Mail bonding: Royal Mail boon as letters market returns

royal mail_20The Covid lockdown has proved a godsend for Royal Mail, with the postal giant not only benefitting from the online shopping surge but also witnessing a resurgence in direct mail, business mail and even stamped mail as consumers fall back in love with the humble letter.

In an unscheduled move, Royal Mail has upgraded its revenue forecast for the second time in less than a month, reporting it now expects sales to be £900m higher than last year – at around £8.6bn – and, for the entire group, adjusted operating profits will hit around £700m, compared with £325m a year ago.

The cost of a major restructuring is also expected to come in below expectations, costing around £90m instead of an original estimate of £140m.

Less than a year ago, the company was warning that its UK business would fall deep into the red this year, while it also faced criticism that it had been too slow to react to the pandemic in light of a major crash in direct mail volumes.

Even so, parcels have remained in line with expectations, which remain at record levels; at its peak, Royal Mail carried 11.7 million parcels in one day, almost a third more than during the peak of the first national lockdown last spring and part of the 496 million parcels delivered over the last three months of 2020.

The company is estimated to have about 20% of the nationwide parcels market.

In a statement to the stock exchange yesterday, Royal Mail said: “Recent letter volume and revenue trends have been more robust than anticipated, with advertising, business and stamped mail all performing above our previous expectations. Growth in parcels in the UK has remained strong.”

The news sent the firm’s shares to their highest level since September 2018, up to 490½p; at the beginning of the first lockdown last spring shares had plummeted to 124p.

The update follows last week’s release of new figures which show direct mail and door-drops are continuing to strengthen their influence in the Covid world, cementing significant year on year increases in interaction, longevity and driving purchase over the past 12 months.

According to Jicmail’s Q4 results – gathered from a panel of 1,000 households – 8.4% of all advertising mail (including direct mail, door drops and business mail) drove traffic to advertiser websites during the period, while 5.0% prompted consumers to look up their account details. Building on Q3 numbers, both measures have grown by nearly 50% year on year.

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