"In stark contrast to its nine-month trading update, investors welcomed LSE:RMG:Royal Mail's full-year results as the UK's original mail delivery service made 3% more adjusted operating profit than expected.Royal Mail shares shot up almost 5% to ..."
TOP NEWS: Royal Mail Profit Up As Parcels Offset Letter Decline
LONDON (Alliance News) - Royal Mail PLC on Thursday reported a rise in pretax profit for its recently-ended financial year, as a good performance from its pan-European parcel delivery business helped offset declines in its UK postal business.
Shares in Royal Mail were up 3.0% at 443.53 pence Thursday, the best performer in the FTSE 100.
The company reported a pretax profit of GBP335 million for the 52 weeks to March 26, up from GBP267 million in the comparative period the prior year, on revenue of GBP9.78 billion, up from GBP9.25 billion.
It reported adjusted operating profit before transformation costs of GBP712 million, down from the GBP742 million it reported the prior year, but at the higher end of consensus expectations of between GBP681 million to GBP719 million.
Royal Mail highlighted a good performance from its General Logistics Systems business, its European parcel delivery network, where revenue rose 9%, more than offsetting a 2% fall in UKPIL revenue.
The company noted an overall hit to letter volumes in the UK from business uncertainty, with its marketing mail revenue down 8% for the year.
Royal Mail proposed a final dividend of 15.6 pence, giving a total dividend for the year of 23.0p, up from 22.1p the prior year.
Looking ahead, it reiterated its outlook for a decline in addressed letter volumes of between 4% to 6%, excluding political parties election mailings, over the medium term, but cautioned it would expect this to be at the higher end of the range of decline in the year ahead if the current climate of business uncertainty persists.
Royal Mail is continuing to focus on costs, and is on track to avoid around GBP600 million in annualised operating costs at UKPIL in the year ahead. It expects to make a net cash investment of around GBP450 million for the year ahead, and less than GBP500 million going forward.
"We have made good progress against all of our strategic priorities. This has been a more challenging period for UK businesses and we have come through it well," said Chief Executive Officer Moya Greene in a statement.
"Through a combination of our strategic approach to costs and more efficient investment spend, we will support our progressive dividend policy with the in-year trading cash generation of the group," Greene added.
The Election Material delivered by Royal Mail and recent Local Elections could add to £20 million in letter delivery for Work. Also any agreement between UCW will include no longer paying additional payments for Election/ material to the Staff.
Discussions about Pensions are on going but there does seem compromise on both sides to make acceptable resolution.
Also Companies competing against Royal Mail using "gig" economy or self-employed status are coming under increasing pressure that they are not paying the minimum wage. Any ruling against these companies would substantially raise there overheads which will be reflected in the prices they charge. (The GMB union has filed a lawsuit challenging Hermes over employment conditions for its couriers, vowing to battle bogus self-employment and gig economy exploitation.) These are my suggestions and any figures are just estimates?
Royal Mail pension costs not over, says Hargreaves Lansdown
Royal Mail (RMG) is shutting its pension plan but Hargreaves Lansdown said the replacement would be costly.
Shares rose on Thursday on the news that it was shutting its expensive defined benefit pension plan to future accrual on 31 March 2018. At the time of writing the shares were up 1.1%, or 4.8p, at 424p.
Analyst Nicholas Hyett said although the scheme ran a surplus, a review on company contributions has been hanging over the group for some time.
Royal Mails current contributions to this scheme alone are about 10% of total salary costs, including wages of staff who are not members of the scheme. These were expected to more than double to over £1 billion in 2018, equivalent to around 25% of the groups entire 2015/16 wage bill, he said.
Although it may no longer be facing that cost, Hyett said with a highly unionised workforce... introducing an alternative plan is likely to prove costly.
Whether those costs will be in the form of chunky employer contributions to a new defined contribution scheme or lost revenue from industrial action remains to be seen, he said.
Nice to see RMG creeping up a bit before the results next week.Would imagine income seekers will be interested in the final div,being held.Any good news should see the sp heading back towards the £5ish level......................
Royal Mail new pension deal could bring cost and risk, says Liberum
A proposal from unions to replace the Royal Mail (RMG) defined benefit (DB) pension scheme with a hybrid scheme will be costly and pose risks for the company, says Liberum.
The Communication Workers Union has put forward a plan for a hybrid pension scheme that is a cross between a DB scheme, which it operates at present, and a defined contribution (DC) scheme.
