HITTING THE POST

Royal Mail sees shares dive as group warns over transformation schedule

SHARES IN Royal Mail have dived after it warned that the company’s transformation programme is “behind schedule”, despite improving profits and revenues over the past six months.

The delivery giant’s shares slid 16.7 per cent to 192.4p in early trading after it also cautioned investors that its UK business could make a loss in the next financial year.

It also fired a warning shot to unions over the continued threat of strike action, saying industrial action “can only hurt” the company.

The firm updated investors over the performance of the business just a week after it secured an injunction to block postal workers from taking part in strike action.

In the trading update, the London-listed company warned that the UK division could be lossmaking in the 2020-2021 financial year, due to revenue and cost headwinds as well as significant investment by the company.

However, Royal Mail hailed its best UK sales performance for the “past five years” but warned the outlook for its letters business is “challenging”. The delivery giant saw revenues rise 5.1 per cent to £5.16bn in the half year to September 29.

Meanwhile, it jumped to a £173m pre-tax profit, up from a £33m profit for the same period in 2018.

Group chief executive Rico Back said the company’s profitability has been “in line with expectations for the half year, despite considerable UK economic and political uncertainty”.

The company said revenues from its letters business are the

“best in five years” but still reported a 1.4 per cent decline in the division. Parcel revenues more than offset the decline in the letters arm, with sales increasing 5.6 per cent on the back of a 5 per cent jump in parcel volumes.

Mr Back said: “People are posting fewer letters and receiving more parcels. We have to adapt to that change. The challenging financial outlook in the UK means now, more than ever before, we need to make the changes required – and accelerate them – to ensure a successful UK business.

“We remain committed to investing £1.8bn in our transformation.”

Last week, the firm won an injunction from the High Court to block potential strikes by postal workers but the CWU has said it will appeal against the decision.