(Alliance News) - Royal Mail on Thursday retained its profit forecast for the current financial year after a "busy" Christmas period though said it will miss its productivity target, and warned its core UKPIL business could be loss making in the upcoming 2021 financial year.
Revenue was up 3.7% for the nine months to December 29.
In Royal Mail's UK parcels, international & letters unit, UKPIL, revenue was up 1.0%, led by parcels which saw revenue growth of 3.7% and volume growth of 3.0%. Letter volumes, meanwhile, sank 9% - excluding election-related material - and revenue fell 1.5%.
GLS - General Logistics Systems - volumes were up 5%, and revenue up 11%.
For the current financial year, Royal Mail said it expects productivity improvement of 1.5%, against its 2% target. All other guidance, including an adjusted operating profit between GBP300 million to GBP340 million, was confirmed.
Looking even further out, things appear "challenging". The third-quarter run rate for addressed letter volumes "has not shown the expected level of recovery", the postal operator said.
"This, coupled with the ongoing uncertain business environment, means that we now expect a 1 percentage point increase in the decline, to 7-9% for 2020-21," said Royal Mail.
Further, the "ongoing industrial relations environment" and economic uncertainty increases the likelihood that UKPIL will be loss making in the 2021 financial year.
"Unless we are able to make significant progress in delivering our transformation plan, our ability to meet the year 3 targets of our Journey 2024 plan will be compromised," Royal Mail warned.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.7% at 7,531.39
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Hang Seng: up 2.5% at 27,468.41
Nikkei 225: closed up 2.4% at 23,873.59
DJIA: closed up 483.22 points, 1.7%, at 29,290.85
S&P 500: closed up 1.1% at 3,334.69
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GBP: flat at USD1.2989 (USD1.2990)
EUR: flat at USD1.1005 (USD1.1002)
Gold: up at USD1,559.99 per ounce (USD1,557.60)
Oil (Brent): up at USD56.12 a barrel (USD55.86)
(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
0730 EST US Challenger job-cut report
0830 EST US preliminary productivity & costs
0830 EST US initial jobless claims
1030 EST US EIA weekly natural gas storage report
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China said it will halve punitive tariffs on USD75 billion in US imports from February 14, a month after Beijing and Washington signed a truce in their long-running trade war. The reduction will apply to levies of 5% and 10% that were imposed on more than 1,700 items in September, according to the State Council Tariff Commission. Products that had been hit by the 10% tariffs included fresh seafood, poultry and soybeans. The tariffs also applied to items such as tungsten lamps for scientific and medical purposes, as well as some types of aircraft. The move is aimed at "promoting the healthy and stable development of China-US economic and trade relations", the Commission said in a statement.
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China scrambled to find bed space for thousands of newly infected patients on Thursday, as the toll from a deadly new virus jumped again. More than 28,000 people are now known to be infected nationwide in an outbreak that has killed 563 and spiralled into a global health emergency. Two dozen countries now have confirmed cases of the novel coronavirus that emerged from a market selling exotic animals at the end of last year. On Thursday, 10 more people were found to have contracted the disease on a cruise ship off the Japanese coast, where 3,700 people face a two-week quarantine. At the Chinese epicentre of the epidemic, the locked-down city of Wuhan was due to open a second field hospital, offering 1,600 beds.
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President Donald Trump was acquitted by the US Senate on Wednesday following a historic impeachment trial that shone a harsh light on America's divisions, without ever shaking the loyalty of his voter base. In a political triumph for the US leader, Trump drew on staunch Republican support to easily defeat a Democratic effort to expel him from office for pressuring Ukraine to help bolster his re-election effort. The president immediately claimed "victory" while the White House declared it a full "exoneration" – and Democrats rejected the acquittal as the "valueless" outcome of an unfair trial. But the vote in the Senate showed just how solid a grip the former real estate mogul holds over the Republican Party – an asset nine months before he seeks a second four-year-term. Even though several conceded Trump's behaviour was wrong, Republicans ultimately stayed loyal in voting to clear the president of charges of abuse of power, by 52 to 48, and of obstruction of Congress, by 53 to 47 – far from the two-thirds supermajority required for conviction.
