Royal Mail shares surge on break-up talk and soaring parcels business

Business

Royal Mail shares surged 10% today after it reported booming business from its parcels delivery service and hope grew in the City that it could be broken up.

In a trading statement on the day of its AGM the company said parcel volumes surged 34% in the five months to the end of August. Meanwhile letter volumes collapsed 28%, as Brits sent 1.1 billion fewer letters than usual during Covid-19.

The Royal Mail took a £75 million hit in extra costs relating to the virus for items such as staff absence and the costs of protective equipment.

But the shares were up 17p to 192p, which values the business at towards £2 billion.

The stock floated at 330p back in 2013, one of the more controversial privatisations of a state monopoly.

Royal Mail still expects to make a “material loss” this year, but the figures look better than the City expected.

The Mail recently saw Czech billionaire Daniel Kretinsky – the “Czech Sphinx” who owns Sparta Prague football club – become the largest single shareholder. It is thought he wants to spin off the parcel business GLS>

In July, the company said it would cut 2,000 management jobs – a fifth of such roles – which would save it £130m.

Royal Mail said: “We are failing to adapt our business to fundamentally lower letter volumes and are holding on to outdated working practices and a delivery structure that no longer meets customer needs.”

It specified a number of practices it wanted to get reduce of get rid of, including sorting parcels by hand and workers signing in by hand.

Royal Mail also said it had yet to remove old letter-sorting machines, “unneeded when letter volumes have halved since 2004”.