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Royal Mail share price volatile as postal operator reaffirms revised profit target

Shares in Royal Mail Group (LON:RMG) have fallen into the red in London this morning, following an upbeat start to the session, as the privatised postal operator posted a small rise in underlying revenue in the first six months of its financial year and reiterated its revised full-year profit target. The update comes after the group recently warned on profits.

As of 08:57 GMT Royal Mail’s share price had given up 0.66 percent to 345.70p, having traded about one percent higher earlier in the session. The shares are underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.48 percent higher at 7,067.54 points.

Royal Mail posts interim results

Royal Mail announced in a statement this morning that its underlying revenue had inched one percent higher to £4.93 billion in the half-year ended September 23. The group’s profit before tax, however, slumped 27 percent to £183 million during the reported period, while earnings per share fell to 13.6p, from 20.1p in the prior-year period. The privatised postal operator nevertheless hiked its payout to shareholders by four percent to 8.0p per share.

“We have put in place a range of actions to improve our performance,” Royal Mail’s chief executive Rico Back commented in the statement, reaffirming the group’s post profit-warning target for operating profit before transformation costs of between £500 million and £550 million.

Back further said that the company will update the market on its strategy next year, flagging a ‘greater emphasis’ on how the postal operator connects with customers, as well as “a clearer focus on financial performance and management accountability”.

Analysts weigh in on update

Ed Monk, from Fidelity Personal Investing, told City A.M. that Royal Mail’s results were largely in line with those lowered expectations.

“The one positive is that the results were not worse than predicted in the October warning – those lower targets were reconfirmed today,” he pointed out, adding that with a lot of bad news priced in after last month’s slump in Royal Mail’s share price, “the market may not be shocked at today’s insipid results”.

As of 08:52 GMT, Thursday, 15 November, Royal Mail share price is 344.00p.

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