Royal Mail expects UK parcels and letters arm to fall to loss

Royal Mail said it expects its UK parcels and letters business to be loss-making next year as it feels the impact of coronavirus.

The delivery giant said it expects to meet its forecasts for the financial year ending March 31 but held off on a dividend payout and suspended guidance for the next year.

Royal Mail said it expects to report an adjusted operating profit between £300 million and £340 million for the current financial year.

However, the postal business warned that its outlook is marred by “significant uncertainty” due to the pandemic.

It expects its UK postal, international and letters business to make a loss in the next year, while profitability in its logistics arm is to be “significantly reduced”.

Royal Mail said its advertising mail has been “particularly impacted” by the virus in the past two weeks, as marketing campaigns have been delayed or cancelled.

Business mail volumes have been “resilient” but it expects that recent restrictions on individuals and businesses will have a negative impact on stamped mail.

It said parcel numbers from businesses to consumers have been “strong” during the past two weeks as more shoppers move online.

Restrictions on movement have also weakened volumes going through Post Offices in the past seven days.

Its GLS logistics division has seen “very challenging” conditions due to the virus, with key markets such as Italy, France and Spain particularly impacted.

Rico Back, group chief executive officer of Royal Mail, said: “We are focused on protecting our people, company and the communities we serve during this unprecedented crisis. We are putting the health and wellbeing of colleagues and customers first.

“At the same time, we are delivering the parcels and letters that are a lifeline for those who cannot leave their homes.

“We are entering a period of significant uncertainty in a good financial position. We have a strong balance sheet.

“We have substantial levels of liquidity and low levels of debt. We are taking immediate steps to further reduce our costs and protect our cash flow.”