Royal Mail still expects material loss despite booming parcel sales

Post by **TrueBlueTerrier** » 08 Sep 2020, 08:35

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Royal Mail PLC (LON:RMG) has said it still expects to make a “material loss” this year though revenues are on track to be better than expected thanks to higher parcel volumes because of the coronavirus pandemic lockdown.

The postal services group reported parcel volumes up 34% in the first five months of the year but letter volumes were down 28%, with 1.1bn fewer letters sent since the start of April this year compared to last.

Group revenue for the five-months to August 30, 2020, is up £139mln compared to last year, with parcels revenue up 33.1% but letters down 21.5%, though that was not as bad as was reported earlier in the year.

GLS, Royal Mail's overseas parcels business, enjoyed a 19% increase in volumes to drive revenue up 18.6% year on year.

In a statement ahead of the company’s annual shareholder meeting, which is being held online this year, Royal Mail said, however, that its letters legacy “has held back operational changes needed to adapt our business” and so the shift from handling more parcels and fewer letters resulted in costs increasing by £85mln.

Coronavirus measures themselves added another £75mln of costs, from such things as elevated levels of staff absence, social distancing and additional protective equipment.

For the full year, these two cost lines are expected to reach £260-280mln.

“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.

Janet Brum · Post by **Janet Brum** » 08 Sep 2020, 09:03

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The company's other recent challenges have included former boss Rico Back making a surprise exit from the business in May. Royal Mail is currently operating with an interim chairman and chief executive.

In its latest trading update, Royal Mail said: "We are failing to adapt our business to fundamentally lower letter volumes and are holding on to outdated working practices and a delivery structure that no longer meets customer needs."

It specified a number of practices it wanted to get reduce of get rid of, including sorting parcels by hand and workers signing in by hand.

Royal Mail also said it had yet to remove old letter-sorting machines, "unneeded when letter volumes have halved since 2004".

Deadly · Post by **Deadly** » 08 Sep 2020, 09:29

"First, our customers want to retain the 'one price goes anywhere' principle of the USO.

Second, they want more ways to send letters and parcels - whether it is online postage or parcel postboxes - and more frequent and convenient parcel deliveries. We want to look again at whether there is enough customer demand for a seven-day parcel service.

Third, they still want an affordable next-day letters service. This is especially important for businesses during the working week."

So reading between the lines I'd say seven day parcel delivery and Mon-Fri letter delivery is coming.

https://www.marketscreener.com/quote/st ... -31248494/

Sir Henry · Post by **Sir Henry** » 08 Sep 2020, 13:46

Hardly a next day letters service if they don't deliver Saturday and Sunday. Unless RM gouge them for the privilege.

Woody Guthrie · Post by **Woody Guthrie** » 08 Sep 2020, 14:06

Sir Henry wrote:Hardly a next day letters service if they don't deliver Saturday and Sunday. Unless RM gouge them for the privilege.

This is especially important for businesses during the working week."

For the rest, not so important I guess.

Deadly · Post by **Deadly** » 08 Sep 2020, 14:41

The statement seems to have impressed the stock market if not the employees, shares were up 40p at one point.

Celgar · Post by **Celgar** » 08 Sep 2020, 22:16

Sir Henry wrote:Hardly a next day letters service if they don't deliver Saturday and Sunday. Unless RM gouge them for the privilege.

Most businesses operate on the week and weekend basis. So they are not concerned about a delivery of letters on Saturdays as they are not open to receive or deal with them.

Celgar · Post by **Celgar** » 08 Sep 2020, 22:26

Deadly wrote:"First, our customers want to retain the 'one price goes anywhere' principle of the USO.

Second, they want more ways to send letters and parcels - whether it is online postage or parcel postboxes - and more frequent and convenient parcel deliveries. We want to look again at whether there is enough customer demand for a seven-day parcel service.

Third, they still want an affordable next-day letters service. This is especially important for businesses during the working week."

So reading between the lines I'd say seven day parcel delivery and Mon-Fri letter delivery is coming.

https://www.marketscreener.com/quote/st ... -31248494/

If RM get their three hubs set up and divert large parcels and most of the Tracked items to the LAT hub separate delivery operation then this would free up a lot of capacity in the existing network. This would cover moving the work currently done on Saturdays into the week. In addition we have the existing situation where the MCs deliver hardly any mail to the DOs on Tuesdays which is additional unused capacity. In short we could move to a five day operation across the board and close nearly everything down over the weekend which reduces overheads and cuts costs.
Don't get me wrong in that I am still against the idea of the three hubs and taking large parcels & Tracked away from the existing network. Its just that for the bosses at the top this seems the logical option plus they can shout they have given us ' the weekend'.