Royal Mail set to reveal bumper profits from Covid lockdowns

Royal Mail is expected to reveal a doubling of profits to more than £700 million next week, as one of the big winners from the Covid-19 crisis.

It saw a fall in business when the pandemic first hit, but with the need for PPE and a shift to online shopping – alongside a renaissance in letter writing – its fortunes quickly changed.

On Thursday bosses will unveil full-year results to show just how good the year has been, including a previously announced resumption of a dividend to investors.

They had to miss out initially when Covid first struck but new boss Simon Thompson will announce a 10p-a-share payout and lay out his plans for future payments to investors.

The former state-owned operator had struggled in recent years, with declining numbers of customers using the universal service.

But with Covid-19 forcing most people to stay at home and turn to online shopping in record numbers, Royal Mail started to reap the benefits.

Analysts now predict operating profits will more than double from £325 million to £704 million and revenues will grow around 16% from £10.8 billion to £12.6 billion.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Royal Mail is expected to deliver some bumper results as it continues to capitalise on the e-commerce boom.

“Momentum has snowballed as the group increased its capacity for parcel deliveries after a huge upswing in demand left the domestic mail system creaking in December.

“A renaissance in letter writing was an added bonus after declines last year, giving the humble post box a new lease of life.

“But after years of under-investment the group’s UK business is still not home and dry and we should find out just how much more capital expenditure will be needed to keep up with demand.”

Investors will also be keen to hear from Mr Thompson – who joined from the Government’s Test and Trace service in January – on his plans for Royal Mail’s UK division in a strategic update.

The boss of Royal Mail’s logistics business GLS outlined his plans in March, including a greater focus on international and business-to-customer as key growth opportunities.

Many will want to hear whether Mr Thompson believes the solid momentum this year can be maintained or whether significant further investment will be required.

Staff and unions will also want to know what the future looks like, although relations are in a better shape between managers and workers, after a new pay deal was agreed in December.