Royal Mail’s pre-tax profit climbs as COVID-19 fuels demand for courier services

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 May 20, 2021
  • Royal Mail's pre-tax profit climbs by a massive 116% in fiscal 2020.
  • The board declared 10 pence per share of a one-off final dividend.
  • Royal Mail shares tanked roughly 7% on market open on Thursday.

Royal Mail plc (LON: RMG) said on Thursday its pre-tax profit climbed in fiscal 2020 as the ongoing Coronavirus pandemic restricted people to their homes, fuelling demand for courier services. The company acknowledged COVID-19 uncertainty but expressed confidence that grounds for future optimism remained on the table.

Royal Mail shares jumped 2.5% in premarket trading on Thursday but tanked by a broader 7% on market open. Including the price action, the stock is now exchanging hands at 510 pence per share. In comparison, it had started the year at a per-share price of 341 pence after recovering from a low of 124 pence per share in the first week of April.

Royal Mail reports £12.64 billion of full-year revenue

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Royal Mail reported £720 million of pre-tax profit for the year that concluded on 28th March. In fiscal 2019, its profit before tax was capped at a much lower £180 million. The postal company valued its annual revenue at £12.64 billion versus the year-ago figure of £10.84 billion.

Analysts, on the other hand, had called for £704 million of pre-tax profit for the courier service in the recent year. Their estimate for full-year revenue was capped at £12.58 billion. In separate news from the United Kingdom, Britain’s competition regulator approved a £31 billion merger between Virgin Media and O2.

Online shopping boomed last year in April, resulting in a massive increase in parcel volumes for Royal Mail. In April 2021, the courier service saw a 2% decline on a year over year basis in its UK parcel volumes. Earlier this year, in January, Royal Mail named Simon Thompson as the new CEO of its UK business.

Royal Mail declares 10 pence per share of a one-off final dividend

The board declared 10 pence per share of a one-off final dividend on Thursday. Royal Mail said:

“The margin trajectory in the short term is assisted by the cost reduction programs launched in June 2020, the benefits of which flow into 2021-2022, but we must now also make swift progress with the business fundamentals that will deliver a sustainably profitable and growing business in the U.K.”

Royal Mail performed largely upbeat in the stock market last year with an annual gain of close to 50%. At the time of writing, the British multinational has a market capitalisation of £5.10 billion and a price to earnings ratio of 231.85.

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