Results from Royal Mail (RMG) came in ahead of some analysts’ expectations, but don’t get overexcited. A better-than-expected performance from the parcels division helped distract attention from the expected 4 per cent decline in letters revenue, but it’s worth remembering the group is also enjoying a strong currency translation tailwind. This is reflected in the performance of the general logistics systems (GLS) segment, which reported 9 per cent underlying growth in both sales and volumes terms, but add in the effects of currency translations and acquisitions, and sales were 19 per cent to the good.
However, cost pressures are expected to intensify during the second half, which won’t be helped by potential industrial disputes. Management admits it’s “a difficult time for Royal Mail and its people” but that the group remains committed to resolving issues with the Communication Workers Union. The current mediation process – which could extend beyond Christmas – is dealing with issues raised over pensions, pay and productivity, although analysts at Liberum warn that rising inflation has already upped the starting point for pay talks. The broker also expects pre-tax profit of £447m for the year to March 2018, giving EPS of 35.2p, compared with £559m and 44.1p in FY2017.
| ROYAL MAIL (RMG) | ||||
| ORD PRICE: | 385.1p | MARKET VALUE: | £3.85bn | |
| TOUCH: | 385.1-385.5p | 12-MONTH HIGH: | 501p | LOW: 368p |
| DIVIDEND YIELD: | 6.1% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 420p* | NET DEBT: | 9% | |
| Half-year to 30 June | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 4.58 | 110 | 8.6 | 7.4 |
| 2017 | 4.83 | 77.0 | 17.1 | 7.7 |
| % change | +5 | -30 | +99 | +4 |
| Ex-div: | 7 Dec | |||
| Payment: | 10 Jan | |||
| *Includes intangible assets of £909m, or 91p a share | ||||
