After Royal Mail Group PLC (LON:RMG) seemed to concede defeat on its 2014 targets, broker Liberum has slashed its share price target and reiterated its ‘sell’ recommendation.

Earlier this month, the letters and parcels group’s chief executive Rico Back openly questioning the achievability of the targets, warning that letters volumes continue to decline and that productivity improvements were slipping below the historic rates.

READ: Royal Mail begins robot roll-out as more strikes loom

What’s more, the threat of strikes by workers, while temporarily crushed by a legal injunction by the company, had seen customers shift some parcel volumes to rivals.

With this all coming just nine months after the strategy was launched, Liberum’s analysts said it was “hardly encouraging”.

A new ballot for industrial action has been started by the CWU union, closing on 17 March 2020, with the result to follow shortly afterwards and seven days’ notice needed before a strike.

As the original ballot last year secured 97% support for industrial action, Liberum is assuming a similarly supportive vote this time around.

Profit margins are being squeezed by the declining letters revenues and poor productivity but with co-operation from staff and the CWU union needed to deliver the recovery, the analysts were pessimistic, even though costs from a strike “could actually be quite modest away from the peak pre-Christmas period”.

The squeeze on margins puts the dividend at risk, the analysts said as they cut their target price to 120p from 175p.

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