Royal Mail interims in focus after full-year profit warning

Royal Mail will lay bare its trading woes in next week’s half-year results after a recent stark profit warning sent shares plummeting to an all-time low.

The group warned last month that full-year earnings were now expected to tumble by up to 28%, which caused shares to plunge 18%.

It said it had failed to meet cost-saving aims, slashing its full-year target from £230 million to £100 million, while its “productivity performance” was also significantly below plan.

Business uncertainty and the recent new data protection rules have also combined to hit marketing mail, which is hitting already under-pressure letter mailing volumes.

The group now expects full-year group underlying operating profits to be in the range of £500 million to £550 million, compared with £694 million last year.

Royal Mail’s trading troubles come amid a tumultuous year for the group, which has faced investor and political pressure over pay deals for its current and former bosses.

Its pay plans were voted down by more than 70% of investors at its annual general meeting in July.

In a recent hearing in front of a House of Commons committee, Royal Mail admitted making a “big mistake” after the shareholder defeat.

Orna Ni-Chionna, chairwoman of Royal Mail’s remuneration committee, said the firm failed to proactively talk to shareholders beforehand over the leaving payment for former chief executive Moya Greene, which included a full-year cash bonus of £774,000.

The Commons committee also grilled Royal Mail over a £5.8 million payout to new boss Rico Back made just before he was promoted from General Logistics Systems (GLS) – Royal Mail’s European parcels business – to the post of group chief executive.

The group has also seen a raft of boardroom changes, announcing the latest earlier this week with the news that UK letters and parcels chief Sue Whalley is stepping down only five months after her appointment to the board.

It is also looking for a new chairman-in-waiting following Peter Long’s departure in the wake of its shareholder revolt over pay.

Mr Long was replaced by Royal Mail board member and former Axa Sun Life boss Les Owen, although he is unlikely to serve more than a year in the role due to corporate governance rules over the independence of directors.

Graham Spooner, investment research analyst at The Share Centre, said: “It has been a difficult year for Royal Mail, which culminated in an October profit warning, which in turn led to the shares hitting an all-time low.

“Cost-saving targets have been missed and its core UK operations were described as being ‘significantly below plan’.”

He added that the group’s half-year results on Thursday will also be watched keenly for any comments on the all-important Christmas period.