October 2, 2018 / 7:56 AM / a year ago

Royal Mail shares tumble to record low, deepening losses to £1.3 billion

FILE PHOTO: A Royal Mail postal worker stands in the yard of a sorting office in Altrincham, Britain October 12, 2017. REUTERS/Phil Noble/File Photo

(Reuters) - Shares of Royal Mail (RMG.L) deepened its slump on Tuesday, hitting a record low, a day after the 500-year-old postal service warned annual profit would be far lower than expected, hurt by eroding logistics business margins and weaker letter volumes.

Shares of the company, founded under Henry VIII, sank 8 percent to a record low of 360.1 pence on Tuesday. The FTSE 100 .FTSE stock has shed 1.3 billion pounds over two sessions, as it plunged 18 percent on Monday after the surprise warning.

“We have been bearish on the outlook for productivity improvements, but yesterday’s profit warning was shocking in its scale and timing,” Liberum analyst Gerald Khoo said.

The brokerage slashed its target price on the stock to 250 pence from 415 pence and cut full-year earnings estimate by 30 percent and subsequent years by 38 percent.

Credit Suisse slashed its price target on the stock by 111 pence to 450 pence, while Deutsche Bank cut its target to 300 pence from 428 pence on Tuesday.

Although Royal Mail maintained its dividend, analysts warned that the policy did not look sustainable in the longer term.

Last month, the company acquired a parcel delivery firm, Dicom Canada, in order to break in to new markets and announced the resignation of Peter Long as chairman.

The stock, which listed in London in 2013, has lost roughly one-fifth of its value year-to-date including session’s losses on Tuesday.

Reporting by Karina Dsouza in Bengaluru; Editing by Amrutha Gayathri

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