Search This Blog

January 25, 2014

Royal Mail performance boosted by strong parcel demand over Christmas

More people sending Christmas cards and higher revenue from parcels helped Royal Mail achieve solid business over the first Christmas since the company floated on the stock market.

The group said underlying sales for the nine months to the end of December rose 2%, helped by strong parcel demand and a rise in stamped mail over the month. Parcel volumes were flat over the nine months but rose during December.

Parcels are important for Royal Mail because it is an area of the business that has been benefiting from the growth in online shopping, while letter sales are falling because of increased use of email and social media.

In UK parcels, revenue was up 8% over the nine months as Royal Mail charged more for bigger items. Although consumer volumes fell as people held off posting big items made more expensive by the size-based pricing, sales to businesses rose.

The company also blamed lack of parcel volume growth on wary business customers going elsewhere during a now settled dispute with the CWU union. Like-for-like letter sales fell 3% over the nine-month period but stamped mail, mainly Christmas cards, was up in December.

The company said it was trading in line with its own expectations and was on track for its full-year targets. Royal Mail floated on the stock market in October in the biggest privatisation for many years.

The sale has been criticised as short-changing the taxpayer after the shares surged far beyond the float price. Royal Mail shares rose in early trading but closed 15p lower at 573p following the figures – a 74% premium on the 330p float price.

The share price performance since the flotation continues to prompt accusations that it was sold too cheaply.

The chief executive, Moya Greene, said: "We remained the nation's number one parcel delivery company, handling 115m parcels in the month of December alone. That's significantly more than any other carrier in the UK parcel market.

"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."

Greene could be in line for an increase in her £1.5m-a-year salary after the company's chairman, Donald Brydon, suggested earlier this week that she was underpaid for the boss of a FTSE 100 company.

However, the government indicated that it might block any large increases in executive pay. Analysts were generally positive about prospects for the business.

John Lawson at Investec said: "Royal Mail has made a good start as a listed entity and the statement indicated that the underlying trading trends are largely as we expected.

Christmas is always a challenging period for the group and without any major weather hindrance Royal Mail has successfully navigated this peak season.

Stay with it." Gert Zonneveld at Panmure Gordon said: "Following a strong share price performance, we have downgraded our recommendation from buy to hold.

While we continue to see longer-term upside potential in the share price, especially if we assume that the dividend payout ratio is likely to increase, in the near term we expect the shares to tread water. We maintain our target price of 570p."

theguardian.com

No comments:

Post a Comment