Royal Mail deliveries under threat

<p>Royal Mail deliveries could be affected by ongoing uncertainty. </p>

Royal Mail has seen its shares slide during trading in London today (November 19th), amid news that rival delivery firms are posing a threat to its government-mandated Universal Service commitment.

The agreement guarantees the delivery of all letters throughout the UK, six days a week at one fixed price.

Royal Mail has long called on the government to reconsider the terms of the obligation, having seen its volume of business letters fall by three per cent over the last six months.

That decline was slower than previously predicted, mainly due to election pamphleting, particularly in regard to the Scottish Referendum, which was responsible for seven million campaign mailings and over five million poll cards.

However, the company also warned that hundreds of millions of pounds could be wiped off its revenues due to increased parcel delivery competition, from firms such as Amazon.

Its UK parcel delivery division saw revenues fall by one per cent, although the company's international service performed well, with revenue increasing by seven per cent to push its overall earnings to just over £4.52 billion.

It all comes amid the firm posting a fall in pre-tax profits from £233 million to £218 million for the six months to September 28th in comparison to the same period last year.

The company begun morning trading by seeing its shares sliding by just over five per cent.

Moya Greene, Royal Mail’s chief executive, told the Guardian: "The UK parcels market remains challenging. As the pre-eminent UK parcels delivery company, we are targeting a number of new, growing areas, and delivered two per cent volume growth in a competitive market. We had a better than expected performance in UK letters."

Royal Mail has already been under increased public scrutiny in recent months after it was privatised back in October 2013, amid accusations that its shares had been undervalued, causing the taxpayer to lose out by around £1 billion.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.