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Royal Mail shares slump amid profit warning

Three days of recent strike action has wiped £70 million off the operations at the Royal Mail and the company has warned that profits for 2022/23 will drop as a result. The company now wants the strike action to be called off.

(Video Transcript)

Royal Mail shares slump

Royal Mail, now called International Distribution Services, has said that the recent three-day strike action has taken £70 million out of its operational cash flow.

And as a consequence the company has now said that it is warning about the outlook for the full-year (FY) earnings between 2022 and 2023.

Share price chart

Let's take a look at the share price chart because this pretty much says it all.

This is what technical analysts call a Marubozu candle. We have no wicks on the upside which means that as soon as we saw the opening of today's session there were sellers, no buyers at all, and we got the candle after 20 minutes of the trading day at the very bottom of the candle, meaning there are no buyers in this market at 189p a share.

So we're now down 9.6%, we're trading at 189. We've got support at 180 that now looks in danger. And you can see if you look back here, we haven't traded below that line since a brief trade below that back in September. 2020.

What's going on? Well the company is locked in a bitter dispute with its largest labour union, the CWU, which is now urging the two to get together and to call off the strike action and embrace the offer to find a resolution to the current dispute.

And Royal Mail continues to say that if this does not get resolved, there will be further impairments and further reductions to the outlook for profit. As a result of that, we're expecting further declines in the share price. That is, unless we see the union come back with an offer to get round the table again, to discuss the outlook, clearly a number of staff will be in danger if this strike action is set to continue.

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