Royal Mail sees Christmas parcel boost as £3.6bn takeover nears completion

The owner of Royal Mail has said it remains on track to return to annual profit after a parcel boost over Christmas as its £3.6bn takeover by Czech billionaire Daniel Kretinsky nears completion.

The owner of Royal Mail, International Distribution Services (IDS), has announced it’s on track for an annual profit comeback following a Christmas parcel surge, as the £3.6bn acquisition by Czech tycoon Daniel Kretinsky edges closer to completion.

IDS reported that Royal Mail successfully delivered over 99% of items posted on or before the recommended deadline in time for the festive season. During the quarter ending December, Royal Mail saw a revenue increase of 2.4%, with parcel sales rising by 3.2% and letters by 1.4%.

Despite a 7% drop in addressed letter volumes, higher stamp prices helped balance the scales. Parcel volumes in the UK held steady at 334 million, but revenue climbed by 2.5% to £1.02bn due to price hikes, and international performance also improved, with revenues soaring by 6.6% to £227m. IDS is confident about achieving an adjusted operating profit for the fiscal year 2024-25, “despite the difficult market environment”.

The takeover by Kretinsky’s EP Group is set to be finalised by the end of Q1, following Government approval last month. European and American regulators have also given the green light, IDS confirmed on Tuesday.

Martin Seidenberg, CEO of IDS, commented: “At Royal Mail, we have made more progress to adapt to customer demand. Successful execution of our union agreements is bringing increased operational flexibility, which together with increased automation, and thousands of new vehicles, is leading to improved reliability.”

He added: “Whilst the market backdrop remains difficult, we are focused on strategic delivery and mitigation of inflationary pressures.”

The group had previously warned in November about a £120m blow due to the upcoming national insurance tax hike and mentioned they could not discount potential job cuts or price increases to counteract this challenge. The latest figures have shown that total group revenue climbed by 0.8% to £3.6bn, as Royal Mail surpassed its international parcel division GLS; despite a 2% dip in revenue for GLS, results adjusted for acquisitions and disposals showed a 2.5% rise.

Royal Mail has also celebrated robust returns from its UK tracked parcel service, which saw an impressive 19% growth in package volumes reaching 188 million. Innovations like their modern parcel hubs in Daventry and Warrington paid off, as they handled upwards of 75 million parcels over the festive season – a 23% increase year-on-year, as per records from IDS.