Royal Mail posts 90% profit plunge but boosts revenue estimates

Royal Mail (LON: RMG) has revealed a collapse in profits for the first half of 2020.

Pre-tax profits plunged by 90.2% to £17m. However, the group is remaining positive and has said that expected full-year revenues could be between £380m and £580m higher than previously projected.

If revenues come in at the upper end of expectations, Royal Mail will “better than break-even”.

The group has also posted an adjusted loss of £127m after Corona-related costs and redundancies.

Despite the loss, the group did report a 51% increase in domestic parcels – not including Amazon. Parcel volumes have increased as shops shut and people are ordering more online.

“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,” said Keith Williams, interim executive chair.

“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,” he added.

Michael Hewson from CMC markets commented on the results and said: The outlook for the business is much more positive now with the company recently competing with Amazon for a £550m one-year contract to deliver 215,000 Covid-19 testing kits a day in the UK.”

Royal Mail shares (LON: RMG) are trading +7.13% at 306,40 (0920GMT).

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Safiya Bashir
Safiya focuses on business and political stories for UK Investor Magazine. Her interests include international development, travel and politics.