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(Alliance News) - Royal Mail on Thursday reported a slump in full-year profit, announced plans to cut 2,000 management jobs, and said it won't restart dividend payments before the 2022 financial year.
Revenue for the financial year that ended in March was GBP10.84 billion, up 2.5% from GBP10.58 billion the year before, which comprised 53 weeks. However, pretax profit slumped to GBP180 million from GBP241 million as operating costs rose 3.7% to GBP10.62 billion.
Profit also was hit by a GBP51 million regulatory fine and a GBP91 million impairment charge, which was up from GBP68 million the year before.
To save costs, Royal Mail is to cut around 2,000 UK management roles and this, along with targeting flat non-people costs, is expected to deliver an annual operating profit benefit in the 2022 financial year of GBP330 million.
Looking out, the postal operator continues to expect UKPIL to be "materially" loss-making in the financial year ahead, while GLS profitability may potentially be reduced.
The year's dividend per share of 7.5 pence reflects the board's decision not to recommend a final dividend, against a total payout of 25p the year before. Royal Mail does not expect to pay a dividend in the financial year ahead, but it is targeting the restart of payouts in the 2022 financial year.
Royal Mail shares were down 3.8% at 173.00 pence early Thursday. Its initial public offer in 2013 was priced at 330p.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.7% at 6,081.80
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Hang Seng: Hong Kong market closed for holiday.
Nikkei 225: closed down 1.2% at 22,259.79
DJIA: closed down 710.16 points, 2.7%, at 25,445.94
S&P 500: closed down 2.6% at 3,050.33
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GBP: down at USD1.2410 (USD1.2427)
EUR: down at USD1.1243 (USD1.1263)
Gold: down at USD1,767.20 per ounce (USD1,775.65)
Oil (Brent): down at USD39.88 a barrel (USD40.44)
(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
China Dragon Boat Festival holiday. Financial markets closed in Shanghai and Hong Kong.
0930 BST UK capital issuance
1100 BST UK CBI distributive trades survey
0830 EDT US advance report on durable goods
0830 EDT US advance international trade in goods
0830 EDT US 3rd estimate GDP
0830 EDT US initial jobless claims
1030 EDT US EIA weekly natural gas storage report
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The UK government is due to publish the latest data from its coronavirus test and trace service as Prime Minister Boris Johnson continues to defend it from criticism, PA reports. The Department for Health & Social Care is expected to release figures for England on Thursday for the NHS Test & Trace Service between June 11 and 17, its third week of operation. It comes as Johnson insisted the system is a "cluster-busting operation" that would quickly tackle any localised Covid-19 outbreaks after he was challenged by Labour leader Keir Starmer over a discrepancy between the estimated number of coronavirus cases in the UK and those covered by test and trace. Meanwhile, Health Secretary Matt Hancock refused to give a date on when the controversial test and trace app would be made available, but said the government is "going to make it work".
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Air bridges will be available from next week to allow Britons to take holidays in other countries without quarantining for 14 days, it has been reported. The Government will finalise agreements in coming days to allow people to travel from the UK to a small number of countries including Spain, France and Greece, according to reporting by The Times, The Sun and The Daily Telegraph. The news follows Transport Secretary Grant Shapps indicating air bridges would only be agreed with countries which have a coronavirus test and trace system at the same standard as that used in Britain. Shapps told the Commons Transport Select Committee there would be an announcement about air bridges on Monday, but the Telegraph reported the unveiling would take place at the weekend.
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The mood among German consumers is brightening further as the country emerges from months of coronavirus lockdown, pollsters GfK said, but still has ground to make up on the pre-pandemic world. "Rapid reopening of the economy and society in Germany is helping consumers get over the corona shock more and more," GfK said, as its monthly forward-looking barometer predicted -9.6 points for July, up nine points on this month. The measure had fallen as low as -23.1 points, an all-time low, in May. Not only reopening, but "extensive aid from government stimulus programmes including reduced VAT" in the second half of the year is helping lift spirits, according to GfK expert Rolf Buerkl.
