1st Oct 2018 16:09
LONDON (Alliance News) - Royal Mail PLC on Monday issued a profit warning, prompting shares in the mail delivery company to drop sharply.
Shares in Royal Mail were down 14% at 408.60 pence on Monday as the company revised its adjusted operating profit before transformation costs down to between GBP500 million and GBP550 million for its full financial year ended March.
This compares to a GBP694 million adjusted operating profit the year before.
The company's UK productivity and cost saving targets have both been cut. Royal Mail's UK productivity performance was "significantly below plan" at just 0.1% in the first half of its financial year with full year performance expected to be "significantly below target" at the upper end of the 2% to 3% range.
Cost savings targets have subsequently been dropped to GBP100 million from GBP230 million with plans to implement "a range of short-term cost actions" being enacted.
UK parcels revenue and volume were up 6% with revenue and volume growth for its current year expected to exceed the year prior.
Medium term guidance for a decline in addressed letter volume of between 4% and 6% per year has been maintained. Addressed letter volumes fell 7% in the first half of its year, which ended September 23.
"Trading conditions in the UK are challenging. Our letter volumes, especially marketing mail, are impacted by ongoing structural decline, business uncertainty and general data protection regulation," said Royal Mail Chief Executive Officer Rico Back.
"While we now expect addressed letter volume declines outside our forecast range this year, we are maintaining our medium-term guidance. Our UK productivity and cost performance has been disappointing. Against this backdrop, we are lowering our targets for cost avoidance and productivity improvements," Back said.
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