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Royal Mail poor first-half results cause stock plunge

By Lawrence Gash

Ambitious £1.8bn reorganisation plan is underway

Royal Mail finished the week down around 11 per cent, with gains not enough to offset the sudden plunge on Thursday November 21.

The FTSE 250 company that was formerly the UK’s nationalised postal service reported poor half-year results causing its share price to drop 14 per cent.

In the 26 weeks to September 29, Royal Mail’s adjusted profit fell 13.2 per cent and its adjusted basic earnings per share were down 18 per cent at 11.1 pence. Net debt more than doubled from £470m last year to £1.37bn ($1.76bn, €1.59bn). It reduced its interim dividend from 8 pence to 7.5 pence.

Chief executive officer Rico Back attributed the company’s trouble to a change in public habits, stating: “People are posting fewer letters and receiving more parcels. We have to adapt to that change.

“The challenging financial outlook in the UK means now, more than ever before, we need to make the changes required – and accelerate them – to ensure a successful UK business.”

While the company reported a 5.1 per cent increase in revenue for the period, Back has admitted that his ambitious reorganisation plan is still “behind schedule”.

Investing £1.8bn ($2.3bn, €2.09bn) in a five-year plan, Royal Mail is seeking to build a balanced “parcels-led” business which will increasingly diversify internationally. Back will hope his plan succeeds and that he will be able to prove those analysts, who have given Royal Mail a “sell” or “strong sell” rating, wrong.

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