On Wednesday 19 November, ahead of a busy Christmas period, Royal Mail is due to post its first-half figures. Markets are expecting the company’s adjusted earnings per share to have increased from 9.5p up to 14.8p. Sales are called a little softer, dropping from £4.936 billion to £4.509 billion. Cost-cutting and improvements in margins however, should see the company’s pre-tax profits more than double from £86 million up to £199 million.
It has now been just over a year since Royal Mail started floating on the stock exchange and it has seen many changes already. One statistic highlights how much more is still needed in order to ensure that the business is as streamline and competitive as possible. On average, the parcel delivery sector attributes staff as 45% of its total running costs. With Royal Mail, staff account for 60% of the company’s running costs. The government still owns a 30% stake in the company and for political reasons would be reluctant to see Royal Mail embark on the cost-cutting exercise that would bring it in-line with its competitors.
The run up to year-end is a particularly busy time for the mail department of the business, but it still remains that parcels are the more profitable department and it is only likely this will increase.
Shares are above the IPO price and the first traded price too, however, at 460p they are still some 140p off year highs. Improving profitability and more aggressive cost-cutting measures will be needed to see this improve.