This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Royal Mail (RMG) is today’s UK 100 underperformer as traders send the shares 6% lower to breach 430p rising support that dates back to October 2014 all-time lows. Headline Q3/9M financials may well be in-line with consensus expectations, the Christmas period strong and FY guidance reiterated, but the results do little to appease concerns about both the long-term decline in UK letter volumes, something worsening via Brexit-inspired business uncertainty, and tough competition within parcels.
If anything group revenues did well to hold flat, saved only by Europe (GLS) delivering 8% volume and 9% revenue growth to offset a 2% revenue drop in the UK (UKPIL). The latter was hindered by a 5% fall in both revenue and letter volumes which proved too much for Parcels volumes +2% and revenues +3% to overcome. Parcels remains highly competitive the world over, in some cases intensifying as online shopping volumes climb, encouraging new carriers to fight for share. Current trends mean it’d take a brave soul to offer that “things can only get better”, hence cost efficiencies still such a big focus in order to protect margins.
Yet to test 2016 lows of 413p, today’s fall extends a falling channel from 525p last September, one with potential to deliver the shares back to aforementioned lows.
Mike van Dulken, Head of Research, 19 Jan
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research
Comments are closed.