico Back, the moneybags CEO of Royal Mail, after the privatised group reported results that were as bad as predicted in the wake of an ugly profit warning last month. Adjusted earnings fell by over a quarter, headline pre tax profits by more than half. The shares were battered, partly as a result of the Brexit crisis, but it wasn't just that.
So what's Mr Back going to do beyond the business speak? Who knows or dares to dream. It won’t be until March when the company hosts its “first capital markets day” since joining the market in 2013 that Mr Back will "share more detail about our direction of travel" for the next five years.
In the meantime, his commute from Switzerland should leave plenty of time for strategising.
Whatever he dreams up had better be good. Mr Back was handed a shade under £6m upon taking up the role. His total remuneration for this year could hit £2.7m.
Royal Mail has been taking considerable flak for that, and for the £900,000 payoff to his predecessor Moya Greene.
The payments led to the City’s traditionally supine institutional investors voting against the company’s remuneration report in the advisory poll at the last AGM. It was one of the biggest rebellions the City has seen. Some 70 per cent of investors said no. You only need 20 per cent to get on to the naughty list the Government set up for miscreant companies.
The chairman duly walked, as he should have, and the company promised to think carefully and talk to its unhappy investors as they always do.
They were handed a sop when Mr Back told them that the company would keep on paying their dividends, and that the ‘progressive’ dividend policy would remain in place.
It was a potentially dangerous move for the new CEO given the challenges he faces.
The largesse showered upon him made squeezing his investors difficult to justify. But if you have to cut a divvy it’s best done at the outset of your rein so you can blame your predecessor.
Doing so would have given him some breathing room. Royal Mail currently faces more challenges than Postman Pat trying to find his black and white cat on a windy night in the hill country. It’s delivering less letters a home, is struggling to keep a lid on costs, and faces lower margins at its fast growing European business. European privacy laws may cut the amount of marketing junk it delivers.
Given the fuss over his pay, and the controversy over his tax arrangements, the onus is very much on Mr Back to prove he can rapidly find a solution to these problems and get the company moving again. He's on a short leash indeed.
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