News Column

Royal Mail slumps over delivery fears

May 23, 2014

ROYAL Mail investors were given a jolt after chief executive Moya Greene warned about "increasing challenges" in its letters and parcels businesses.

Shares slid 9.7 per cent as the message in the company's maiden annual results overshadowed a 6.7 per cent rise in profits to pound(s)430 million for the year to March 30.

In a busy session for corporate results, the FTSE 100 Index was 0.5 points lower at 6820.6.

In mixed economic news a manufacturing survey in China suggested the slowdown in the world's second largest economy is easing.

Investors were also relieved that minutes from the US Federal Reserve had shown policymakers are in no hurry to raise interest rates.

But Britain's public finances suffered a worse-than-expected start to the financial year as borrowing in April rose to pound(s)7.4 billion - pound(s)1.7bn higher than the same month in 2013. The news knocked sterling which was down against the dollar, at 1.69, and was lower against the euro at 1.23.

In the US, the Dow Jones Industrial Average added 24.23 points to 16,557.29 in early trading on strong manufacturing data.

Royal Mail shares were lower, off 56p to 519p, after Ms Greene highlighted intense competition in the parcels market and warned about the impact that the direct delivery ambitions of rivals such as TNT will have on the economics of the universal postal service unless Ofcom intervenes.

The company's shares have surged from their launch price of 330p in October to 617p in February but have fallen back since then on fears that the watchdog might take up to two years to tackle the issue of access rights.

Among other fallers, Royal Dutch Shell was 95p lower at 2456.5p and Unilever dipped 27p to 2668p after it announced the sale of its North American Ragu sauces business for pound(s)1.3bn.

Brewing giant SABMiller topped the risers' board as it announced a 2 per cent rise in pre-tax profits and reassured investors over its performance in developing markets. Shares were 112.5p higher at 3372p, a 3.4 per cent rise.

Elsewhere, shares in Mothercare surged 16.7 per cent - up 23.3p to 162p - after it said a recovery in fourth quarter trading had continued into the current period. The retailer posted an annual loss of pound(s)26.3 million but said its banks had given it greater flexibility by extending its lending facility to pound(s)100 million.

Car parts and bicycles retailer Halfords surged 10.6 per cent, up 46.6p to 488p, after its pre-tax profit lifted 1.1 per cent to pound(s)72.8 million, outperforming market expectations. The firm said its bike sales grew 19.4 per cent on a like-for-like basis over the year, aided by upgrades to its Apollo and Boardman range of cycles.

The biggest risers on the FTSE 100 Index were SABMiller, Arm Holdings up 28.5p at 889.5p and Aberdeen Asset Management. The biggest fallers were Royal Mail, Royal Dutch Shell and Astra Zeneca down 145p at 4275p.

U.S. stocks ended higher for the second straight session, led by small-cap stocks, while the Nasdaq climbed on a rally in biotech shares.

Among momentum names, noted for high growth and perceptions of excessive valuation, Vertex Pharmaceuticals shares shot up 6 per cent to $71.18, while Alexion Pharmaceuticals rose 2.5 per cent to $160.48.

The Nasdaq biotechnology index gained 1.9 per cent. Shares of Salesforce.com , the world's biggest maker of online sales software, advanced 6.1 per cent to $53.27.

The Russell 2000 index of small-cap shares rose 0.9 per cent, outperforming the broader S&P 500. The Russell fell into correction territory last week - defined as a 10 per cent decline from a recent closing high - but has since retraced some of that, and is now less than 8 per cent from its peak.

Hewlett-Packard Co posted a bigger-than-expected drop of 1 per cent in quarterly revenue as it struggled to keep its grip on a shrinking personal computer market while protecting profit margins. The stock reversed earlier gains to end down 2.3 per cent at $31.78.

The Dow Jones industrial average rose 10.02 points or 0.06 per cent, to end at 16,543.08. The S&P 500 gained 4.46 points or 0.24 per cent, to 1892.49.

The Nasdaq Composite added 22.81 points or 0.55 per cent, to close at 4,154.34.

Shares of JD.Com soared in their market debut, jumping 10 per cent to close at $20.90 after the Chinese e-commerce company raised $1.78 billion in an initial public offering.


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Source: Herald, The (Scotland)


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