Royal Mail and Antofagasta

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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

“The utilities sector came to the market’s rescue on Tuesday, helping to put the FTSE 100 in positive territory with support from the insurance sector off the back of Esure’s takeover bid. The blue chip index nudged up 0.2% to 7,656 in early trading,” says Russ Mould, Investment Director at AJ Bell.

Royal Mail

Royal Mail’s £50m fine by Ofcom for breaking competition law is an embarrassment to new chief executive Rico Back who has only been in the top seat since June. While the matter dates back four years, a time when Royal Mail was run by Moya Greene, staff and shareholders will still look to Back to make sure the company’s legal advisers win an appeal.

“The fine – should it be upheld – would have a notable impact on Royal Mail’s current year earnings. It accounts for approximately 10% of its forecast adjusted pre-tax profit for the financial year ending 31 March 2019.

“While Royal Mail will no doubt fight this matter hard in the courts, management could do without such a distraction at a time when they are trying to modernise the business and improve profit margins.”

Antofagasta

“Today’s results from copper producer Antofagasta fall down on nearly every measure. Earnings, margins and the dividend are all well short of what had been pencilled in by analysts.

“The blame is pinned on production issues, higher input costs and a stronger Chilean peso and for now the market appears happy to take the company at its word that this was just a bad half year period and that things will get much better in the second half.

“The shares have fallen since early June. However, the highs achieved by the stock during that period were driven by a spike in copper prices, in turn the result of miners threatening to strike in Chile and potentially cause major supply disruption.

“Putting this fairly anomalous trading to one side, the shares have barely shifted in the last 12 months. If the company is unable to follow through on the guided second half improvement, underpinned by a reduction in costs and rising output, then the share price could suffer heavier damage.”

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