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Christmas Boosts Parcel Revenues At Royal Mail plc

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The shares of Royal Mail (LSE: RMG) were flat in early morning trading, with shares closing on Thursday at 588p. This is up 78% from its 330p share price in October.

Today the company revealed it recorded a rise in parcel delivery revenue in the nine months ended 29 December. This was said to be in line with expectations as higher parcel prices helped offset a decline in letters posted.

The newly privatised company stated parcel revenue spiked 8% on a like-for-like basis, helped by the record amount of online shopping done in December, where there was a 20% increase in internet purchases on the year before.

Parcel volumes in December were 115 million, a like-for-like increase, peaking at 10 million delivered on the busiest day. This was more than any other carrier in the UK parcel market, and in total parcels accounted for 51% of revenue. During this time, Parcelforce Worldwide also grew strongly.

The FTSE 100 member, valued at £5.9 billion, meanwhile confirmed that like total letter revenue declined 3% on a like-for-like basis. This compares with a first-half decline of 4% due to the impact of the ‘London 2012’ stamp sales.

Addressed letter volumes fell 5% during the same period, which the FTSE 100 member claimed was expected, and compares with a like-for-like decline of 6% in the first half. The improvement in the second half decline was partially due to high levels of mailing from energy companies.

In December like for like increase of stamped mail volumes increased in concert with the delivery of Christmas cards.

Chief executive Moya Greene had the following to say:

“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.

“We remained the nation’s number one parcel delivery company, handling 115 million parcels in the month of December alone. That’s significantly more than any other carrier in the UK parcel market. GLS, our ground-based European parcels business, has performed well and is exploiting the growth opportunities in the Eurozone. 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.”

The consensus estimate from City experts is that upcoming annual results will show earnings at 37p a share. Shares may therefore trade at a P/E of 16.

Whether those ratings combined your opinion on the future outlook for Royal Mail combine to make shares a ‘buy’ is something only you can decide.

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> Mark does not own shares in Royal Mail.