George Osborne shipped out the last of the government’s stake in Royal Mail a month ago, raising £591m for the Treasury in the process.
Many of the postal workers who received free shares in the October 2013 flotation may well wish they could follow suit, but sadly for them they are locked in for another year or so. Still, given that employees paid nothing in the first place, they will still make some kind of profit even if the shares fall from their current level of 444p.
And they could well do that, because the company faces a number of challenges in the months ahead. Competition continues to eat away at its business, with the likes of Amazon muscling in on the delivery market with its own network. Royal Mail continues to cut costs to cope, but there is always the prospect of industrial action in the background.
With the all-important Christmas trading period ahead, this week’s half-year results are expected to show a 7% fall in operating profits to £322m, according to analysts at Jefferies. They said: “We don’t expect the company to paint a bullish outlook pending a new labour agreement, and the parcel market is increasingly competitive.”
Investec is more optimistic, pointing to the prospect of changes to Royal Mail’s pension scheme, its lack of debt and an estimated £600m of surplus property to be sold.
Interesting birthday for easyJet
It has been a striking few days for easyJet. The budget airline last week celebrated its 20th anniversary and has now launched a loyalty scheme for frequent flyers.
But of course the dominant event in the aviation world recently has been the fallout from the Metrojet crash in Egypt, which left thousands of passengers – including those of easyJet – stranded in Sharm el-Sheikh. The subsequent confusion over rescue flights did the airline no favours, and the effect on future bookings is yet to be determined.
Analysts will be looking for clarification on this issue when it reports full-year results on Tuesday. In September easyJet forecast annual profits of £675m-£700m (an increase on the previous forecast of £620m-£660m). Those figures will not be affected by the Egyptian crash, which took place after the year end, but the airline’s first-quarter performance is likely to be a different matter.
The City will also be watching for any comments on the low oil price, and whether this will feed through into lower ticket prices, as competition in the budget airline sector continues to grow.
Signs of interest in the US?
Those who like to read the runes of central bank speak will be looking forward to Wednesday, when the US Federal Reserve releases the minutes of its October meeting.
Although the Fed left interest rates on hold last month, it omitted a key phrase about “global risks” which had been included in the September statement, and that encouraged the belief that it was keen to sanction dearer borrowing costs at its December meeting (the next one on the calendar, since the Fed skips November).
A stronger-than-expected US jobs figure since the October meeting has only strengthened this view, despite the announcement of some weak retail sales figures on Friday.
But the minutes will be scrutinised for any indication of how many of the Fed’s rate setters are likely to back an increase, since there still seems to be a divide in opinion between the various members. Ranko Berich, head of market analysis at Monex Europe, said: “The doves, led by Lael Brainard and Charles Evans, appear to be in the minority. These minutes will be very useful for judging just how persuasive Brainard’s arguments have been. However, even if the doves don’t win the argument about hikes in December, their views may prove influential for the path of policy in 2016.”
