(Alliance News) - Royal Mail remained bullish on its future as a parcel delivery firm, despite reporting on Thursday that interim profit was reduced to just one-tenth of the year-earlier level on a range of costs.
Revenue for the half-year to September 27 amounted to GBP5.67 billion, up 9.8% on a year ago. However, pretax profit dived 90% to GBP17 million from GBP173 million, and the firm posted an operating loss of GBP20 million versus a profit of GBP61 million a year prior.
For the Royal Mail arm, its UK business, revenue was up 4.9%, with parcels revenue up 33% but letters revenue falling 21%.
However, the UK unit posted an adjusted operating loss of GBP129 million, swinging from a profit of GBP75 million a year ago, as it took GBP95 million in costs from mix change - from handling fewer letters and more parcels - GBP85 million in Covid-19 costs, GBP147 million for voluntary redundancies and GBP32 million for international conveyance, due to a virus-driven shortage in airline conveyance capacity.
For GLS - which offers parcel, logistics and express services, throughout Europe as well as in the US and in Canada - revenue rose 22% and adjusted operating profit jumped 84% to GBP166 million.
Keith Williams, interim executive chair, commented on the company's outlook: "We have updated our scenario for the full year. As parcel volumes at both Royal Mail and GLS have continued to be robust year to date, revenue performance in the scenario has improved.
"It remains difficult to give precise guidance but parcel growth is expected to remain robust in Q3, with more uncertainty over trends in Q4 due to the development of the Covid-19 pandemic, further recessionary impacts and trends in international volumes."
Williams said talks with its worker unions is "at an important stage".
"We have been engaged in talks with CWU since July, which have intensified over the past weeks," he said. "Our first half performance demonstrates we can capture the revenue opportunity in the market, and deliver a growth agenda to support jobs, which has long been advocated by CWU."
Williams moved from non-executive chair to interim executive chair when Rico Back resigned as chief executive officer back in May. No update was provided on senior management in Thursday's statement.
"We are already working hard to deliver Christmas, recruiting around 33,000 additional flexible workers in Royal Mail over the peak season," Williams said, "and we continue to provide significant support to the government's COVID-19 testing programme and the distribution of protective equipment."
Royal Mail shares were up 5.6% early Thursday. The stock is up by a third so far in 2020.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.8% at 6,336.24
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Hang Seng: down 0.5% at 26,402.34
Nikkei 225: closed down 0.4% at 25,634.34
DJIA: closed down 344.93 points, 1.2%, at 29,438.42
S&P 500: closed down 1.2% at 3,567.79
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GBP: down at USD1.3235 (USD1.3300)
EUR: down at USD1.1850 (USD1.1870)
Gold: down at USD1,863.95 per ounce (USD1,879.79)
Oil (Brent): unchanged at USD44.44 a barrel
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
1100 GMT UK CBI industrial trends survey
1000 CET EU euro area balance of payments
1200 CET France OECD quarterly national GDP growth
0830 EST US Philadelphia Federal Reserve business outlook survey
0830 EST US jobless claims
0945 EST US Bloomberg consumer comfort index
1000 EST US leading indicators
1000 EST US existing home sales
1030 EST US EIA weekly natural gas storage report
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UK household mixing could be allowed over Christmas, but scientists have warned that each day's freedom might require five days of tougher measures to make up for it. The UK government is considering ways to allow people to spend time with family over the festive period, although a senior health official said any socialising would likely have to be followed by "very responsible" behaviour and a reduction in contacts again. Reports suggest households might be allowed to mix indoors for a five-day period from Christmas Eve, and that ministers are considering plans to allow three or four households to form bubbles. A five-day easing could mean a potential 25-day period of tighter measures into January if the government follows advice from the Scientific Advisory Group for Emergencies.
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Hospital conditions across the US are deteriorating by the day as the coronavirus rages across the country at an unrelenting pace and the death toll surpasses 250,000. The number of people in the hospital with Covid-19 in the US has doubled in the past month and set new records every day this week. As of Tuesday, nearly 77,000 were hospitalised with the virus. Newly confirmed infections per day in the US have exploded more than 80% over the past two weeks to the highest levels on record, with the daily count running at close to 160,000 on average. Cases are on the rise in all 50 states. Deaths are averaging more than 1,155 per day, the highest in months. The out-of-control surge is leading governors and mayors across the US to grudgingly issue mask mandates, limit the size of private and public gatherings ahead of Thanksgiving, ban indoor restaurant dining, close gyms or restrict the hours and capacity of bars, stores and other businesses. New York City's school system — the nation's largest, with more than 1 million students — suspended in-person classes on Wednesday amid a mounting infection rate.
