A profits warning sparked a frenzied sell-off by panicked investors.
The struggling post and parcel firm said it would save just £100million this year, rather than a forecast £230million.
It said addressed letter volume fell by seven per cent in the first half of this year and productivity was “below plan”.
The announcement was made shortly before the London market closed.
It spooked investors, with shares falling 85.7p to 391.4p.
A firm’s stock market value is determined by its share price.
Royal Mail was valued at around £5billion before the update saw its share price fall around 20 per cent.
Some 4.3billion letters were sent across the UK between January and June — down from 4.6billion last year.
Royal Mail chiefs adjusted operating profit to between £500million and £550million.
Last year it was £694million.
Chief executive Rico Back said UK trading conditions were “challenging” — with the number of letters posted, particularly marketing mail, hit.
But he said Royal Mail’s UK parcels arm was performing well. Neil Wilson, of markets.com, said it was a “really horrible profits warning” but described the share plunge as excessive.
City analyst Laith Khalaf, of brokers Hargreaves Lansdown, said: “Royal Mail has been hit by a triple whammy of lower cost savings in the UK, higher labour costs in its international business and a big decline in letter volumes.”
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