Things had been going so well for the British institution. For the first 4 and a half months of the year the stock was on a near uninterrupted climb; from a starting price of £4.45 it had hit £6.32 by mid-May, a hard-fought record peak, and the first time it was above £6 since early 2014.
Yet since then it’s all gone Pete Tong. The firm’s annual results – more on those below – sparked a rather aggressive reaction from investors, the stock plunging nearly 20% in the 3 weeks following the full year release. That left the stock at £4.80 by early June, and while it managed to climb back above £5 by at points during that month, it’s been on the back foot more recently. Royal Mail PLC now sits at a current trading price, and 5 month low, of £4.79.
There were a few decent figures in that aforementioned full year report, namely a 2% rise in revenue to £10.2 billion, thanks to a 10% surge at its European arm GLS. In comparison, revenue at UKPIL actually fell, from £7.658 billion to £7.615 billion year-on-year. And though profit before tax dropped from £335 million to £212 million, adjusted pre-tax profit actually rose 1% to £565 million, with the company also producing 4% hike to its dividend to 24p per share.
However, the main takeaway, as tends to be the case with Royal Mail updates, was the dour situation in its letters business. While parcels revenue was up 4%, total letters revenue was down 4%, with addressed letters volumes sliding 4%. The real kicker was that for the next financial year the company expects the number of addressed letters to fall at the upper end of its 4% to 6% guidance, due to GDPR making it harder for firms to send unsolicited mail to customers.
If Royal Mail is to bounce back market-wise, then it’ll need to produce some sterling parcels figures, and continued double digit growth at GLS, to compensate for the steady decline of its once formidable letters division.
Royal Mail Group PLC has a consensus rating of ‘Hold’ alongside an average target price of £4.80.
Disclaimer: Spreadex provides an execution only service and the comments above do not constitute (or should not be construed as constituting) investment advice or recommendations, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any person placing trades based on their interpretations of the above comments does so entirely at their own risk. Spreadex Ltd is a financial and sports spread betting and sports fixed odds betting firm, which specialises in the personal service and credit area. Founded in 1999, Spreadex is recognised as one of the longest established spread betting firms in the industry with a strong reputation for its high level of customer service and account management.
In relation to spread betting, Spreadex Ltd is authorised and regulated by the Financial Conduct Authority. Spread betting carries a high level of risk to your capital and can result in losses larger than your initial stake/deposit. It may not be suitable for everyone, so please ensure you fully understand the risks involved."