StockMarketWire.com - Royal Mail upgraded its annual revenue expectations as the Covid-19 crisis drove a spike in demand for parcels, but warned that poor letter volumes and increased costs meant it would still post a 'material' loss.

Revenue for the year through March 2021 was now expected to be £75m-to-£150m higher on-year.

At the same time, however, the net cost of mix change from letters to parcels was now seen at £140m-to-£160m.

In the five months through August, parcel volumes had jumped 34% but addressed letter volumes had slumped 28%.

Total revenue for the five months was up £139m.

'The strong growth in parcel volumes is being driven by B2C and e-commerce,' the company said in an AGM trading update.

'Whilst this has driven better-than-expected revenues, as discussed previously, our legacy in letters has held back operational changes needed to adapt our business to a market that has fewer letters and more parcels,' it added.

'As a result, the mix shift from handling more parcels and fewer letters increased costs in the period by £85m.'

In addition, costs related to Covid-19, associated with elevated absence, social distancing, additional protective equipment and other costs, were £75m in the first five months.

'We continue to expect Royal Mail to make a material loss this financial year 2020-21 and will not become profitable without substantial business change,' the company said.




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