Royal Mail posts loss and makes more money from parcels than letters


Royal Mail posts a half-year loss but rakes in more money from parcels than letters for the first time

  • Profits fall by over 90% in the first six months of its financial year 
  • Group posts a £20m overall loss loss for the period today 
  • Underlying operating loss for core postal arm came in at £129m 

Royal Mail saw its profits fall by 90 per cent in the first six months of the year, despite an upturn in fortunes across its parcel arm as online shoppers stocked up on goods to get them through lockdown.

The company revealed a £20million group operating loss for the period, with the core postal arm seeing profits wiped away to an underlying operating loss of £129million. Its GLS parcels division recorded a £166million operating profit.

The £20million overall loss compares with earnings of £61million at the same point a year ago, but the group today said it remained confident that its parcel arm would continue to bolster its bottom line. 

Parcel deliveries comprised 60 per cent of the company’s revenue over the period, against 47 per cent by the same stage last year.

Suffering: Royal Mail saw its profits fall by 90 per cent in the first six months of the year

Overall, the company’s pre-tax profits fell by 90.2 per cent to £17million on a year ago.  

Covid-19 related staff absences, PPE equipment purchases and social distancing measures implemented cost the company £85million over the period.

The group also faced a voluntary redundancy charge of £147million, coinciding with plans announced in June to cut 2,000 management jobs. 

Group revenue rose 9.8 per cent to £5.7billionn in the six months to 27 September, marking a rise of £505million on a year ago.

The mail delivery company said it expected its full-year revenues to be between £380million to £580million higher year-on-year, which could, potentially, see a ‘better than break-even’ result.

Keith Williams, interim executive chair at Royal Mail, said: ‘The growth in online shopping and parcels during the pandemic, combined with our increased focus on delivering more of what customers want, has led to revenue growth of nearly 10% for the group in the first half, with Royal Mail revenue up nearly 5%.

‘For the first time, parcels revenue at Royal Mail is now larger than letters revenue, representing 60% of total revenue, compared with 47% in the prior period.

‘As parcel volumes at both Royal Mail and GLS have continued to be robust year to date, revenue performance in the scenario has improved.

‘It remains difficult to give precise guidance but parcel growth is expected to remain robust in the third quarter, with more uncertainty over trends in the fourth quarter due to the development of the COVID-19 pandemic, further recessionary impacts and trends in international volumes.’

Costly: Covid-19 related staff absences, PPE equipment purchases and social distancing measures implemented cost Royal Mail £85million in six months

Costly: Covid-19 related staff absences, PPE equipment purchases and social distancing measures implemented cost Royal Mail £85million in six months

FTSE 250-listed Royal Mail’s share price jumped over 6 per cent or 18.10p to 304.10p in early morning trading A year ago, the company’s share price stood at the 232.50p mark. 

Watch out for this Royal Mail scam

There is a scam email purporting to be from Royal Mail doing the rounds online at the moment. 

The scam email claims that the Royal Mail has an undelivered letter for you, and requires you to pay £1.99 for them to redeliver it.

A statement on Royal Mail’s genuine website states: ‘If you receive a suspicious email or discover a Royal Mail branded website which you think is fraudulent, please let us know by contacting us.

‘If you have been the victim of a payment scam, you can get a crime reference number by reporting it to your local police station.’

Customers are urged to check the subject line and email address before responding to a message.

John Moore, senior investment manager at Brewin Dolphin, said: ‘Royal Mail’s performance continues to reflect structural changes in the sector, which have only intensified through the Covid-19 pandemic. 

‘The fact that for the first time parcels revenue is now larger than letters revenue is a milestone for the business and only goes to underline the importance of Royal Mail’s restructuring programme, which was long overdue even when it was introduced. 

‘Inevitably, this period of transition has led to a mixed bag of results in headline terms, with revenue growth and a relatively positive guidance update overshadowed by significantly reduced profits. 

‘Notably, debt has been cut and some of the costs incurred in the period should be of a one-off nature. Royal Mail is making some important decisions and changes at a challenging time – it is perhaps more important than ever to create a more flexible business while keeping staff onside against an uncertain economic backdrop.’

Read more at DailyMail.co.uk