"Astonishing!" - Royal Mail set to double year-on-year profits amid e-commerce frenzy

Royal Mail’s “astonishing reversal of fortunes” after the online shopping surge during the pandemic means it expects to make an adjusted operating profit of £700m, more than double last year’s £325m.

In a pre-close announcement, the postal group said it would continue to focus on its international and B2C work, identified as key growth opportunities.

Its international subsidiary, GLS, is expected to grow revenue at around 12% between 2019/20 and 2024/25 and more than double its operating profit to Euros 500m.

Richard Hunter, head of markets at Interactive Investor, said growth had been partly driven by better-than-expected volumes in Royal Mail’s letter business and its restructuring charge is also likely to have been improved, now estimated at £90m, rather than the £140m originally envisaged.

Hunter said: “The astonishing reversal of fortunes at Royal Mail continues, as the momentum of bumper Christmas trading has spilled over into the new year.

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“Challenges remain, however, and the group will need to be alert.

“Competition is particularly fierce in the parcels business,” he said.

“It is not yet clear whether the current volumes are at a temporary peak, as customers have been driven to online shopping from their homes during the pandemic.

At the same time, the effect on business volumes after the return to some kind of normality is also difficult to gauge, while hefty ongoing investment will be required to maintain progress so far.

“Along the way, it has been nothing short of a rollercoaster ride for investors.”