It’s been quite the year for Royal Mail shares. Early on things were going very well indeed, the stock finally surpassing the levels struck in the first few months of its market-existence as Royal Mail shares hit an all-time high of £6.33 in mid-May.
Yet since then the British Institution has been in serious trouble, in part related to concerns surrounding the impact of GDPR.
After striking that peak, Royal Mail shares immediately began to plunge, dropping back under £5 just a fortnight after that record high.
It continued to gradually drift lower as summer turned to autumn, before collapsing at the start of October as it lost 22% in a single session. Royal Mail shares now sit at a current trading price of £3.48.
A rather nasty profit warning was responsible for that bloody October open.
The update wasn’t entirely without positives. UK parcel revenue and volume was up 6% for the first half of the year, and is now expected to be better than 2017/18, while its European arm GLS saw a 9% jump in revenue, though the division did see labour market and other cost pressures hurt margins to a greater extent than anticipated.
However, none of this really mattered to investors.
With interim letter volumes tumbling 7%, and UK productivity ‘significantly below plan’, it was forced to lower its cost avoidance target from £230 million to £100 million for the year. That leaves its adjusted operating forecasts at £500 million to £550 million for 2018/19, well below both the previous £652 million target and the previous year’s £694 million.
Whether or not Royal Mail shares can rebound on Thursday will be down to a) the avoidance of any further shocks, and b) a sign that adjusted operating profit will at least come in at the upper end of estimates.
Royal Mail shares have a consensus rating of ‘Sell’ alongside an average target price of £3.79.
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