UPDATE 2-Royal Mail raises revenue estimate as online shopping surges

* Royal Mail raises annual revenue estimate

* Shares up 7% at near two-year high

* H1 above initial expectations in many areas (Adds background on restructuring, labour dispute, shares)

Nov 19 (Reuters) – Royal Mail raised its full-year revenue outlook on Thursday, as it benefited from a surge in online shopping during coronavirus lockdowns, sending its shares up sharply.

The company’s updated scenario for the current fiscal year estimated revenue to be 380 million to 580 million pounds higher year-on-year and that its main UK operation could break even if it hits the top end of that forecast.

Shares in Royal Mail, Britain’s state-owned postal monopoly until its privatisation in 2013, climbed 7% to 304.5 pence, a near two-year high.

The company, in the midst of a long-running battle with unions over restructuring plans, in September had forecast revenues could rise 75-150 million pounds in the year to March 2021, assuming no further UK lockdowns.

Royal Mail has announced plans to hire 33,000 extra workers ahead of the traditional Christmas parcels and cards boom, but said on Thursday that tight new restrictions imposed across the country until at least the start of December left doubts over how the period would pan out for the business.

“Whilst the COVID-19 pandemic continues to present challenges for both Royal Mail in the UK and GLS (international parcels business), the first-half performance has been above our initial expectations in many areas,” Interim Executive Chairman Keith Williams said in a statement.

Royal Mail, balancing declining letter deliveries with surging parcels, said costs related to COVID-19, the increased parcel volumes and restructuring led to an adjusted operating loss of 129 million pounds in the UK.

Royal Mail pre-tax profit dropped to 17 million pounds ($22.51 million) for the six months ended Sept. 27 from 173 million pounds a year earlier.

Revenue jumped nearly 10% to 5.67 billion pounds as parcel volumes rose 33%, driven by the increase in e-commerce activity.

The UK first-half operating loss of 129 million pounds, compared with a profit of 75 million pounds a year earlier, as it faced 85 million pounds in COVID-19 costs and 147 million pounds for voluntary redundancies.

Royal Mail said the letters business alone lost 180 million pounds, with revenues for the first time ever falling below those for parcels. ($1 = 0.7551 pounds) (Reporting by Patrick Graham and Muvija M in Bengaluru; Editing by Ramakrishnan M. and Jane Merriman)