I am interested to hear any opinions about the proposed Royal Mail floatation. Will it remain a croc and sink or will it open at a premium and fly?

Preliminary Results

Revenue and volume

· Group revenue increased by two per cent, due to parcel revenue growth in both UKPIL and GLS. Parcels are the largest contributor to Group revenue, accounting for 51 per cent.
· UKPIL revenue was £7,787 million, up two per cent. UKPIL parcel revenue increased by seven per cent. As expected, parcel volumes (1,068 million items) were flat compared with 2012-13.
· UKPIL letter revenue (including marketing mail) declined to £4,625 million, a two per cent reduction. The four per cent decline in addressed letter volumes for the full year was at the better end of our forecast range of four to six per cent per annum. Marketing mail revenue, part of letter revenue, was £1,111 million.
· GLS revenue was £1,651 million, up seven per cent. Volumes increased six per cent, with growth in both domestic and international volumes.

Profit and margins
· Group operating profit before transformation costs grew to £671 million.
· Transformation costs of £241 million for the year include a provision of £104 million in relation to the management reorganisation programme, announced on 25 March 2014, which will be implemented in 2014-15.
· Group operating profit after transformation costs increased to £430 million. The operating profit margin reduced from 4.4 per cent to 4.2 per cent, as a result of the provision for the management reorganisation programme.
· UKPIL generated operating profit after transformation costs of £309 million. The operating profit margin decreased from 3.9 per cent to 3.5 per cent, again as a result of the provision for the management reorganisation programme.
· GLS operating profit was £108 million. The operating profit margin decreased from 6.7 per cent to 6.5 per cent due to the full year effect of further increases in sub-contractor rates in Germany.
· Profit before taxation (excluding specific items) of £363 million reflects the trading performance of the Group. Accounting standards require us to include a one-time, non-cash benefit of £1,350 million as a result of the Pensions Reform in reported profit before taxation and reported notional earnings per share.

Notional earnings per share (EPS)
· Notional EPS excluding specific items was 26.3 pence.
Cash flow and balance sheet
· EBITDA before transformation costs grew to £942 million, due to improved trading performance.
· Net cash investment of £581 million represents £617 million investment after cash from asset disposals of £36 million.
· Free cash flow increased to £398 million. This has driven a reduction in net debt to £555 million.

Dividends
· As previously indicated, the Board has recommended a final dividend of 13.3 pence per share, subject to shareholder approval at the Annual General Meeting, to be held on 24 July 2014.

Transformation and cost control
· Collections, processing and delivery productivity improved by 1.7 per cent, as we reduced the number of frontline hours at a faster rate than the reduction in the level of workload.
· Eight Mail Centres closed this financial year, taking the total number of Mail Centres remaining to 40. We have completed or commenced modernisation in 94 per cent of our Delivery Offices.
· Tight cost control meant non-people costs in UKPIL reduced by three per cent.

Regulation
· The Ofcom investigation into changes to access5 pricing puts this commercial response to changing market conditions on hold.
· Based on our estimates of the impact of TNT Post UK's publicly-stated plans, direct delivery could reduce Royal Mail revenue by over £200 million in 2017-18. See regulation section of Chief Executive's Review for more information.
· With our proposed access price changes suspended and unfettered direct delivery rollout, there is a reasonable prospect that Ofcom's indicative EBIT margin range of between five and ten per cent for Royal Mail's reported business may never sustainably be achieved.
· We are preparing a regulatory submission calling on Ofcom to take action now and carry out a full review of direct delivery.

Summary outlook
· We are facing increasing challenges in the parcels and letters markets in the UK. However, our key value drivers of single digit revenue growth, margin expansion and underlying free cash flow growth remain the objectives for the Group for 2014-15.
· The Board's intention remains to pursue a progressive dividend policy, having regard to the normalised earnings progression of the Group.

Take your pick - double take on Barclays..

