Brits set to send fewer letters than expected next year

Royal Mail’s CEO gave a subdued comment, causing the share price to plummet.

Article updated: 29 January 2019 12:00pm Author: Graham Spooner

  • Despite parcel volumes rising by 6%, number of letters being sent fell by 8%.
  • Investors have seen shares fall by over 50% since May 2018 high.
  • Investors remain wary of a business struggling to adjust to competition and changing social trends.

A nine month trading update from Royal Mail highlights parcel volumes were up 6% but the lower trend for letters remains prevalent with an 8% decline, and business uncertainty continues to impact. Following on from the profit warning last October the group expect to deliver operating profit of £500 - £530 million for the year.

The CEO described the recent trading performance as being “broadly in line with our expectations”. Yet this subdued comment along with the overall numbers has led to an 8% fall in the share price in early morning trading. Long suffering investors have now seen the share price fall by around 55% since the high seen in May 2018.

Around the negative news, there were positives to be gleaned. Over the crucial Christmas period the CEO was pleased with performance and its international business saw revenue up by 13%, although cost pressure is mounting and the rate of volume growth is expected to slow next year.

Overall the update will do little to allay the concerns the market has over a mature business that is struggling to adjust to competition and changing social trends.

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Graham Spooner

Investment Research Analyst

Graham started out as a fully authorised dealer on the Stock Exchange trading floor and for various banks, before becoming an FCA-approved investment adviser. Now a respected voice in the media, Graham’s share tips and comments on the markets are frequently sought by the national press.