Analyst Gerald Khoo retained his sell recommendation and target price of 400p following the news. The shares were trading flat at 406p at the time of writing.
A union proposal for a hybrid scheme to replace the current DB pension scheme suggests a willingness to compromise and acceptance of the financial unsustainability of the DB scheme, he said.
We believe the proposals would be likely to result in higher costs and risks for Royal Mail than a DC scheme. That might be acceptable given the risk of industrial action, but expanding the hybrid arrangement to current DC scheme members would risk pushing up the cost of pension provision for those staff.
"The headlines haven't been kind to LSE:RMG:Royal Mail, but then there's been little to cheer about at the country's oldest postie. Half-year results last November caused a rush for the exit, and then recent third-quarter numbers sunk the share ..."
I have been told by the DPD man that even better tracking is shortly to be introduced. Not sure how it can be improved.
Royal Mail is very reliable and a trusted brand. Living in a very rural area, other carriers just get lost with sat nav apart from RM and DPD.
I am going to try to find out what RM are working on. Information about their new tracking is a bit vague. Shares undervalued.
It seems that customers are more happy with the Royal Mail and DPD than any other parcel couriers.
To be fair I use the Royal Mail a lot as well as DPD. They are both excellent. As you say the archaic tracking mechanism of the Royal Mail needs to catch up. it is inherently inadequate, slow and not 100% reliable. DPD's tracking system is perfect in every way - all the detail and flexibility needed with real time updates. This is effectively excellent communication, computer generated from basic data. Others are starting to work toward this - Royal Mail need to pull their finger out!
More and more people are choosing DPD services to send their parcels that's the issue. They need to match the service level offered by DPD. Tracking for all parcels and hour delivery slots and the ability to track precisely online how long your parcel will be. Until they match this then despite the huge growth in online shopping they will not get the business. I know that RMG have plans to do some of this but they need to crack on with it fast. They have a great base and infrastructure to build on.
Because there are a fair few similar or better yields available, in the UK market alone, without the same exposure to secular long-term decline in one core biz and fierce and mounting competition in the other? Or to a large and militant workforce and their generous pension provision....
All stocks have their own risks of course, particularly the high-yielders - by definition, more or less... And not saying RMG is expensive - just not stand-out cheap against it's own part of the market IMHO.
and if the worst comes to the worst the selfish brats will inherit a stock whose value has dropped like an anchor:-)
They would obviously sell, ignoring the compensatory factor of dividends because no mind to the future.
Choose a life. Choose a job. Choose a career. Choose a family. Choose a big television. Choose washing machines, cars, compact disc players and electrical tin openers... Choose DSY and wondering who the you are on a Sunday morning. Choose sitting on that couch watching mind-numbing, spirit crushing game shows, sucking junk food into your mouth. Choose rotting away in the end of it all, in your last in a miserable home, nothing more than an embarrassment to the selfish, messed up brats you spawned to replace yourself, choose your future. Choose life... But why would I want to do a thing like that?
When you could choose to buy Royal Mail Group at these prices with a div of around 5.5%
" FTSE for the week (FTSE:UKX) We've not published our Big Picture chart for the FTSE for a while and it's starting to illustrate something quite remarkable. It's even worth stressing we've never seen this behaviour against the FTSE but the DOW ..."
Agree with you nk1999 to watch and wait a little longer.
Decision on final salary scheme by March so still time drift lower combined with the fact employees shareholders can now sell their shares which have been locked and prevented to do so although some will be impacted by tax bill so some may defer for further 2 yrs to avoid tax bill.
Those same holders will be given more shares so again a mixed outcome as to how much are sold now which could add to the stock overhang weakness and the sHare price drifts sub 4.00 first before 3.90 lows tested. Those levels may hold because of the yield but I'm watching to see if broker 3.60 target is seen.
"We've come to expect solid, if uninspiring results from Royal Mail - with perhaps a touch of glamour from double digit European growth. The UK business remains sluggish with letter volumes declining, albeit in line with company expectations, and competitive pressures in the UK parcels business showing little sign of easing.
UK parcels was supposed to be the growth engine for Royal Mail. So it is somewhat disappointing that conditions in the UK parcel market look set to remain challenging. The demise of rival City Link in December 2014 has been followed by a host of announcements from other parcel operators warning of pricing pressures. That looks unlikely to let up, with Deutsche Post, the big boy of European post, stepping into the market through the acquisition of struggling UK Mail in September.
