Royal Mail shares unfazed as company fined £1.6m by Ofcom

Royal Mail shares unfazed as company fined £1.6m by Ofcom

Royal Mail Group plc (LON:RMG) has been fined £1.6 million by communications regulator Ofcom for late deliveries and overcharging for stamps. Meanwhile, the company’s share price remains largely unbothered by the penalty, up 0.36% to 165.90p at Friday lunchtime.

The postal service is required to deliver 93% of its First Class mail within one working day of collection, but between 2018 and 2019 Royal Mail missed the target by a “significant amount”, with only 91.5% of next-day mail delivered on time.

Highways England was blamed for disruption on the roads, but Ofcom argued that the company still undershot the target even when adjusting for disadvantaged drivers.

In addition to late deliveries, Royal Mail also overcharged customers by 1p for second-class stamps during one week in March 2019. Despite the relatively small fee, UK customers were overcharged by a cumulative £60,000 – indicating that a total of 6 million overpriced stamps were bought with money that the company is unable to refund.

Ofcom has since handed down an additional £100,000 fine for the stamp error, on top of the £1.5 million for breach of delivery obligations. The fines will be received by the Treasury.

Gaucho Rasmussen, Ofcom’s Director of Investigations and Enforcement, commented on the news:

“Many people depend on postal services, and our rules are there to ensure they get a good service, at an affordable price. Royal Mail let its customers down, and these fines should serve as a reminder that we’ll take action when companies fall short.”

Royal Mail said in a statement that it “accepts and understands Ofcom’s decision”, and added:

“We accept and note Ofcom’s decision around the 2019 Second Class price cap. We made a mistake. Due to an error on our part, our price for Second Class stamps was 1p above the requisite regulatory cap for seven days. At the time, we sought to put this error right by publicly acknowledging our mistake”.

The company has since donated the £60,000 revenue it gained from the stamp error to the charity Action for Children, which helps young people at risk of developing mental health problems.

Royal Mail’s share price has nonetheless risen a modest 0.36% to 165.90p at BST 13:03 10/07/20, gaining some ground after falling to just 160p in the last week of June. The company’s full year results released last month revealed that while revenue was up 3.8%, profits sank a painful 31% to £275 million.

An estimated 2,000 Royal Mail employees are set to be made redundant due to the coronavirus pandemic.