Royal Mail share price falls more than 8 per cent after it warns on parcels business

Emma Haslett
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Shares have swung by as much as 36 per cent in the past year (Source: Getty)

Shares in Royal Mail had fallen more than eight per cent to 431p in early afternoon trading, after the company posted disappointing half-year profits and warned its parcel business is likely to be impacted by heavy competition.

The business, which was floated at 330p last October, has been the subject of fierce debate, with MPs accusing Vince Cable, who oversaw the IPO, of having undervalued it.

But in the past year shares in the business have fallen as much as 37 per cent, swinging between a high of 615p in January to a low of 390p at the beginning of October - suggesting Cable's valuation was pretty spot-on.

In its half-year results, the company warned that the "highly competitive environment in the UK parcels market" had impacted its revenues, adding that the launch of Amazon's own delivery network "will reduce the annual rate of growth in the UK addressable market to 1-2 per cent for approximately two years".

Richard Hunter, head of equities at Hargreaves Lansdown, said the company is facing "harsh realities"

Most of the key metrics are flat to negative, with a decrease in operating profit, margin and earnings per share accompanied by an increase in costs. The quiet emergence of Amazon in the parcels space, already a fiercely competitive arena, could become a medium term threat, whilst the company openly concedes in its outlook that the Christmas period will set the tone for the full year performance.

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