Sep 8, 2020
Royal Mail warns of loss despite surge in parcel delivery
Royal Mail benefited from a sharp rise in parcel deliveries during the pandemic but a slump in letter volumes and higher costs meant it still expected to make a loss this year. Shares in Royal Mail rose 18 per cent to 206p in morning trading in London as the company updated its forecasts for this financial year. Royal Mail said it expected GLS revenues to grow by 10-14 per cent this year, higher than the previous 5-7 per cent forecast. Sales for its letters business, which Royal Mail was set up to primarily focus on, dropped 28 per cent across the five-month period, far higher than the recent average decline of about 8 per cent. In order to cope with the additional costs, the group is embarking on a previously announced management restructuring to save £130m in the following financial year and reducing non-people costs by a further £200m. It has also committed to reducing capital expenditure by £250m, even as investment in two major parcel hubs and automatic sorting machines is critical to making the rapidly growing parcel business profitable.
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