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Royal Mail boosted by online shopping frenzy Royal Mail revenue boosted by online shopping frenzy
(about 4 hours later)
Royal Mail handled 115 million parcels in December as the newly-privatised delivery firm continues to reap the benefit of the online shopping boom. Higher prices for parcels and loads of Christmas cards delivered helped Royal Mail boost revenues by 2 per cent in the past nine months, the recently privatised business reported today.
The company's seasonal workload, which saw a peak of 10 million parcels on its busiest day, also included a rise in stamped mail volumes as Britons remained loyal to Christmas cards for passing on festive good wishes. Shares in Royal Mail, which were sold at what many called a cut-price 330p last October, fell 3p to 585p.
Letter volumes were also boosted by the high level of mailings from energy companies following a round of price rises in the sector. Chief executive Moya Greene was this week at the centre of a row between Business Secretary Vince Cable and his deputy Michael Fallon over whether her £1.5 million pay should be increased.
Parcel revenues were up 8 per cent on a like-for-like basis in the nine months to December 29 after the company moved to price deliveries by size rather than weight. This meant parcel volumes were flat as a result of the loss of some large uneconomic items in the wake of the price change. She said: “Our financial performance to date is in line with our expectations and gives us confidence that we will deliver against our key value drivers for the full year.”
Royal Mail's parcels division now accounts for more than half of group revenues, with the company claiming it handled significantly more parcels than any other carrier in the UK market. Despite strong Christmas cards business and an unexpected boost in October when energy companies sent millions of customers letters warning them of price rises, UK letter revenues fell 3 per cent on volumes down 5 per cent. That was a slightly lower decline than the 6 per cent seen in the first half.
Revenues from UK letters were down by 3 per cent on a like-for-like basis in the nine-month period, although Royal Mail said this was better than the rate of 4 per cent lower seen in the first six months of the period. In parcels, where Greene is concentrating her efforts, while volumes were flat, revenues were up 8 per cent as the move to boost small parcels and deter large ones through pricing continued  to work.
Chief executive Moya Greene said: "Our postmen and women have again delivered Christmas for the UK. We were delighted to see that people continue to send seasonal good wishes, with Christmas cards underpinning a like-for-like increase in our December stamped mail volumes." Royal Mail said it remains by far the biggest parcels business in the UK, delivering 115 million in December with a peak 10 million delivered on the 18th. It admitted that while online shopping continues to soar there was a much larger rise in click and collect than in home deliveries.
Royal Mail shares were flat at 588p in the wake of today's update, having jumped from their flotation price of 330p in October. Its eurozone parcels business, General Logistics Systems, saw a 6 per cent rise in revenues on a 5 per cent rise in volumes in the nine months. Royal Mail’s £1.7 billion privatisation saw 690,000 private investors each receive 227 shares. They paid £749 for those shares, which are worth £1328 today.
Confidence has been boosted by a deal between the company and union leaders on pay, pensions and other issues linked to the privatisation of the postal group. Analysts are divided on Royal Mail shares.
More follows- PA Panmure Gordon’s Gert Zonneveld, who was the first analyst to say they were seriously undervalued at the flotation price, changed his recommendation from buy to hold today with a price target of 570p.
Alex Patterson of Espirito Santo recommends buying the shares with a price target of 635p.
The Communication Workers  Union, which is still balloting its members on a three-year pay deal it  has recommended, welcomed today’s figures.