Royal Mail faces major test when it reveals if boom in business that came with Covid pandemic is here to stay
Royal Mail faces a major test when it reveals if the boom in business that came with the pandemic is here to stay.
The 506-year-old firm benefited as shops shut in lockdown and people travelled less. That triggered a huge rise in parcel deliveries – but there are fears it could now be flagging after Covid restrictions ended.
In January, Royal Mail said it expected profits at its UK arm of £430m for the 12 months to March 31, down from a previous target of £500m.
So all eyes are on its full-year results on Thursday. Total profits – including at its international business – are expected to rise from £664m to £722m, according to Refinitiv data.
The share price has tumbled by a third this year, indicating that there is some scepticism about its prospects.
Covid-related staff absences will have pushed up its costs. But analysts are likely to look past one-offs.
Royal Mail grabbed headlines this week when it said it was planning 50 new routes for delivery drones after a series of trials, though this raises questions about how much it is spending on new technologies. A huge investment ‘well over £400m’ has raised eyebrows.
Analysts will also be keen for an update on the aim to slash 700 managers’ jobs to save £40m a year.
Laura Hoy, equity analyst at Hargreaves Lansdown, said it was in a ‘tricky position’. She said: ‘Now that tailwinds have dissipated, much of the transition involves cutting cost, and its biggest cost is its massive network of employees.’