Liberum is predicting further headwinds for Royal Mail Group (LON:RMG), Citywire reports. The comments follow the postal operator’s recent full-year results which revealed a drop in profits and warned about the impact of the introduction of General Data Protection Regulation (GDPR) on its letter volumes.
Royal Mail’s share price rose in the previous session, adding 0.64 percent to close at 499.40p. The stock marginally outperformed the broader UK market, with the benchmark FTSE 100 index ending the session 0.51 percent higher at 7,741.29 points. The group’s shares have added nearly 14 percent to their value over the past year, as compared with about a 2.6-percent gain in the Footsie.
Liberum flags headwinds
Liberum retained its ‘sell’ rating on Royal Mail, trimming its price target on the shares from 450p to 415p yesterday, pointing to “more cautious outlook for letters revenue on GDPR”. Citywire quoted the broker’s analyst Gerald Khoo as elaborating that “general business uncertainty adds short-term headwinds to our longer-term bear case” and that the postal operator would struggle to “fully offset declining letters revenue with parcels growth, some of which is driving higher costs and adverse productivity”.
“The latter remains a key challenge, with the combination of pay rises, non-wage inflation, and working week reductions requiring productivity improvements well in excess of the historic achieved rate,” the analyst concluded.
Other analysts on group
The 17 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 525.00p on the shares, with a high estimate of 630.00p and a low estimate of 300.00p. As of June 1, the consensus forecast amongst 18 polled investment analysts covering the privatised postal operator advises investors to hold their position in the company.