Royal Mail raises its target for annual revenue

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 Sep 8, 2020
  • Royal Mail raises its target for revenue but forecasts to remain in loss this year.
  • The British postal service's forecast does not assume another lockdown.
  • The London-headquartered company faces a new pensions row.

Royal Mail (LON: RMG) said that online shopping parcel volumes had seen a significant increase in recent months, on the back of which, the company raised its target for full-year revenue on Tuesday. Due to the Coronavirus pandemic that has so far infected more than 347 thousand people in the United Kingdom and caused over 41 thousand deaths, however, Royal Mail still warns that it is likely to conclude the current fiscal year in loss.

Shares of the company jumped more than 2% in premarket trading on Tuesday. On market open, the stock continued its rally and posted an intraday gain of another over 15%. Royal Mail is now trading at 207 pence per share that represents an about 65% recovery since March when the stock printed a year to date low of 125 per share. Confused about choosing a reliable stockbroker to trade online? Here’s a simple comparison of a top few to make selection easier for you.

Royal Mail’s forecast does not assume another lockdown

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Royal Mail forecasts a year over year increase of £75 million to £150 million in its revenue this year. The estimate, as per the British postal service, assumes that the government won’t announce another nationwide lockdown in the upcoming months. Earlier this year when COVID-19 restrictions were at its peak, Royal Mail had predicted a £200 million to £250 million of decline in its annual revenue.

Net cost estimate, the London-based firm added, for a switch from letters to parcels, currently stands at £140 million to £160 million as compared to £110 million that it had predicted earlier in 2020. Royal Mail valued its COVID-19-related costs at £120 million on Tuesday versus the earlier estimate of £140 million.

Royal Mail faces a new pensions row

According to Royal Mail:

“We continue to expect Royal Mail to make a material loss this financial year 2020-21, and will not become profitable without substantial business change. 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.”

In related news, concerns were recently raised that top bosses at Royal Mail were receiving higher pension contributions as compared to new postal workers.

At the time of writing, Royal Mail is valued at £2.07 billion and has a price to earnings ratio of 12.82.

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