Royal Mail plc (LON: RMG) said on Thursday that its full-year operating profit on an adjusted basis is expected to come in well over £500 million. The company attributed its hawkish forecast for fiscal 2021 to the ongoing Coronavirus pandemic that pushed the British government into imposing another national lockdown. Royal Mail said:
“Trading over the third quarter and into January was stronger than anticipated, primarily driven by the reintroduction of nationwide COVID-19 restrictions.”
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Royal Mail shares jumped close to 10% in premarket trading on Thursday but lost nearly half of the intraday gain on market open. The stock is now trading at a per-share price of 451 pence versus a low of 125 pence per share in April 2020.
Royal Mail says trading remained upbeat during the Christmas period
Royal Mail said that trading remained upbeat during the Christmas period. The COVID-19 restrictions, it added, helped boost its financial performance in the first three quarters of the current year as people switched to online shopping.
In its earlier guidance, the courier company had expected its revenue in fiscal 2021 to fall in the range of £274.86 million to £419.53 million. On Thursday, it expressed confidence that its full-year revenue will beat its estimate by a significant margin.
Higher parcel volumes, as per the postal service, is likely to result in higher handling costs in the upcoming months. In the nine months that concluded on 27th December, Royal Mail reported £9.31 billion of revenue that represents a 14% annualised growth. The London-based firm handled 496 million parcels in the fiscal third quarter, resulting in a 20% increase in revenue.
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Royal Mail expanded its workforce to boost efficiency of its services
Royal Mail also said on Thursday that the ongoing health emergency fuelled parcel volumes in recent months but also resulted in an increased absence of staff that, at times, weighed on the quality of its services.
Royal Mail hired 33 thousand flexible workers to boost efficiency during the Christmas period. Ten thousand of these, the British multinational added, have been retained to streamline services in the upcoming months. In an announcement in January, Royal Mail named Simon Thompson as the new CEO of its UK business.
Royal Mail performed largely upbeat in the stock market last year with an annual gain of more than 45%. At the time of writing, it is valued at £4.57 billion and has a price to earnings ratio of 207.83.
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