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The US Senate adjourned for the Thanksgiving holiday on Wednesday without Congress having made headway on stalled negotiations for a new stimulus package, even with coronavirus cases spiking and states rolling back re-openings. Republicans and Democrats are at loggerheads on the stimulus bill, with neither side willing to compromise further, as has been the case for months. The Senate will not hold another voting session until November 30. Republicans say they are willing to pass a stimulus worth hundreds of billions of dollars in targeted aid, including to small businesses. Democrats are demanding a far more expansive bill, worth upwards of USD2 trillion.
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BROKER RATING CHANGES
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CREDIT SUISSE REINITIATES IAG WITH 'OUTPERFORM' - PRICE TARGET 228 PENCE
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GOLDMAN SACHS RAISES WM MORRISON SUPERMARKETS TO 'BUY' ('SELL') - TARGET 215 (176) PENCE
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BARCLAYS INITIATES TATE & LYLE WITH 'EQUAL WEIGHT' - TARGET 700 PENCE
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COMPANIES - FTSE 100
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DIY retailer Kingfisher revealed a third-quarter boost as consumers bought the supplies to make home improvements. Third quarter total sales were GBP3.46 billion, up 17% on both a reported and like-for-like basis. UK & Ireland sales rose 22% in the three months to October 31, at GBP1.58 billion. Sales in France increased 18%, in Poland by 8%, in Iberia by 19% and in Romania by 9.6%. Group online sales more than doubled, with click & collect sales more than tripling to now account for 77% of e-commerce sales. "We achieved strong sales growth in Q3 across all retail banners and categories, with higher footfall and average transaction value. Our growth was supported by strong market demand, as consumers spent more time in their homes and focused on improving them," said Chief Executive Thierry Garnier. For the fourth quarter thus far, like-for-like sales are up 13%, the B&Q owner said, reflecting recent lockdown measures.
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Speciality chemicals firm Johnson Matthey said it expects a stronger second half after posting a sharp fall in interim profit. Revenue for the six months to September 30 rose 2% to GBP6.80 billion, but pretax profit slumped 88% to GBP26 million. The fall in profit was driven by lower demand in the Clean Air segment, which mostly serves car makers, and major impairment and restructuring charges of GBP78 million. Underlying pretax profit still fell sharply, down 53% to GBP109 million. Johnson Matthey declared an interim dividend of 20.0 pence, down from 24.5p a year ago. "The board remains committed to a progressive dividend and anticipates restoring future dividend payments to levels seen prior to the Covid-19 pandemic when circumstances permit," the company said. Looking ahead, Johnson Matthey noted that activity in autos and other key markets has improved since the pandemic began and it expects a "materially" stronger second half versus the first.
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COMPANIES - FTSE 250
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Cineworld Group is considering a company voluntary arrangement as part of talks with lenders, the Financial Times reported. The cinema chain, the FT said, looking to reduce its rent payments and to permanently close UK cinemas amid lockdown restrictions and a lack of blockbuster films. Citing "three sources close to the negotiations" the FT said the insolvency process is aimed at cutting costs and is part of talks with lenders, as Cineworld seeks access to capital while waiting for the return of major movie releases in the spring.
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COMPANIES - GLOBAL
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Heavily indebted budget airline Norwegian Air said it has applied for bankruptcy protection for subsidiaries in Ireland that will pave the way for restructuring. The move relates to the Irish-based Norwegian subsidiaries Norwegian Air International and Arctic Aviation Assets DAC and some of the subsidiaries of Arctic Aviation Assets DAC. It follows the decision of the Norwegian government not to give any further financial support to the group, which has suffered heavy losses during the coronavirus pandemic. Under the Irish examinership process, failing companies receive bankruptcy protection for a period of time. In this way, the business can continue to operate under supervision, allowing for restructuring.
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Ahold Delhaize said it will take a majority stake in a New York-based online grocer, as the Dutch retailer eyes bolstering its "omni-channel" offering. Alongside private equity firm Centerbridge Partners, Ahold will acquire FreshDirect for an undisclosed sum. Ahold didn't specify the majority stake it will have in FreshDirect, but said that Centerbridge will hold a minority stake of 20%. No financial details for the transaction, which is expected to close in the first quarter of 2021, were provided.
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Thursday's Shareholder Meetings
Close Brothers Group PLC - AGM
FW Thorpe PLC - AGM
William Hill PLC - GM re acquisition by Caesars Group
Jupiter UK Growth Investment Trust PLC - AGM
Finsbury Food Group PLC - AGM
Maestrano Group PLC - AGM
Randall & Quilter Investment Holdings Ltd - GM - re capital return
Infrastructure India PLC - AGM
Gresham House Energy Storage Fund PLC - GM re share issue, changes to investment policy
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By Tom Waite; thomaslwaite@alliancenews.com
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