Royal Mail braces for a hit to its turnaround plan amidst the COVID-19 pandemic

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Mar 27, 2020
Updated: Apr 15, 2020
  • Royal Mail braces for a hit to its turnaround plan amidst the COVID-19 pandemic.
  • Royal Mail expects fiscal 2020/21 to be the year of loss attributed to the ongoing health crisis.
  • Royal Mail's parcel business is performing upbeat amidst the Coronavirus restrictions.

The leading postal service and courier company of the UK, Royal Mail (LON:RMG), joined the long list of companies on Friday that have withdrawn financial guidance and suspended dividends amidst the Coronavirus pandemic. The company also said that its “Journey 2024” turnaround plan has also been affected significantly due to COVID-19.

Royal Mail had announced in May 2019 that it plans on making a sizeable investment of £1.8 billion to turn the company sustainable and profitable by 2024. Ever since, it has held multiple negotiations with the labor union.

Royal Mail Expects Fiscal 2020/21 To Be The Year Of Loss

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According to Royal Mail:

“Uncertainty around the length and impact of the COVID-19 pandemic, means we now believe it will take longer than expected to achieve the targets laid out in our Journey 2024 plan.”

The company said that the rising uncertainty associated with the health emergency makes it hard to give meaningful guidance regarding the financial impact of the pandemic. It, however, anticipated fiscal 2020/21 to be the year of loss. In the upcoming months, Royal Mail added, business to business volumes are expected to see a further decline.

At 148 pence, Royal Mail was reported trading 8.4% down on Friday in the morning session. The postal service has lost around 40% in the stock market in 2020 so far.

Royal Mail currently boasts over 30 million households and businesses that it serves. Depending on how the COVID-19 emergency unravels, however, the company said that it may have to resort to scaling back in the upcoming months.

The advertising mail volume, as per Royal Mail, has taken the largest blow amidst the Coronavirus pandemic. With restrictions imposed in multiple countries including China, the courier company highlighted a sharp decline in international operations.

Royal Mail’s Parcel Business Performs Upbeat Amidst Coronavirus Restrictions

The parcel business, on the contrary, is performing upbeat during the lockdowns as people continue to increasingly rely on online shopping to avoid contraction of the deadly virus.

The Financial Reporting Council and the Financial Conduct Authority recently eased requirements of financial reporting for British companies amidst the pandemic. Following the announcement, Royal Mail also highlighted that its fiscal 2019-20 performance results are likely to be delayed. Originally, the company was scheduled to report its financial results on May 21st.

Royal Mail currently boasts over £800 million in cash. The postal service also has an additional £925 million credit facility.

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