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BROKER RATING CHANGES
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SOCGEN RAISES BAE SYSTEMS PRICE TARGET TO 705 (593) PENCE - 'HOLD'
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BERENBERG CUTS EQUINITI PRICE TARGET TO 260 (320) PENCE - 'BUY'
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PEEL HUNT CUTS CMC MARKETS TO 'ADD' ('BUY')
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COMPANIES - FTSE 100
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Compass said it has had an "encouraging" start to the year. In the three months to December 31, the contract caterer told its annual general meeting that organic revenue grew 5.3%, driven by strong levels of new business wins and good retention rates, particularly in North America. "The cost action programme, which was announced in November, is progressing as expected and the benefits are offsetting the anticipated impact of lower Business & Industry volumes in Europe," said Compass. Across geographies, organic revenue in North America surged 7.5%, while Europe, as expected, was flat. Rest of World increased by 4.7%, supported by "good levels of growth" in Australia and Latin America.
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HSBC Holdings won't name a permanent new chief executive until after the announcement of its annual results on February 18, the Financial Times reported. The Asia-focused bank at the same time will unveil details of the strategic plan being crafted by Interim CEO Noel Quinn. This will involve at least 10,000 job losses and a reduction of HSBC's investment bank, the newspaper noted. Quinn will not be confirmed on or before February 18, and the search for a permanent successor to John Flint, who left in August last year, is still in progress, the FT reported, citing four people briefed on HSBC's plans. One said Quinn is the only internal candidate and is "not out of the race", according to the FT. It said HSBC declined to comment.
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COMPANIES - FTSE 250
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Beazley reported a surge in profit for 2019, though the insurer's combined ratio indicated no underwriting profit. Gross premiums written were up 15% to USD3.00 billion in the year, while net premiums grew 11% to USD2.50 billion. Pretax profit, however, surged to USD267.7 million from USD76.4 million. Profit was boosted as net investment income jumped to USD263.7 million from just USD41.1 million in 2018. The insurer's combined ratio rose to 100% from 98% in 2018, due to an "adverse claims experience". A combined ratio below 100% means an insurer made a profit from its underwriting. "An adverse claims experience across several lines of business, leading to reduced prior year reserve releases, meant that our combined ratio rose to 100% for 2019. Despite this, we are optimistic that the remedial action that we have been taking across several lines of business in recent years, alongside the expected continued premium rate increase, will favour us as we move into 2020," said Chief Executive Andrew Horton.
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COMPANIES - INTERNATIONAL
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Workers making Apple's iPhones at tech giant Foxconn's plant in central China will be quarantined for up to two weeks, the company said, as cities on the mainland tighten their defences against the deadly coronavirus outbreak. Also known by its official name Hon Hai Precision Industry, Foxconn is the world's biggest contract electronics maker and assembles Apple's iPhones as well as gadgets for other international brands. Foxconn's vast network of factories in China, including one of its largest in Zhengzhou in central Henan province which is dubbed "iPhone City" by workers, are set to resume operations on February 10 after an extended Lunar New Year holiday caused by the outbreak. But the company said it has advised in-state and out-of-state employees at the Zhengzhou plant to be quarantined for seven and 14 days, respectively, in accordance with local government policies.
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Japanese car giant Toyota Motor reported gains in net profit and sales for the nine months to December thanks to cost-cutting efforts, and upgraded its full-year profit forecasts. While the maker of the Camry sedan and Prius hybrid unveiled upbeat earnings and forecasts, analysts were closely watching the impact of the new coronavirus in China, where the firm has suspended operations at more than 10 plants. Toyota said net profit for April-December jumped 41% from a year earlier to JPY2.0 trillion, about USD18 billion, with sales up 1.6% at JPY22.8 trillion. The company revised upward its full-year profit forecast, now projecting a net profit of JPY2.35 trillion for the fiscal year to March, compared with its earlier estimate of JPY2.15 trillion, thanks to foreign exchange gains.
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Thursday's Shareholder Meetings
easyJet
Compass Group
GVC Holdings (re relocating tax residence to UK)
President Energy (re Trafigura investment)
MXC Capital
Victrex
Stock Spirits Group
Urban&Civic
On the Beach
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
