Royal Mail shares were trading at more than 630p in May. On Friday, they closed at 345p – within flirting distance of the 330p flotation price five years ago.

The stock had been drifting lower all summer but it fell 27 per cent last week alone, after a shock profit warning from new chief executive Rico Back.

Back confessed that the letters business has been faring even worse than the company expected, with volumes likely to be down by 7 per cent this year. 

Stock watch: Royal Mail's share price plummeted after business admitted it was faring worse than expected

Stock watch: Royal Mail's share price plummeted after business admitted it was faring worse than expected

Stock watch: Royal Mail’s share price plummeted after business admitted it was faring worse than expected

Hoped-for productivity gains have not materialised and even the overseas parcels division, supposedly a jewel in the crown, has been hit by cost pressures.

The UK parcels business is growing but full-year group profits are still expected to slide from £694 million to £525 million. 

The main bright spot is the dividend, forecast at 24.9p, putting the shares on a yield of just over 7 per cent.

Back says he is committed to a progressive dividend, which normally means payments should rise. However, analysts are already questioning how long that can last.

The company generates plenty of cash but Back has a big challenge on his hands, particularly when it comes to improving productivity – which really means encouraging 90,000 postmen and women to deliver more letters and packages than they are used to.

Midas verdict: More than 500,000 people own shares in this business, including thousands of staff. Many will be tempted to sell now, while they can still make a tiny profit on the 330p flotation price. 

But the company reports half-year figures next month and Back will almost certainly try to deliver better news then. Worth holding, at least for the next few weeks. 

 

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