Royal Mail (RMG) has delivered steady progress with these full-year numbers, bolstered again by the strength of its European business.
The GLS unit, which accounts for 25% of overall revenues, again showed growth of 10%, whilst there were marginal gains in the headline revenue and adjusted profit numbers. The group’s focus on costs is becoming sharper, whilst its move from net debt to net cash is a positive sign.
Indeed, the generally cash generative nature of the business has fuelled its progressive dividend policy, where a projected yield of 4.1% is a clear attraction for income-seekers.
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With the general direction of travel now entrenched, with a letters and cards market in terminal decline, offset by the continuing growth in parcels as online shopping strengthens its grip, the group is understandably focusing its efforts on the latter.
Meanwhile, the previously announced agreement with the unions was a welcome development in removing a management distraction.
Source: interactive investor Past performance is not a guide to future performance
There are, however, some potential pitfalls ahead.
In terms of these results, UK productivity was below target, transition costs were significant and this move towards a leaner and more technologically focussed operation will become more pressing.
In the meantime, competition shows no sign of abating, where Deutsche Post (DPW) – let alone the seemingly ubiquitous Amazon (AMZN) – are menacing foes.
This leaves Royal Mail at an interesting juncture in market terms. The share price rise over the last six months of 51% has propelled the company back into the premier index, and the performance over the last year is also remarkable, having added 40% as compared to a 2.8% gain for the wider FTSE 100 (UKX).
This in turn has had the result of lowering the consensus, where the general view of the shares as a ‘sell’ suggests that the market is signalling that investors take their profits.
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