Liberum remains bearish on Royal Mail Group (LON:RMG), pointing to competition and market dynamics. The downbeat comments came even as the privatised postal operator unveiled a small rise in quarterly revenue.
Royal Mail’s share price, however, rallied in the previous session following the results, adding 3.08 percent to close at 411.10p, outperforming the broader UK market, with the benchmark FTSE 100 index shedding 13.91 points to end the session 0.19 percent lower at 7,390.22. The group’s shares, however, remain a little over 11 percent down in the year-to-date, as compared with a more than three-percent rise in the Footsie.
Liberum reiterated its ‘sell’ stance on Royal Mail yesterday, after the company posted a small rise in first-quarter revenues. While the postal operator benefitted from strong performance at its GLS division and a rise in parcel revenues, letter revenues continued to decline in the first quarter of its financial year.
Citywire quoted the broker’s analyst Gerald Khoo as commenting that the “first-quarter trends were mixed, but broadly consistent with our assumptions for the full year”. He added that “UK parcels revenue growth was in line with our full year assumption, but we remain concerned that parcels growth is not fast enough to offset the decline in letters”.
Khoo further pointed out that the combination of “competition from lower cost and more agile smaller operators and market dynamics do not favour the Royal Mail’s strengths”.
The Times meanwhile quoted David Kerstens, an analyst at Jefferies, as conceding that trading was not as weak as had been feared, but that he was worried about the company’s relations with its trade unions. Last week, the Communication Workers Union rejected the postal operator’s newest proposal which offers employees a choice between a defined benefit or contribution pension scheme.
Royal Mail is scheduled to hold its annual general meeting tomorrow.