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UK's Royal Mail revenue could rise if no further lockdown

The logo of Royal Mail is seen outside the Mount Pleasant Sorting Office as a delivery vehicle arrives, in London
The logo of Royal Mail is seen outside the Mount Pleasant Sorting Office as a delivery vehicle arrives, in London
Muvija M

By Muvija M

(Reuters) - Royal Mail's <RMG.L> revenues could be much higher than previously expected if Britain can avoid another nationwide lockdown, thanks to a surge in online shopping deliveries, it said on Tuesday.

However the company, one of the world's oldest postal groups, said it still expected to make an annual loss due to costs related to the COVID-19 pandemic and to the long-term shift in its business from letters to parcels.

Assuming no further nationwide lockdown to control the pandemic, Royal Mail said its revenues could rise 75-150 million pounds ($98-$197 million) in the year to March 2021, compared with previous expectations for a fall of 200-250 million.

It said this was just one of a number of planning scenarios, although it did not provide figures for others.

Brokerage Liberum said the updated scenario pointed to a smaller loss in the UK than reflected in analysts' current consensus forecast.

Royal Mail shares, which had dropped 26% so far this year, were up 11.1% at the top of the FTSE 250 midcap index by 0735 GMT, heading for their best day since a 2013 debut performance.

The company said it still expected a "material loss" and would not become profitable without substantial change in its business, as letter deliveries decline and parcels surge.

Previous boss Rico Back left in May after a year of labour union resistance to his 1.8 billion pound restructuring plan, but Royal Mail in July agreed with its largest union to start talks to settle a prolonged dispute over pay and operational changes.

The company, whose restructuring plan had included 2,000 job cuts, said the talks were ongoing.

"Currently, too many parcels are sorted by hand and we are failing to adapt our business to fundamentally lower letter volumes and are holding on to outdated working practices and a delivery structure that no longer meets customer needs," it said.

Royal Mail said the net cost of adapting its business this financial year, assuming no further nationwide lockdown, was 140-160 million pounds versus 110 million previously. It also said costs related to the pandemic were now expected to total 140 million pounds, up from 120 million.


(Reporting by Muvija M in Bengaluru; Editing by Saumyadeb Chakrabarty and Mark Potter)