However, we feel Royal Mail is in a much better position than other postal operators to weather the storm. It is by far the largest player, with around 50% of the UK parcel market, so can invest more in technology and service. Importantly there is plenty of scope to reduce costs, having spent so long in public hands. This should help to support profits, at a time when rivals are seeing margins squeezed.
We think Royal Mail is performing reasonably well in a tough environment. The UK parcels business isn't growing much, but nor is it in decline. Progress on cost cutting is being made, if slowly. The group has a healthy balance sheet, underpinned by a substantial London property portfolio. Although significant pension commitments remain a concern for the medium term, the prospective yield of 5.5% looks well underpinned."
I agree this is a good price. The company has good prospects. Although Mail is down parcel growth is huge in the U.K. and Europe they just need to match the DPD service level. This will require significant investment. But most people like having a delivery slot and total track ability.
Such things are for the regulator to decide.
We need competition in any industry which leads to improvements in the service for which people pay for.
As far as RMG as an investment is concerned, that is for you to decide. The trading statement said revenues were flat, so turnover will be £9bn odd for the year, profits of around £500m,and dividends of circa 22p per share. There is the pension fund question to be resolved and it will end up that us employees will pay more into our pensions but get less of a return, but that's not just RM it will be the norm.
As far as the sp is concerned it will be volatile finding its level again, but dividend of @5.5% is certainly not in danger at the moment , and with known cost savings flowing through over the next couple of years there seems no short term dangers ahead.
My verdict. Sell off overdone, nice buying opportunity for sp recovery and good dividend.
It has a historical, bottom line PE of 17 with the price at 409.6 !!! 17? Really?
The dividend is 5.4% with a cover of 1. Just one. The value is 241ml but it needs over 500ml to top up the pension plan for the 100K or so employees, Even if it chopped the dividend to 0 it would still be short.
Amazon delivers in less than 24 hours from order time. A random man in a van. Other companies deliver in their own vans who we have learned them now as they do the area. Competition is fierce.
So unless they convert their Royal Mail London offices to Pret A Mangers or Costa Coffees, I cannot see how they will use those fixed assets better.
It is not looking good. A buy only for speculators with big balls, and hats off to them.
I am well used to being underwater on shares and to be fair only around 10% down on this at the moment.
Personal issue with Rmg is that I am finding it incredibly boring.
It got to the stage where I was genuinely tempted to sell all my Rmg and buy Pearson yesterday. Now that ain't right! - bit like looking over Niagara falls and having to suppress the urge to jump.
"The dividend is now very good by default as currently over 5% but a long wait for that and bears (excuse pun) little significance when the capital value drops by more than that in one day. "
Rhino et al - RMG is a yield stock, pure and simple, and hard to see that changing. The problem is, there are plenty of other 5%+ yields out there currently, with risk/reward profiles no worse than (and arguably many better than) RMG... The UK market itself is now yielding over 4% on average, the highest level for a long long time...
One big part if the business is in long-term secular (if not as yet terminal) decline... the rest of it faces fierce competition and cyclical economic exposure. And you have a pension problem. Sure, you have some kind of property angle, but I fear that has always been overblown.
But cash generation remains good and there is ample scope for ongoing retrenchment of the operating cost base (fixed and variable). The question is, what yield do you need for all of that? As long as revenues and profits stay fairly flat, so will the divi most likely - perhaps eking out small increases over the medium term?
At 410p, the yield (current historic) is 5.4%... decent, but hardly unavailable elsewhere and arguably with greater upside risk. My guess is a 'fair value' yield is somewhere nearer 6% then 5%, at least for the moment... at 360p, an actual yield of 6.1% probably is too cheap and I'm with Games, it'd be a Buy down there. But not sure anywhere much higher, at all...
Thanks all. I appreciate gratefully the input from presneill, nk1999, games and IOM. I remain to be convinced it's worth having a punt here as there seem to be quite a few headwinds. Nevertheless, I will go off and do some serious research on RMG now.
Please don't depress me any more than I already am with this share - definitely the dog in my portfolio.
Had considered that the writing was on the wall with Royal Mail as all possible bad news and predictions were out and the only way was up.
The dividend is now very good by default as currently over 5% but a long wait for that and bears(excuse pun) little significance when the capital value drops by more than that in one day.
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