Royal Mail shares crash to record low

9pc fall in letter deliveries Dividend payment at risk Unions in strike threat

Royal Mail shares crashed to an all-time low as another row with unions threatened to derail its turnaround plan.

on a further bleak day for investors in the 504-year- old organisation, shares fell more than 8pc in early trading. They ended the day down 5.5pc, or 10.45p, at 178.9p, well below the 330p it floated at in 2013.

The slump came as Royal Mail warned that the outlook for the coming year looked ‘challenging’ as it delivers fewer letters and faces strike action by staff.

It said failure to deliver its transformation plan ‘increases the likelihood’ that the UK business will be loss making in 2020-21. Under the leadership of German chief executive Rico Back, Royal Mail wants to increase automation at the company’s distribution centres and overhaul working practices.

But the plans are opposed by the Communications Workers Union (CWU) which will ballot staff on February 25 over industrial action, having seen a Christmas walkout blocked by the courts. With the company under increasing pressure, analysts warned that the dividend is now at risk, making the shares even less attractive.

Royal Mail said ‘industrial action, or the threat of it, is damaging for our business and undermines the trust of our customers’.

It warned that ‘unless we are able to make significant progress’ with the overhaul of the business, its ability to hit its turnaround targets ‘will be compromised’.

Back, 66, who has been dubbed the flying postman because he commutes from his home in Zurich to london, 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 £1.8bn 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.’

In another disappointing update to investors, Royal Mail revealed it delivered 9pc fewer letters in the nine months to December 29 than in the same period a year earlier, excluding post related to the General Election.

Parcel deliveries were up 3pc, boosted by a strong performance over the Black Friday weekend when many households shopped online for heavily- discounted goods. For the coming year, Royal Mail said it expects letter volumes to decline by between 7pc-9pc, having previously pencilled in a 6pc8pc fall. Back ( pictured) is conducting a delicate balancing act between the trade unions and shareholders, both of whom have criticised the firm’s executive pay policy in recent years. This culminated in July 2018 when Royal Mail investors conducted one of the largest shareholder revolts in UK corporate history, with almost 70pc voting against Back’s £2.7m annual salary package and a £6m ‘golden hello’. Several City brokers were pessimistic about Royal Mail’s prospects, with analysts at liberum saying they saw ‘significant risks’ in the coming years and cast doubt over the firm’s ability to achieve its 2024 targets.

analysts at Peel Hunt also encouraged investors to avoid the stock. Berenberg analyst William Fitzalan Howard added that further price increases were ‘almost a definite’ amid the flagging forecasts.

Helal Miah at the Share Centre said: ‘ Investors are getting increasingly concerned that Royal Mail’s once attractive dividend has now reached unsustainable yield levels in the region of 8pc to 9pc.’