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BROKER RATING CHANGES
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BERENBERG CUTS RIGHTMOVE TO 'SELL' ('HOLD') - TARGET 385 (400) PENCE
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CREDIT SUISSE CUTS SCHRODERS TO 'UNDERPERFORM' ('NEUTRAL') - TARGET 2,690 (2,520) PENCE
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CREDIT SUISSE CUTS MAN GROUP TO 'NEUTRAL' ('OUTPERFORM') - TARGET 130 (150) PENCE
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CREDIT SUISSE RAISES JUPITER FUND MANAGEMENT TO 'NEUTRAL' ('UNDERPERFORM') TARGET 250 (200) PENCE
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JEFFERIES CUTS PPHE HOTELS TO 'HOLD' ('BUY') - TARGET 1150 (1400) PENCE
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COMPANIES - FTSE 100
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London Stock Exchange Group said Anna Manz will join as chief financial officer from speciality chemicals firm Johnson Matthey. Manz will step down as Johnson Matthey's CFO on November 20, the day after the firm's interim results. A process has commenced to find her successor. Manz will succeed David Warren at LSEG who announced in October his intention to retire from the group and step down from the board. Prior to Johnson Matthey, Manz spent 17 years at Diageo in a number of senior finance roles and as chief strategy officer. She also serves as a non-executive director at ITV.
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Defence contractor BAE Systems said the Covid-19 pandemic has dented trading in the second quarter. Demand remains high, with order intake in line with BAE's original expectations for the year. Sales for the half-year are expected to be broadly stable year-on-year, but profit is expected to fall 15% due to cost under recoveries in the period, significantly reduced volumes in higher margin commercial work, and the sales mix. "As we return towards full operational tempo we expect the business performance in the second half to be much stronger than in the first half, assuming no new significant Covid-19 related disruptions," said BAE. The company added that it will provide an update alongside its interim results on its move to defer the decision on a 2019 final dividend.
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Auto Trader reported annual profit growth and said it has been encouraged by recent demand following the easing of the UK's lockdown. Revenue for the year ended March was up 4% to GBP368.9 million, while pretax profit was up 4% to GBP251.5 million. Since the start of June, when retailers were allowed to re-open showrooms, Auto Trader said both visitors and enquiries have "rebounded strongly" and are now at record levels. With high levels of demand in the market, used car pricing has remained strong. The Covid-19 outbreak is "likely to result in an increase in the level of exclusive use vehicle ownership", Auto Trader believes, and the current environment should accelerate the shift online for the car buying process.
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COMPANIES - FTSE 250
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easyJet raised GBP419 million from the placing of 59.5 million shares at 703 pence per share, versus its last closing price of 740.00p. The placing was announced after the market close on Wednesday, alongside interim results. The low-cost airline, demoted this month to the FTSE 250, said its interim loss widened due to charges related to hedge ineffectiveness and discontinued hedge accounting for jet fuel, despite an increase in revenue. Alongside the proceeds from easyJet's sale and leaseback programme, in the range of GBP250 million to GBP300 million, following the placing the company expects to have a cash balance in excess of GBP3 billion, allowing easyJet to handle further grounding or protracted recovery scenarios. For the six months to the end of March, easyJet reported a widened pretax loss of GBP353 million, compared to GBP272 million a year before, due to a GBP164 million net charge, related to hedge ineffectiveness and the discontinuation of hedge accounting for jet fuel and foreign exchange derivative contracts.
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COMPANIES - GLOBAL
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Nokia and Ericsson have been chosen as Singapore's main 5G network providers, telecom operators said, leaving Huawei with only a minor role as the Chinese tech giant faces growing US pressure. Huawei has been dogged by allegations of stealing American trade secrets and aiding China's espionage efforts, with Washington pushing countries to bar the company from involvement in their next-generation networks. Huawei has denied ties with the Chinese government. Singtel, one of the city-state's main telecom operators, said it has picked Sweden's Ericsson to build its 5G network after the government gave final approval. A joint venture that includes the country's two other major telecom operators, M1 and StarHub, announced it had opted for Nokia to build its main 5G infrastructure. However both M1 and Starhub said that other firms, including Huawei, could have some involvement in the project.
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Thursday's Shareholder Meetings
Balfour Beatty
Warpaint London
AG Barr
NAHL Group
Lamprell
GVC Holdings
Atalaya Mining
Tribal Group
Gemfields Group
Futura Medical
Pebble Beach
Biopharma Credit
Capita
Anpario
Mircrosaic
Trainline
Sigma Capital
Marston's (re Carlsberg joint venture)
Scottish Mortgage Investment Trust
3i Group
Savills
Premier Oil
Next Fifteen Communications
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
