Royal Mail to present first set of results

Royal Mail will present its first set of results as a listed company this week, alongside figures from Thomas Cook and Severn Trent

Royal Mail
Royal Mail

Royal Mail shares have soared since being valued at 330p in last month’s initial public offer, which saw 690,000 members of the public pick up tranches worth around £750.

At one point they were trading at nearly 600p - fuelling claims that they had been underpriced by the Government and that City traders had been allowed to make vast profits at taxpayers expense.

Business Secretary Vince Cable dismissed the surge as “froth” but they have held steady at well over 500p.

However a recent analysts’ note from UBS poured cold water on the strong run, saying despite its good prospects the stock now looked overpriced and targeting a much-lower value of 450p instead.

They argued that while margins will continue to improve amid a transformation in the business, it faces challenges including declining letter volumes, competition, and hurdles in trying to cut the workforce.

However, Shore Capital disagreed, targeting a 540p level and noting that “industrial action, whilst rightly feared, has remained in the background throughout the business’s major transformation in recent years”.

Chief executive Moya Greene returned Royal Mail to profit last year after four years of successive losses, as the company prepared for privatisation.

Operating profits for the year to the end of March this year more than doubled to £440 million. Its last set of interim results saw a figure of £144 million for the six months to September 2012, up sharply from £12 million the year before.

Looking to the half-year results on Wednesday, UBS expects to see some weakness in parcels due to tough comparisons, pricing increases and a slowdown in e-commerce growth, although it still expects Royal Mail to benefit from a strong Christmas.

Across the 12 months, the broker believes operating profits will edge up by around £5 million to £445 million, with a bigger jump to £591 million the following year.

In the run-up to the results, Ofcom said the recently-privatised company missed a requirement to deliver 93% of all first class letters on the day after collection, reaching 91.7%.

Thomas Cook chief executive Harriet Green will face the spotlight as she sets out the latest update on the 172-year-old travel operator’s battle to return to profit.

Annual results to be published on Thursday will cover the first full 12-month period under her stewardship. The group had been on the brink of collapse before agreeing a rescue deal with its bankers in May last year. Ms Green took up her post two months later after joining from electronics firm Premier Farnell.

Last November the travel agent revealed annual pre-tax losses had sunk to £485.3 million and the new boss described the results as “unacceptable”.

It fired the starting gun on a fresh round of cost-cutting and the six months to the end of March saw losses narrow to £275.6 million. The company then announced it was axing 2,500 jobs and closing nearly 200 high street travel agencies. In May, the group unveiled a £425 million fundraising with shareholders in a bid to cut debt, part of a wider £1.6 billion refinancing plan. It has said that in the financial year 2012/13 it would cut costs by £170 million. In August, the group said net debt had been halved from £1.1 billion to £452 million.


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