Royal Mail shares plunge 18pc on profit warning

Royal Mail shares plunge 18pc on profit warning

Shares in Royal Mail (LON: RMG) fell almost 18 percent after the group issued a profit warning.

In an unscheduled trading update, the Royal Mail cut its profits guidance for this year from £694 million last year to £500 million -£550 million.

Stuart Simpson, the chief financial officer, said: “We are going to be looking at all the levers that we have across revenues and cost [cutting].”

“We are [also] looking at … management layers, head office structure and all discretionary spending. We are doing a full portfolio review.”

Chief executive Rico Back said that trading conditions in the UK are “challenging”, particularly affected by the decrease in marketing mail due to the “ongoing structural decline, business uncertainty and GDPR”.

“I’m very disappointed with the performance we have had to announce today,” Back said. “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.”

Two weeks ago, Peter Long, stepped down from being the group’s chairman after being accused of having too many boardroom jobs.

There is question over whether the group may risk falling out of the FTSE 100 in the next reshuffle.

Helal Miah, an investment research analyst at The Share Centre, said: “After only a few months in charge the new chief executive of Royal Mail has issued a shocking trading update to the market, which was certainly unexpected.”

“Having been hovering around the FTSE 100 relegation lists in the last few quarterly reviews, the shares are now more than ever at risk of dropping out of the prestigious top 100 in the next reshuffle.”

Shares fell 85.7p to 391.4p on the news, an hour before the London market closed.