Royal Mail shares hit as profits drop
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by Abi Moses on 19th January, 2017
It is no secret that Royal Mail are having a hard time of it of late, with profit losses encouraging a slump in share price over the past few days. Its shares slid 7.6% to their lowest level since March, making it the biggest faller on the FTSE 100.
"We are seeing the impact of overall business uncertainty in the UK on letter volumes," it said.
Seeing operating profit fall 5% to £320m from £342m Royal Mail is reportedly seeking cost savings of £600m a year, up from a previous target of £500m.
While consumed with negative news, the firm did report a rise in revenue for the 6 months leading to 25h September, however, this was a figure of just 1%. Being a lot lower that forecasts suggested. Continuing the trend of less letters being posted trough the business, the total letter revenues fell at around 3%, while the parcel side of the business grew by the same rate.
"The fall in the volume of letters and an 8% dip in marketing mail after the Brexit vote in June is causing concern about what can be assumed going forward," said David Kerstens, equity analyst at Jefferies.
Moya Greene, Royal Mail's chief executive. said the Christmas period would be crucial for the full-year results.
"Extensive planning, which began in the spring, will help us to manage our busiest time," she said. "This includes the recruitment of over 19,000 temporary staff and opening nine temporary parcel sort centres."
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