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The latest Royal Mail results will be closely watched over the next week to prove that the company’s continued transition to a parcel delivery service is going smoothly and that a progressive dividend policy remains on track.
Royal Mail reinstated its dividend in March, with a surprise final payment of 10p, and its shares returned to the FTSE 100 in June. The stock’s dramatic quadrupling since reaching a low of around Â£ 1.24 last April reflects an equally impressive increase in pre-tax profits in the year through March, but Will good news continue to come as the pandemic wears off?
Parcels topped Letters for the first time in 2020-2021 as Royal Mail’s main source of revenue. Plans to bring a second fully automated hub into operation by 2023 with a capacity of one million packages per day demonstrate the company is determined to adapt to a longer-term change in the way consumers are shopping.
Royal Mail has won contracts from the NHS and Birmingham City Council for Covid test kit deliveries so far in 2021, and more could follow as cases of the Delta variant continue to rise. However, this demand will decline over time, as will short-term consumer demand for parcels as brick and mortar purchases pick up.