Royal Mail reined in its full-year profit forecast today and spoke of a larger than expected decline in letter volumes.

The news sent its shares down as much as 18% to a record low in London trade.

Hit by reduced letter volumes as more people switch to email, Royal Mail has been reviewing its operations and testing methods including automation, to deliver post and parcels as its attempts to cut costs have been slower than expected. 

"While the rate of e-substitution remains in line with our expectations, business uncertainty is impacting letter volumes," chief executive Officer Rico Back said, who took the top job last year. 

The company also said it would focus on protecting margins in its General Logistics Systems (GLS) business, and warned of slowing GLS volume growth next year as a result. 

GLS, formerly run by CEO Back, is a ground-based parcel network which operates in 41 countries and nation-states in Europe as well as eight states in the US and in Canada. It accounts for a fourth of the company's revenue. 

The former British postal monopoly said it expected adjusted operating profit before transformation costs to range between £500-530m for the year ending March 31, below its previous forecast of £500-550m.

That represents a big fall on its adjusted operating profit before costs of £694m a year ago.

Royal Mail shares traded 7% lower at 278.8 pence, after hitting an all-time low of 246.6 pence in early deals. This was well below the 330 pence price at which they were floated more than five years ago.

The company, which was recently downgraded from the blue-chip index to the mid-caps, said the decline in addressed letter volumes, excluding political parties' election mailings, would likely be wider than its forecast range of 4-6 percent in 2019-20.

It expects addressed letter volumes to fall 7-8% for the current year and said the volumes were likely to be outside its forecast medium-term range next year.

The company's update prompted analysts to say they expect downward pressure on consensus for 2019-2020 due to the cautious guidance on UK letter volumes and GLS growth.

However, the parcels business in the UK performed well over Christmas, with the number of parcels handled in the December trading period up 10% to 164 million.