Royal Mail, Naked Wines and Jet2

Three things you need to know in the financial markets this morning from investment writer, Tony Cross.

Royal Mail

Half year numbers from Royal Mail [LON:RMG] this morning showed a marked uptick in revenues. Digging a little deeper shows some very interesting patterns, with income from letters down 20.5% but parcels up by more than 33%. The uptick in revenues however didn’t reflect well on the bottom line, with pre-tax profits falling by 90%. This is a complex business and one that remains constrained by the universal service obligation. However with the government showing no signs of relenting over this, challenges may continue for some time yet.

Naked Wines

Another winner from lockdown has been Naked Wines [LON:WINE], who reported half year numbers this morning and saw income up 80%. Although the business doesn’t quite expect to match this through the second half, they have still upgraded expected sales growth to around 60% for the full year, reflecting the capacity which has been added during this time. One stand-out here is that repeat customer contributions are up 89% over the period, meaning that the business has seen this metric grow by as much over the last six months as was recorded during the previous six years. The company does however acknowledge the political and economic uncertainty that lies ahead.

Jet2

One company that hasn’t had a good lockdown is Jet2 [LON:JET2] and that’s reflected in their half year report, again published today. Revenues were just under £300m, down from the £2.5 billion recorded for the same period last year. That’s pushed the business to a post-tax loss of £68 million, well below the £278m profit of summer 2019. Despite the pandemic being far from over, the company expects to fly around 50% of the schedule seen last winter but note that forward bookings will likely remain constrained. With a cash balance of just over £1 billion at the end of the reporting period along with monthly cash flow forecasts, the company has sufficient resources to continue in operational existence for the next 12 months. Some may wonder whether the forecast loads are achievable but regardless of this, a turbulent time lies ahead for the whole industry.

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