Barclays Capital Equal weight 516.00 - 925.00 Reiterates

Barclays Capital Equal weight 516.00 - - Reiterates

Espirito Santo Execution Noble Neutral 516.00 560.00 505.00 Retains

Credit Suisse Underperform 516.00 460.00 460.00 Reiterates

JP Morgan Cazenove Overweight 516.00 765.00 765.00 Reiterates

Beaufort Securities Hold 516.00 - - Reiterates

Deutsche Bank Hold 516.00 587.00 587.00 Initiates/Starts

Citigroup Neutral 516.00 531.00 531.00 Upgrades

Berenberg Buy 513.75 519.00 700.00 700.00 Reiterates

Ex divi wed 2nd July 2014 (13.3p)

Credit Suisse note today:
"TP cut to 360p, no near term positive catalysts: We now model a 30pbs margin improvement for 2015E, down from 100bps and against RMG guidance of 50bps. We cut our 2015-16-17E EPS by 16%-17%-14% respectively and see consensus as too high. We sit 15% below a 2015E EBIT consensus of £495m (BBG) for 2015E.
Weak parcels compounding the competitive threat in mail: We see risk to 2015 guidance premised on (i) overcapacity in the UK parcels market which we think will take time to adjust, impacting volumes and pricing; (ii) FX headwinds persisting in 2Q (at least) driving continued weakness in international parcels; (iii) a further 20bps YoY margin contraction at GLS from sustained cost pressures (France/Germany), additional capacity (Germany) and tougher revenue comps (Italy); (iv) well flagged competitive pressures in mail from TNT Post UK which have yet to materialise and; (v) high fixed costs and a heavily unionised workforce which limit cost saving initiatives that may be needed in a lower revenue environment this year. Crucially, pressures in the parcels market increases the risk that mail volume declines will not be offset requiring potentially deeper restructuring initiatives.
These would have clear near term cash implications from additional Transformation costs. Our bear case scenario outlined in this note generates a FV of 270p.
Valuation: Our TP of 360p is based on a blend of our DCF (350p), SOTP (360p) and multiples analysis (370p). RMG trades on a 2015E EV/EBITDA of 6.6x for a 6.3% FCF yield representing a 5% and 11% discount to peers for a stock with materially more risk to cash flows in our view."

not looking so underpriced now is it, after all the blather and hullaballoo at launch

Thats because Camorons mates and spivs have cashed in.

any more crappy excuses from your quarter?
it's called making the theory fit the facts :-)

I am getting interested in this one again after the carpet bagging.

UBS note today:
"Last week, we had negative trading statements from both TNT Express and UK Mail. Although it is dangerous to extrapolate too much, the commentary on weak UK parcel volumes (UK Mail) and adverse pan-European trading (TNT Express) are clearly not positive for Royal Mail. Due to this we have cut RMG’s UK parcel FY2014 volume growth forecast from 2.5% to 2%, implying 1% growth in H1, followed by 3% in H2. GLS performance likely to be less impacted.
We have also reassessed GLS’s performance given the newsflow but the largest change has been to the rate we translate euro earnings, given recent moves. We now assume € per £ of 1.26 this year and 1.27 thereafter. We believe that flat EBIT margins at GLS are perhaps a better reflection of the kind of performance we can expect in the current economic environment in continental Europe.
A lot of challenges face Royal Mail but share price is largely discounting this RMG faces a number of challenges, including modernising its network, managing the decline in letter mail volumes, the threat from competition in both letter and parcel, as well as dealing with a highly fixed cost base. We believe RMG faces particular issues with having a highly unionised, relatively well paid workforce at a time when its revenue visibility is low and when both the letter and parcel markets are undergoing significant change. Having said all this we believe the poor share price performance and valuation largely reflect the fact these negatives are known by the market.
Valuation: EPS estimates cut by 6-8%; Rating raised to Neutral, PT cut to 400p. We have cut our EPS estimates by 6-8% going forward, given the weakness in UK parcel as well as updated FX forecasts. We note that our underlying improvement in margins is now 5pp, in-line with company guidance. RMG trades on 5.3x CY2015 EBITDA, 12.3x P/E versus peers on 3-8x and 7-16x. However, we regard RMG as more of a work in progress than the likes of Austrian Post, bpost, and Deutsche Post. We have cut our DCF-based price target to 400p."

so this was floated at about 330 from memory, and then there was a massive ballyhoo that it had been disgustingly underpriced
12 months later, reality has set in and the price is barely 400, what do we hear?
was that a deafening silence?

