Royal Mail Sticks With Lowered View, Promises Customer Focus

(Bloomberg) -- Royal Mail Plc, the U.K.’s 500-year-old postal service, held to its lowered profit forecast and promised to become more customer-focused after a tumultuous first half that witnessed its biggest stock drop since going public in 2013.

  • Revenue advanced 1 percent in the period ended in September, while pretax profit sank by 27 percent. CEO Rico Back said the company will share more detail about direction at a capital markets day in March, its first since the IPO.

Key Insights

  • After some delays, Royal Mail and its unions are testing new ways of sorting mail to improve efficiency, Back said in an interview. Workers threatened to strike last year over pensions, pay and working conditions. Back, who took over in June, also endured a shareholder revolt over his hefty pay package.
  • The company has been replacing managers as it tries to address a drop in letter volumes and automate package deliveries. It ousted the head of its post-and-parcels operation last week after just five months in the job. CFO Stuart Simpson and a new senior executive will handle those responsibilities going forward.
  • Letter volumes have been in decline since the change in General Data Protection Regulations in May, which clamped down on junk mail. Royal Mail cut its full-year cost-savings target in early October by more than half, leading the stock to an 18 percent tumble.

Market Reaction

  • The shares advanced as much as 2 percent. The stock was up 1 percent at 8:19 a.m. in London, trimming the company’s year-to-date stock drop to 22 percent.

Get More

  • Click here to see Royal Mail’s latest earnings update.

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