Thursday preview: Royal Mail reports third quarter trading update

Royal Mail’s third quarter trading update on Thursday is expected to show the London-listed company achieved strong volumes in parcel deliveries, offset by a decline in the struggling letters business.

“This update will be for the all-important Christmas season and from the retail data it appears the market for parcel should have remained strong (with BRC data stating online non-food sales growth of 9.5% in calendar fourth quarter),” UBS said.

The bank has forecast the postal service firm’s UKPIL division will report parcel volume growth of 9.5% and a 4% fall in letter volumes for the first nine months of the year.

Royal Mail’s continental European parcels division, General Logistics Systems, is projected to report an 8% increase in volumes.

“Overall we believe market expectations for the fiscal year (March year-end) should remain unchanged,” USB said.

“However, the big issue remains what will happen in 2017, with price inflation in UK retail likely to reduce volume growth (which is what drives parcels).”

Royal Mail has become increasingly reliant on parcel dispatches from online shopping as customers send fewer letters each year.

At the company’s half year results in November, Royal Mail said falling letter volumes continued to eat into operating margins. Total letter volumes dropped 4%, leading to a 3% decline in letter revenue.

The group also blamed uncertainty over the Brexit vote in June for a reduction in UK marketing letters, which dragged on overall letter volumes.

However, group revenue in the first half climbed 1% to £4.6bn, supported by a 2% increase in UKPIL parcel volumes and a 10% jump in GLS parcel volumes.

Pre-tax profits also rose to £252m compared with £240m during the same period last year.

Thursday 19 January

INTERIMS
1pm, NCC Group

INTERIM DIVIDEND PAYMENT DATE
Crystal Amber Fund Ltd.

INTERIM EX-DIVIDEND DATE
Ashtead Group, Bilby, Consort Medical, Coral Products, Fletcher King, SSE, Supergroup

QUARTERLY EX-DIVIDEND DATE
Custodian Reit

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Building Permits (US) (13:30)
Continuing Claims (US) (13:30)
Crude Oil Inventories (US) (16:00)
Current Account (EU) (09:00)
ECB Interest Rate (EU) (12:45)
Housing Starts (US) (13:30)
Initial Jobless Claims (US) (13:30)

GMS
Northern Investors Co

FINALS
Chemring Group

EGMS
Industrial Mlulti Propety Trust

TRADING ANNOUNCEMENTS
Halfords Group, Revolution Bars Group

FINAL EX-DIVIDEND DATE
Baring Emerging Europe, Compass Group, Dewhurst, Shaftesbury, Third Point Offshore Investors Limited, Third Point Offshore Investors Ltd. GBP Shares, UDG Healthcare Public Limited Company