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Royal Mail has warned it may have to cut back on postal services as increasing numbers of its staff take sick leave.
The company, which provides letter and parcel delivery services to 30m homes and businesses, said it had taken measures to limit contact in the workplace and with customers on postal rounds but that the coronavirus was taking a toll.
“In recent weeks, we have seen rising levels of sick absence as colleagues self-isolate or care for family members,” the company said. “We cannot rule out reductions to services as Covid-19 develops.”
Royal Mail said that stay-at-home restrictions had led to a drop in business at its Post Office branches and that it expected letter volumes to decline. However, parcel deliveries have been strong over the last two weeks, with the public buying more products online after shops had to close.
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The company said that in the last two weeks advertising mail has plummeted, especially in the travel sector, as companies delay or cancel marketing campaigns. Business mail has held up. International business has been affected by restrictions in certain countries, especially in and out of China, and a reduction in air freight capacity as airlines cut flights.
Royal Mail’s European business has also suffered, especially in Italy, Spain and France, which have been seriously affected by the coronavirus.
“We are focused on protecting our people, company and the communities we serve during this unprecedented crisis,” said Rico Back, the chief executive of Royal Mail. “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.”
Royal Mail also said it would scrap its final dividend to help shore up its finances and said its UK business would be “materially loss-making” this year. The company added it would no longer be giving financial guidance to the market.
“We are entering a period of significant uncertainty in a good financial position,” Back said. “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 cashflow.”
Royal Mail said it can sustain the current market conditions – it has in excess of £800m in cash and a £925m revolving credit facility. However, the company said the risk of breaching certain financial covenants will increase if current conditions continue into the final quarter of the year.
Royal Mail also said that its already-behind-schedule £1.8bn transformation plan to move away from letters and focus on parcel delivery – which is booming thanks to online shopping – would be further delayed. The plan has caused major tension with staff, who have threatened strike action over job security and employment terms and conditions.
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