Will Royal Mail Deliver A Good Set Of FY Results?
Spreadex | May 15, 2018 11:15
After a strong end to 2017, where a late-ish rally that lifted the stock from its £3.69 all-time lows, the British postal institution has been on a tear in 2018. Opening at £4.48, the stock shot up to £5.75 by the end of February; and though the first half of March saw the company slip to £5.25, since then it has resumed its galloping form, hitting a record high of £6.34 on 14th May. Royal Mail (LON:RMG) PLC now sits at a current trading price of £6.23.
The firm’s last substantial update came in mid-January, when it revealed its figures for the 9 months to 24th December 2017. Overall group revenue rose 2%, with UK revenue flat as a 4% in parcel revenue countered the 3% drop in its letter equivalent; volumes were up 6% and down 5% in the UK parcels and letter divisions respectively. In its more robust, Europe-focused GLS unit both volumes and revenues surged 10%,
January’s statement wasn’t where Royal Mail’s rally really started, however. No, the first real jump came at the start of February, as the company announced it had finally struck a deal with the Communication Workers Union over its final salary pension scheme. Combine that with a positive trading note, and news that GLS had acquired Spanish express parcels delivery company Redyser Transporte, and investors were very happy with what Royal Mail delivered.
In terms of the week’s annual results, Royal Mail warned back in January that ‘cost pressures due to labour market conditions’ in many of the regions GLS covers may ‘slightly impact margins’. However, the company is still expecting group operating profit before transformation costs to come in at a minimum of £680 million, a near 39% increase year-on-year. Revenue, meanwhile, is set to rise 4% to £10.2 billion. Investors may also want to hear about its reported plans to promote its unaddressed marketing mail service as a way for companies to circumvent the impending GPDR rules.
Royal Mail PLC has a consensus rating of ‘Hold’ alongside an average target price of £4.66.
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