Royal Mail results boosted by parcels

Jo Francis
Thursday, February 11, 2021

Royal Mail’s share price hit a 52-week high after it said it expected to file adjusted operating profits “well in excess of £500m” for the full year, on the back of a booming parcels business and better letter volumes.

Royal Mail delivered 11.7m parcels on its busiest day during Q3
Royal Mail delivered 11.7m parcels on its busiest day during Q3

The group reported its busiest-ever period for parcels in a trading update covering the Christmas period, with nearly half a billion packages passing through its network.

Its share price briefly hit a 52-week high of 479.7p in early trading, and had settled at 451.10p, up 5% on the previous close, at the time of writing.

In financial Q3 2020 – the three months to the end of December – the group handled a whopping 496m parcels as e-commerce sales rocketed thanks to a combination of Black Friday and Christmas purchases, as well as lockdown restrictions.   

Royal Mail said that on its busiest day the business delivered 11.7m parcels, up more than 30% on the equivalent day during the UK’s initial lockdown period last year.

However, the huge increase in volumes combined with Covid-19 employee absence resulted in well-documented issues with service levels and a massive backlog in deliveries.

Royal Mail said it was “investing in quality improvements”, and 10,000 of the 30,000 temporary workers recruited to handle the Christmas peak are being kept on, as temps.

The group recently agreed a new framework agreement about future working practices with the CWU.

Four temporary Parcel Sort Centres are being kept open, under review, along with 6,000 additional vehicles.

The decline in addressed letter volumes also slowed, with volumes down 14% compared with 33% at the beginning of the financial year.

Non-executive chairman Keith Williams thanked the group’s workers for their “extraordinary dedication” and said that with the introduction of new processes, the business was making “encouraging process”.

“We are resolutely focused on delivering a comprehensive service despite the challenging circumstances,” he stated.

The group also said that sales growth for the full would be “significantly beyond the top end” of estimates made in November, of £380m to £580m.

In the nine months to 27 December group revenue was up 20% at £9.3bn. Parcel revenues jumped by 43.3% to £3.83bn. Letter revenues fell 8.5% to £2.57bn.

Royal Mail is also a key partner for the government's Covid-19 testing programme,  and is delivering and collecting “tens of millions” of testing kits across the UK.

Since April 2020 the business has also delivered around 1bn items of Personal Protective Equipment (PPE) to care homes, GP surgeries and social care providers.

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