Royal Mail sees FY profits 'well in excess' of £500m as parcel revenues soar

The company on Thursday forecast 2020-21 revenue "significantly" beyond the top end of the £380m - £580m range guided in November after third quarter parcel revenues grew 43.3% to £3.8bn.

January trading has remained robust with parcel volume growth of 37%, with the re-introduction of nationwide Covid-19 restrictions and a peak in the volume of items being returned to retailers following Christmas playing a part, Royal Mail said in a trading update.

Group revenue for the nine months to December rose 20% to £9.3bn. The company handled 496m parcels in the third quarter as it cashed in on the boom in online shopping during tighter Covid-19 restrictions and the peak Christmas period.

It added that Brexit had caused a reduction in international volumes as the reality of customs forms, taxes and duties for imports and exports to and from the European Union struck home, but it was still too early to gauge the future impact.

Letter revenue decreased by 16.0% in the nine months and 8.5% during the third quarter helped by more robust volumes in December, where the decline narrowed to 9%.

The third national Covid-19 lockdown imposed at the start of the year saw January volumes slump by 24%. Royal Mail has kept on 10,000 out of the 33,000 seasonal workers who joined for the Christmas peak to deal with increased traffic during the latest lockdowns.

On its busiest day in the last quarter the company delivered 11.7m parcels, a third more than the busiest day during the first national lockdown in 2020.

Royal Mail said social-distancing requirements in sorting offices and staff absences due to mandatory self-isolation had caused well-publicised disruption to services.

Company chair Keith Williams said the company had faced “unprecedented parcel volumes” during “challenging circumstances”.

“Given these record volumes, we recognise that at times our service during the period was not always as we would have wished,” he said.