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Royal Mail shares at lowest since privatisation

Shares in Royal Mail plummeted to its lowest since the company was privatised in 2013, following the release of its latest trading update.

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Royal Mail shares plummet amid declining letter volumes

For the nine months ending December 23rd, 2018, Royal Mail reported a revenue increase of 2% across the group of companies, which includes European arm GLS and Parcelforce Worldwide. Overall, Royal Mail said it expected profits to decline to £500-£530m for the 2018-19 financial year before restructuring costs, compared to £694m last year.

Shares dropped by more than 13% on Tuesday (January 29th) to its lowest point since privatisation of the company, down from 301.6p to 254.3p.

The number of addressed letters had decreased by 8%, resulting in a total letter revenue loss of 6%, with the company citing GDPR as having a “continuing impact” on the volume of letters sent as businesses have had to scale back on communications. The company said it expected letter volumes to continue to fall over the next financial year.

While the rate of e-substitution remains in line with our expectations, business uncertainty is impacting letter volumes

Rico Back, group chief executive officer at Royal Mail, says: “In the UK, our parcels business continued to perform well, with volumes and revenue in the nine months both up 6%. Addressed letter volumes, excluding the impact of elections, were down 8%, with total letter revenue down 6%, largely reflecting the continuing impact of GDPR and a relatively strong prior year comparative period.

“Due to our letters performance to date, we expect addressed letter volume declines, excluding elections, to be in the range of 7-8% for 2018-19. While the rate of e-substitution remains in line with our expectations, business uncertainty is impacting letter volumes.”

In November the company launched a cost-cutting programme and has since said it was on track to cut costs of £100m from the UK business in 2018-19. 

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