Thursday preview: Royal Mail to report flat annual revenue as letter volumes drag
Royal Mail’s full-year figures on Thursday are set to be weak as the letter delivery business drags on sales.
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The UK’s postal service is forecast to report flat revenue of £9.4bn, as an increase in parcel volumes is offset by a drop in letters.
“For the outlook we believe the tone will be cautious, given new capacity in the parcel market, limited price increases and continued letter mail volume decline,” UBS analyst Dominic Edridge.
“We believe there may be a change in presentation of the figures, with the difference between accounting and cash pension cost now separated out in ‘specific items’ in order to give a better indication of the underlying performance of the business.”
Adjusted earnings per share is predicted to improve to 32.8p from 26.3p while pre-tax profit is projected to drop to £399.7m from £1.6bn last year.
IG market analyst Alastair McCaig said the government requirement that the business must provide the UK with a letter delivery service.
“The fundamental issue is that letters have become increasingly obsolete as a form of communication and with less deliveries to make but the same sized infrastructure to maintain, the cost has exceeded the rate the company can charge,” he said.
However, providing a boost to Royal Mail, rival City Link closed its parcel business in December. More recently, competitor Whistl, formerly TNT post, stopped its door-to-door letter delivery service in a number of key locations.
“Royal Mail’s outlook has improved considerably with Whistl’s suspension of delivery services, dramatically reducing the risk that a competing end-to-end (E2E) network is rolled out," Investec analyst Alex Paterson said in note to investors on Monday, issuing a ‘buy’ rating.
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