Royal Mail’s Christmas glitter could soon fade
ROYAL Mail turned in bumper results over Christmas, helped by a 73 per cent rise in tracked parcels.
The strong quarter wasn’t a great surprise. Lockdowns meant online shopping boomed during the festive period. The pandemic-fuelled rise in parcels over the past year has been a double-edged sword though.
The group wasn’t initially prepared for the sudden surge in demand, and the investment needed to cope squeezed margins considerably.
However, with additional infrastructure now in place, the group is making the most of the extra business.
Unfortunately, this spike in posting over the Christmas period is likely to be a temporary. There’s no doubt the pandemic has accelerated the shift toward online shopping — a tailwind the group can ride well into the future.
But ultimately we suspect this mailing frenzy is a one-off event.
Letters, a high-margin segment for Royal Mail, have been steadily declining for years – and that trend looks set to continue indefinitely.
As a result, management need to focus on growing segments such as parcels and the international business.
Improving margins in parcels is top priority. Fully automated parcel sorting is a big step in the right direction, with a new hub under construction in the Midlands capable of sorting over a million parcels a day.
That kind of advancement comes with a hefty price tag though, which is a big part of the reason the group did away with its dividend this year.
Management has plans to reinstate it, at least in part, but the need to update infrastructure could continue to put pressure on the balance sheet.
Royal Mail’s commitment to improving efficiency is encouraging and should pay-off in the longer term. The Christmas boost was a good springboard, but when the pandemicrelated demand lets up, margins could be in trouble once again.
Investors need to strap in for a bumpy ride as the group works to set itself up for success in the post-pandemic era.
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THE Kingmaker Novices’ Chase is “no gimme” for Dan Skelton’s Arkle Trophy hope Allmankind.
The five-year-old, who took his tally over the larger obstacles to two from two when lifting the Grade One Henry VIII Novices’ Chase at Sandown Park in December, faces three rivals in the Agetur UK-sponsored Cheltenham Festival trial at Warwick.
Allmankind carries a 5lb penalty for his top-level win and Skelton said: “It’s no gimme – it’s a decent field.
“It’s a strong race, but I”m very happy with him.
He looks fantastic, and I couldn’t be more pleased with him.
“No excuses – he’s ready to go.”
ARCHIE WATSON will shut his Lambourn stable for two weeks after tests on one of his horses revealed antibodies for an equine virus.
THE pause before Eddie Hearn answered said it all.
Hearn was asked if he would trigger the rematch clause to give Josh Warrington an immediate chance to avenge his stunning defeat by Mauricio Lara.
He took a couple of telling seconds before saying the Leeds Warrior’s priority should be his recovery rather than thinking about jumping straight back in with 22-year-old Lara.
Warrington, 30, was not just beaten, he was beaten up as the heavy-handed Mexican battered him into submission in nine rounds to hand him the first pro loss of his 31-fight career.
Hearn knows how devastating this was for Warrington, who came into the fight at Wembley Arena as the world’s No 1 featherweight, and says the former IBF champion faces a long road back. “It’s a huge rematch, but you just want Josh to recover,” said the Matchroom promoter. “If he went 12 and came out on his feet, you’d say, ‘Yeah, rematch at Elland Road, etc’. But he got badly beaten, so I don’t believe it’s even right to even talk about the rematch. “If he recovers and has the appetite for a rematch, we have the ability to do it again.”