Three things you need to know in the financial markets this morning from investment writer, Tony Cross.
Full year numbers from Royal Mail [LON:RMG] paint something of a mixed bag. Revenues have nudged higher, but lower profitability of UK parcels, international and letters (UKPIL) business has impacted returns. No final dividend will be paid and cost cutting plans will see some 2,000 management roles impacted. The company is braced for difficult times ahead as the UK economy attempts to rebound from the COVID-19 crisis. There’s quite a lot in the report on the company’s Universal Service Obligation that leaves it on the hook for deliveries to the remote addresses for a fixed price when other courier services don’t want to go that extra mile. The situation here could deteriorate further if COVID-19 drives more parcel volumes, so any hint that the regulator may change its stance here is a key point to watch for the stock.
There’s a pre-close trading update out from BAE Systems [LON:BA] today. As expected, COVID has taken a toll on the business, although productivity is once again improving as a degree of normality returns to operations. Demand for products remains high although the impact of the pandemic is expected to result in half year profits being 15% lower. Liquidity remains strong and the US acquisitions made earlier in the year continue to proceed. An update on the final 2019 dividend payment is promised with next month’s results announcement.
Retailer N Brown [LON:BWING] has published full year results this morning for the year to February 29th. Revenues are down 6.1% but the business has swung to a significant operating profit. The company appears to be benefitting from a more targeted approach and is coming close to making all sales through digital channels, rather than its former reliance on printed catalogues. Despite the remote model, the company hasn’t had a good start to the new financial year with sales down almost 30% in Q1, although decisive action on costs has produced significant savings here. One worrying point is the company’s caution that it may not be able to refinance debts due to mature soon at commercially acceptable levels. There’s a lot in this note and it requires further analysis.
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