PostNL NV’s U.K. unit Whistl suspended its end-to-end delivery business to stem losses, sending Royal Mail Plc, the country’s largest postal service, to the biggest advance among stocks on the benchmark FTSE 100 Index Monday.
The move follows the collapse of talks last month with Lloyds Banking Group Plc’s LDC private-equity arm on financing expansion of the service. The E2E business is under review and 1,600 staff have been told not to come to work as Whistl meets with unions, the unit of Dutch postal service PostNL said.
“We struggle to see how PNL could reverse this decision,” Damian Brewer, an analyst at RBC, said in a note to clients. “We think it implies PNL made significant losses in the U.K. and that to-the-door mail delivery is likely the natural preserve of the incumbent mail operator -- Royal Mail.”
Existing parcels will be handled by a separate delivery arm. LDC said April 30 that discussions on financing to extend the service had ended, terminating a joint venture plan struck in May 2013 and citing declining U.K. postal volumes and “the complexity of the regulatory landscape.”
The Lloyds offshoot said today that it aims to back profitable business capable of achieving growth and investor returns, and has committed more than 200 million pounds ($312 million) of equity investment in the last four months alone.
Royal Mail rose as much as 5.5 percent and closed 3.9 percent higher at 497.6 pence in London.
“At the moment there will be no redundancies, but I do not know what the future will hold,” Herbert Brinkman, a spokesman for PostNL, said by phone. Whistl’s delivery workers were told to stay home, with only 400 of its 2,000 staff -- mainly junior managers -- asked to come to work.
Royal Mail also saw a competitor disappear last year when parcel delivery company City Link Ltd. was put into administration at Christmas.
“As the universal service provider, Royal Mail is ready to accept the additional volumes into our network,” a spokesman for the company said today. “We are liaising with Whistl to make certain customers aren’t impacted in any way.”