Interactive Investor argues that Royal Mail Group’s (LON:RMG) results make for ‘uncomfortable reading’ and the company has a long way to ‘recapture any former glory’, Citywire reports. The comments came after the privatised postal operator logged a small rise in underlying revenue in the first six months of its financial year and reiterated its revised full-year profit target.
Royal Mail’s share price finished the previous session deep in the red following the results, giving up 6.49 percent to close at 325.40p. The shares have lost more than six percent of their value over the past year.
Citywire quoted Richard Hunter at Interactive Investor as commenting yesterday that the slump in Royal Mail’s share price since May had ‘likely cemented’ the postal operator’s relegation from the benchmark FTSE 100 index at next month’s reshuffle.
“Quite apart from the increasing competition […] Royal Mail has a long road ahead to recapture any former glory, and the market consensus of the shares as a sell seems likely to remain entrenched for the time being,” the analyst pointed out.
Other analysts weigh in
Liberum, which sees Royal Mail as a ‘sell,’ meanwhile argues that the group’s dividend is ‘unsustainable’. The postal operator hiked its payout to shareholders yesterday, by four percent to 8.0p per share.
“We view the current dividend rate and policy as unsustainable, given poor cover and earnings and cash flow, and inappropriate in light of limited earnings visibility and the lack of long-term earnings growth,” the broker explained, as quoted by Proactive Investors. The newswire also quoted AJ Bell’s investment director Russ Mould as commenting that the hike in Royal Mail’s dividend was ‘something of a surprise,’ and looked like “a sop from the delivery firm’s newly installed management to keep investors on side while they await a big strategy announcement in March 2019”.