Embattled Royal Mail Relying On Pandemic Parcels For Revival

The half-year results for Royal Mail reveal an operating loss of £20 million, but the group says a record growth in parcel deliveries – driven by the global coronavirus pandemic – means it remains in robust health.

Yet while online retailers and delivery logistics firms have been posting record profits and results, Royal Mail’s pre-tax profits plunged by more than 90 per cent to just £17 million.

Better At Full Year?

Nevertheless, the group remains hopeful that it will achieve a ‘better than break-even’ scenario for its full-year results, as it estimates that it should achieve revenues that are up to £580 million higher year-on-year.

Parcels have now also overtaken letters in terms of revenue volume – a landmark result for the group, whose core business has traditionally been in letters.

In fact, the group said it processed 2.5 million tracked parcels on its busiest day in 2020 alone, and its tracked parcel volumes were up by 72 per cent, with overall domestic parcels up 51 per cent in volume.

Volumes of international parcels also grew during the first six months of 2020, partly thanks to China exiting early from COVID-19 lockdown, although this increase dwindled as global air capacity became reduced later in the reporting period.

Executive Statements

“For the first time, parcels revenue at Royal Mail is now larger than letters revenue,” said Keith Williams, interim executive chair at Royal Mail, “representing 60% of total revenue, compared with 47% in the prior period.”

The firm is now clearly pinning its hopes of riding out the coronavirus crisis on the boost from more packages than ever being sent through its systems.

Keith Williams again:

“It remains difficult to give precise guidance but parcel growth is expected to remain robust in the third quarter, with more uncertainty over trends in the fourth quarter due to the development of the COVID-19 pandemic, further recessionary impacts and trends in international volumes.”

What is clear is that the upcoming Christmas period will remain as crucial as ever to Royal Mail, which has already lined up an extra 33,000 workers to help deal with volumes during the peak season running up to Christmas.