Royal Mail share price rises as Christmas packages pick up

Sarah Spickernell
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Vince Cable was criticised for the company's low IPO value (Source: Getty)

The figures

Shares in Royal Mail went up by 4.18 per cent to £4.49 in trading this morning, following the company's positive results for the Christmas period.
Group revenue rose one per cent during the nine months to 28 December, indicating the company is performing in line with expectations.
The UK postal service said its delivery service performed particularly well compared to the year before, with a three per cent rise in volume of parcels.
This was largely driven by a busy festive period at the end of the year – the number of packages handled over the Christmas period was four per cent higher than in 2013. According to Royal Mail, preparations for December began in April.

Why it's interesting

The Christmas success was important for the future of Royal Mail - chief executive Moya Greene had previously said that as long as the company performed well over Christmas, it would still be in line to meet market expectations of £235m profit and £9.47bn for the full year.
In November, the 500-year-old postal service said its delivery operations faced “stiff competition” in the first half off the financial year. The competition came from a number of retailers setting up their own click-and-collect services, with Amazon being described as a particularly fierce rival.
This caused shares to fall as much as 7.3 per cent, after they had finally reached a relatively steady value. It took quite a while for this to happen – when Royal Mail listed in October 2013 at 330p per share, it was very popular among investors and shares soared to as high as 618p.
This invited much criticism of business secretary Vince Cable, whose idea it was to float the company. Many people said he had undervalued the company and as a result had cost the government a huge sum of money in its sale.
However, shares then slid back down again over the following months, and in September shares fell below 400p for the first time since its IPO.

What Royal Mail said

Moya Greene has been vocal about the difficulties the company now faces with competition, leading some analysts to predict that she might step downs.
Greene gave a positive commentary on the performance, however, indicating she may be sticking around for a while longer:
Our postmen and women delivered a great service over the busy festive period. Royal Mail delivered one of its highest ever quality of service performances for parcel delivery to our customers over the month. This is because we started to plan for Christmas in April, putting investment behind extra sorting capacity with 10 temporary hubs and training around 19,000 extra people.
We are continuing to bear down on costs and expect that underlying operating costs before transformation costs in UKPIL will be flat for the full year. Given our performance over the Christmas period, we are confident that the outcome for the full year will be in line with our expectations.

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