Royal Mail shares crash to record low

There's nothing in these quarterly results to justify the 13% rally in 2019, writes our head of markets. 

The third-quarter update provides further recognition of, rather than solutions to, Royal Mail (LSE:RMG) ongoing issues.

The profits warning in October was something of a hammer blow from which the shares have not recovered. Indeed, in the last three months alone the price has drifted another 16%.

The productivity assessment which did such damage a few months ago remains ongoing, although rather more positively the cost avoidance target seems achievable.

Meanwhile, in the UK business parcels growth was not enough to offset the decline in letters, where revenues have fallen 6% in the year to date, continuing their terminal decline. 

Even in the normally impressive numbers from GLS, cost pressures remain and Royal Mail has announced its intention to focus on margin protection, which will inevitably come at the cost of a loss of some volume growth. Even if achieved, the overall projected operating profit will be significantly shy of the previous year's number.

Source: TradingView (*) Past performance is not a guide to future performance

As has been the case of late, upbeat figures are few and far between. The GLS business has posted a 13% rise in revenues, subject to the forthcoming limitations as mentioned. Parcels volumes and revenues have improved 9% in the year to date, and the Christmas period seems to have been a welcome and thankfully uneventful period. 

In the background, the dividend yield of somewhere around 9%, although largely driven by the share price decline, is at least adequately covered, which should mean it is not under threat for the time being.

Even so, there is little here to assuage bears of this stock, and the situation could compound as the likes of Amazon (NASDAQ:AMZN) and Deutsche Post (XETRA:DPW) continue to encroach as Royal Mail seeks to get its own house in order. 

• Time to buy Royal Mail shares?
• Could Royal Mail really fall another 30%?
• Royal Mail crashes after shock profits warning
• Are high yielder Royal Mail's results any good

Prior to today's further slump, the shares had given up 36% over the last year, as compared to a 10% decline in the wider FTSE 250 to which the company was relegated late last year. 

The absence of any strategic strength, unlikely to be announced prior to a market presentation in March, is still a major concern and the market consensus of the shares as a sell is most unlikely to be moved by this update.

*Horizontal lines on charts represent levels of previous technical support and resistance. Trendlines are marked in red.