Royal Mail has downgraded its forecast performance for 2018 and issued a profits warning. In turn this has had a detrimental impact on the UK’s national postal service’s share price after the information was published on Monday.
Royal Mail reduced its profits guidance for this year to £500m-£550m which is compared with £694m made in profit last year. In a conference call, Stuart Simpson, the chief financial officer for Royal Mail said that they would be looking at cost cutting and possible revenue raisers too with the hope of reversing the trend. In the call Simpson refused to speculate on whether this could mean an increase in postage prices. In terms of efficiencies, he said that head office structures and management layers would be reviewed.
Royal Mail also reported that it had missed its target for improved productivity, which it says it has increased by only 0.1% against a target of 2-3%. The ambition to find £230m in cost savings this year will also not be achieved and the privatised service expects to achieve only £100m in savings during 2018.
Royal Mail made several comments on the causes of the problems. GDPR has had a negative impact on the volume of marketing mail that Royal Mail delivers as companies have become more circumspect about the promotional letters they send out since the EU regulations related to personal data came into force earlier this year.
I’m very disappointed with the performance we have had to announce today. It is clearly not the announcement we ever wanted to make. Trading conditions in the UK are challenging. Our UK productivity and cost performance has been disappointing. Our letter volumes, especially marketing mail, are impacted by ongoing structural decline, business uncertainty and GDPR.
– Rico Back, CEO, Royal Mail
Yesterday, before the announcement, the stock price was£491 and by the close of the day stocks were valued at £363.36.
2 Responses
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