StockMarketWire.com
Royal Mail says contracts have been exchanged for the sale of its former Paddington mail centre site at London Street, W2 to Great Western Developments for £111m in cash.

The one-acre site is next to the Paddington main line railway station in central West London. It is part of Royal Mail's 'London Development Portfolio', which comprises surplus sites Royal Mail has identified for potential sale or redevelopment in London. Royal Mail vacated the Paddington site in 2008 and operations relocated to Mount Pleasant.

Great Western Developments is owned by Hotel Properties, a listed Singaporean hotels and real estate company, which has a 70% ultimate shareholding, and Anchorage View Pte Limited, which has a 30% shareholding, both via a joint venture holding company.

In November 2012 Westminster City Council resolved to grant planning permission2 for Royal Mail's mixed use scheme on the site. The purchaser intends to seek further planning permission which, if granted, will require the purchaser to pay a further £20m to Royal Mail Group Limited. In addition, if the purchaser sells the site within two years of completion, it has agreed to pay Royal Mail Group Limited 50% of any net sale proceeds above the £111m purchase price if sold within the first year and 25 per cent if sold within the second year.

A 10% non-refundable deposit of £11.1m is payable upon exchange of contracts. The remaining proceeds will be payable upon completion, which is expected to take place on 8 December 2014. Net cash proceeds of the sale of around £108 million will be used for general corporate purposes. The site had a net book value at 30 March 2014 of £1.6m. The net book value reflects the purchase of the land over a number of years, beginning in 1889, subsequent building and development and Royal Mail's policy of depreciating freehold properties over a period of up to 50 years. In addition, around £30m has been invested in buying, building and fitting out the site over the years.

Royal Mail group property director Martin Gafsen said: "Royal Mail continues to seek to optimise value from sites no longer required for operational use and will consider all options as to the manner in which this is achieved."

"......Royal Mail's policy of depreciating freehold properties over a period of up to 50 years"
How the hell does that work?????? ...In Central London?????

how can auditors even accept that sort of rubbish?

Are you still holding Harry?

No. I have never held this stock , but only because I didn't have spare cash at the time of float.

I had it at float and sold too quickly - its starting to look interesting again?

Blast!

RMG

Goldman sachs note today..........

Royal Mail is among the leading risers, up 12.3p at 464.6p after Goldman Sachs resumed coverage with a buy recommendation and 575p price target. The bank said:

We believe Royal Mail should benefit from margin improvements, as the restructuring gathers pace, and from the potential disposal of the London real estate (which we value at 80p a share).

Despite its relatively weak positioning, owing to high competition in both parcels and mail, we believe Royal Mail offers significant earnings growth potential, as it strives to increase its efficiency levels and continues to grow in parcels. While the parcels market remains competitive in the UK, Royal Mail has been able to increase its market share from 35% in 2011 to 38% in 2013.

On the other hand, its staff costs represent 60% of the total costs, compared to 45%, on average, for the other postals under our coverage; bringing this down to the average cost of the other postals could result in as much as £1.3bn of savings. With 31% of the employees over 30 years old, we believe that natural attrition, in addition to specific efficiency plans, will help to reduce costs and gradually bring Royal Mail margins within the lower end of the regulatory range of 5-10%, from 4.5% in 2014. We forecast earnings before interest and tax margins to improve to 6.0% by 2017 and 6.9% by 2019, and we expect Royal Mail to be able to deliver 8.7% EBITDA and 16% earnings growth over 2014-2017.

long way out (away) these forecasts - 2014/19 - and goodness knows what might happen in the meantime

you can bet your bottom $ that the unions, rightly or wrongly, will fight tooth and nail to keep what very much looks like heavy over-staffing

ohhhhhhhhhh SHUT UP............and get some bought.

If you had done when I flagged them up this morning youd already be in profit.