Royal Mail issues its first set of results as a publicly quoted company, against a background of simmering employee unrest.
On the same day that the interims are due out, the deadline for talks between management and the unions expires. As Investec said: "It could be a busy day, with some key news."
The Royal Mail share price was looking like a one-way bet until UBS, one of the banks that handled the controversial flotation, suggested that it was time to bank profits.
UBS was effusive about the achievements thus far of Royal Mail's management, and says it expects further improvements, due to productivity and revenue growth.
“However, with Royal Mail’s share price up 69% since the IPO (versus 7-32% for peers), we believe the market is over-estimating margin upside. In particular, we believe it will be difficult to accelerate its transformation, given the limitations of the labour agreement. To get to the upper end of the 5-10% regulated range (assumed by the market; current 3%) would require acceleration of staff reductions, additional automation and no adverse events,” UBS says.
As for the interims, Investec identified a few things to look out for, other than the outcome of the pay and conditions talks.
"(1) Parcels volumes may appear relatively weak in H1, due to a temporary e-retailing slowdown (caused by the good UK summer weather, according to Royal Mail) and the move to sized-based pricing. Q3 should see a return to more normal trends, we believe. (2) The addressed letter volume decline should be in the predicted 4-6% range, a trend that we believe has not worsened," Investec said.
“More focus should emerge on the FY14E estimates, where a consensus is yet to form. Much will depend upon the pay discussions, how Royal Mail is going to present its business transformation costs (that we treat as operating-related costs in our underlying numbers, in line with group policy we believe) and the on-going treatment of the pension credit for instance,” the broker added.
United Utilities is the second water company this week to update the market.
Adjusted profit before tax is seen by Deutsche Bank (DB) rising to £212mln from £190mln last year, with earnings per share up to 23.9p from 20.9p at the halfway stage in 2012.
"We forecast a 7.2% increase in its dividend to 11.7p/share, reflecting the company’s policy to increase DPS [dividend per share] by 2% above RPI inflation (based on prior year inflation)," DB said.
Significant announcements expected
Companies: Finals: Shaftesbury (LON:SHB). Interims: Royal Mail (LON:RMG), Real Estate Credit Investments (LON:RECI), Hogg Robinson (LON:HRG), First Property (LON:FPO), Findel (LON:FDL), United Utilities (LON:UU.), Immunodiagnostic Systems Holdings (LON:IDH), Telford Homes (LON:TEF), Omega Diagnostics (LON:ODX).
The following widely-held stocks are trading in ex-dividend form: Daily Mail & General Trust, Dunelm, AMEC, Johnson Matthey, Telecom Plus, Vedanta Resources
Macroeconomic: UK: CBI Distributive Trades Surveys, GDP, Index of Services. US: Bloomberg Consume Confidence, Chicago PMI, Continuing Claims, Crude oil Inventories, Durable Goods Orders, Initial Jobless Claims, Leading Indicators, MBA Mortgage Applications, Personal Consumption Expenditures, Personal Income, Personal Spending, University of Michigan Consumer Confidence. EU: GfK Consumer Confidence (Germany)