Royal Mail gives shareholders the jitters

Royal Mail’s shares have fallen 12% this morning after it said that its change programme is behind schedule despite an increase in profit before tax.

Over the first half of the financial year (H1) Royal Mail’s pre-tax profit grew to £173 million thanks to increased parcel volumes. The operating profit grew to £61 million, up from a £4 million loss in the same period last year.

The postal operator’s revenue grew to £5.2 billion, its best UK performance in five years.

The upcoming general election is set to boost its revenue this year, but even so it expects a letter volume drop of 7-9% in the next financial year, and similar volume falls the year after.

Operating profits at Royal Mail are set to be between £300m-£400m at the end of the full year, in line with its expectations.

The change programme is aimed at meeting customer expectations as Royal Mail transitions from a mail operator to a parcel operator. It does so in the face of stiff competition and the programme is behind schedule.

Strike action is possible in the coming weeks, should the CWU union win its appeal against the injunction against the strike.

“People are posting fewer letters and receiving more parcels. We have to adapt to that change,” said Royal Mail CEO and Switzerland resident Rico Black.

“Our transformation is behind schedule. We are investing more because of the industrial relations environment, the General Election and Christmas, to underpin our Quality of Service at this key time. This is likely to impact our productivity for the remainder of the year.”

“We want to change, working with our unions, but we can only do so through an affordable resolution,” Black continued. “We have changed many times before. We will do it again.”

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