Today the Royal Mail 2020 forecast to investors has been raised as their weakest division – letters has shown strong performance. As much of this would be advertising along with business and stamped mail, it could be an impact of the pandemic with more companies sending junk mail and could in part be impacted by businesses and consumers selling online and using letter post for smaller items.
Growth in parcels in the UK has remained strong but broadly in line with expectations.
Royal Mail are also nearing completion of the Royal Mail management restructuring programme announced in June 2020, the charge associated with this is now anticipated to be around £90 million compared to the original estimate of £140 million. Royal Mail say that this will deliver the targeted savings of £130 million annually, with around £15 million savings in the Royal Mail 2020 forecast impacting the current financial year FY2020-21.
GLS performance remains in line with prior expectations with the intriguing comment that a business update on GLS will be provided on the 30th of March. Surely they can’t be about to sell GLS and will just be a performance announcement? While we thought a sale a strong possibility a year ago, just about every courier company has benefited from the pandemic and across the board this has made them immensely more valuable assets. It’s not that we think Royal Mail wouldn’t flog GLS to appease shareholders, it’s just that we think it’s now worth so much money we don’t know who would have deep enough pockets to buy it at what must be it’s current record valuation.
Royal Mail say that if the current trading performance in Royal Mail continues for the remainder of March, they would expect Royal Mail revenue for FY2020-21 to be more than £900 million higher year on year. For the Group, adjusted operating profit for FY2020-21 is now expected to be around £700 million.
Royal Mail will issue a pre-close announcement on the 30th March and alongside the business update on GLS. This will be followed by an update on Royal Mail in the UK alongside FY2020-21 results on the 20th of May.