Royal Mail plan failing to deliver

ROYAL Mail shares fell to their lowest level since privatisation in 2013 as it warned that a faltering transformation plan and strained industrial relations make it increasingly likely its UK business will deliver a loss next year.

The postal service, which was floated at £3.3billion, is now worth less than £2billlion. Shares fell 10½p to 179p compared with their 330p listing price.

It has fallen behind on its £1.8billion turnaround plan announced last year to transform it into an international parcelled business.

Meanwhile, the expected decline in letter volumes next year has accelerated to between 7-9 per cent.

It has moved ahead on several fronts, including choosing a supplier for automation of its Warrington parcel hub, but admitted some trials and initiatives had been “held up for several months”.

Royal Mail faces possible strikes by the Communication Workers Union, and although it averted a walkout over the Christmas period, some customers switched to other delivery firms.

The company said: “The outlook for 2020/21 is challenging. The third-quarter run rate for addressed letter volumes, excluding elections, has not shown the expected level of recovery.

“The ongoing industrial relations environment and delays to the delivery of our transformational plan, when combined with continuing economic uncertainty, increases the likelihood the UK business will be loss making in 2020/21.”

AJ Bell director, Russ Mould, said: “Royal Mail has to reshape its business for the future while also operating against a difficult backdrop.

“The renewed threat of strikes could make customers think twice about wanting to use its delivery services, particularly as there are plenty of alternative providers.”