Royal Mail warns on “challenging” outlook, shares crash

Royal Mail (LON:RMG) shares crashed on Thursday after the UK postal service and courier company released a trading update warning against the “challenging” outlook.

Shares in the company were down by over 8% during trading on Wednesday.

Royal Mail faced the threat of a strike over the Christmas Period. However, it was able to win a high court injunction to prevent the strike, which may have disrupted postal voting during the General Election as well as general deliveries over Christmas.

However, strike threats prevail as the CWU has said that it is preparing another ballot of its members for industrial action.

On Wednesday the company said that “the outlook for 2020-21 is challenging”.

Royal Mail added that addressed letter volumes have not shown “the expected level of recovery”.

Indeed, addressed letter volumes are expected to drop 7-9% for 2020 to 2021, which is a deeper decline than previously stated.

“We had a busy Christmas season, which coincided with a General Election for the first time in almost a century,” Rico Back, Royal Mail’s Chief Executive Officer, commented in a statement.

“We achieved a high quality service for customers across the UK due to additional investment and, more importantly, the commitment and dedication of our people – I thank them for all their efforts,” Rico Back said.

“Overall, our recent trading performance has been broadly in line with our expectations. We confirm adjusted Group operating profit is expected to be £300-340 million (before IFRS 16) for 2019-20.”

The Chief Executive Officer added: “We are disappointed that the CWU has issued a timeline for a ballot of its members for industrial action. We stand ready to invest £1.8 billion to modernise and grow in the UK. We want to reach agreement with CWU; but we cannot afford to delay this essential transformation any longer. So we are proceeding with key national trials and local initiatives, to improve our customer offering and grow the business, whilst maintaining good quality jobs and delivering a sustainable Universal Service.”

Shares in Royal Mail plc (LON:RMG) were down on Thursday, trading at -7.49% as of 11:44 GMT.