Royal Mail PLC (LON:RMG) released today its financial results for the half year ended September 24, 2017. The market seemed to be quite surprised as the share price spiked in the market open from £386 to more than £400. For those who need a calculator that is more than a 3% stock returns.
Market participants who were able to study to prepare these news yesterday night should be celebrating. Like Moya Greene, Chief Executive Officer, who was quoted:
“We had a good start to the year. Group revenue was up two per cent on an underlying basis. GLS delivered a strong performance with revenue up nine per cent. Outside the EU, GLS is also growing through selective acquisitions to capture higher growth markets.” Source
Have a look at the income statement reported and form your own opinion:
We believe that the most significant was the following.
The revenue increased a 2% on an underlying basis. The adjusted operating profit was £323 million, which was also up a 7%. Furthermore, the adjusted operating profit margin after transformation costs increased by 30 basis points on an underlying basis.
Additionally, the company noted that it is targeting net cash investment of around £450 million in 2017-18 compared to £492 million in 2016-17 and £656 million in 2015-16. Moreover, trading cash flow increased to £125 million.
For those market participants looking for a dividend on this name, the company will give a 7.7 pence per ordinary share for the half year ended 24 September 2017. It will be paid to stock holders on 10 January 2018 to shareholders on the register on 8 December 2017.
What did the market expect?
We believe that the biggest surprise were the revenues. Market participants were expecting the revenues to be close to £4.51 billion, and the company released much more than that. This is what made the share price spike up in the market open.
The company provided some information about what will be the most significant for the performance for the full year; the Christmas period. It was released that the company is already preparing for it. “We are opening six temporary parcel sort centres and recruiting over 20,000 staff. We are also extending opening hours at many of our Enquiry Offices to help retailers and consumers.”
The shares started trading close to £405 but went down to £385 after two hours. It seems that the the market participants who expected the share price spike yesterday are sending profit orders, which seems to be putting pressure on the stock.
Check the following stock chart:
Let’s see what happens next. If more market participants become aware of the increase in revenues, the share price could be pushed up again.
Be sure to check the macroeconomic news!
We believe that many market participants will be waiting for the Bank of England Governor Carney Speech, which you will be able to follow here:
Additionally, the data that will be released today from the Philadelphia Fed Manufacturing Index may move the market quite a bit.
Many market participants may be waiting for these two events to do something in the market. We cannot blame them! Until these events are not over, the volatility in the share price of Royal Mail PLC (LON:RMG) will be low.