(Alliance News) - Royal Mail PLC on Friday said it still expects to report a financial 2020 adjusted operating profit but its UK Parcels, International & Letters business is likely to be "materially loss making" in financial 2021.
Shares Royal Mail were down 8.0% at 148.86 pence in London in morning trading.
For its financial year ending March 2020, Royal Mail said it still expects a between GBP300 million and GBP340 million adjusted operating profit before IFRS 16, as forecast in May 2019 when it published its financial 2019 result.
However, while there is "significant uncertainty going forward", UKPIL is likely to post a loss for financial 2021 while profitability for Royal Mail's other main business, General Logistics Systems, will be "significantly reduced".
As its UKPIL transformation is currently delayed, and in combination with Covid-19 uncertainty, Royal Mail no longer expects to meet its Journey 2024 transformation plan targets on schedule. It has also suspended guidance for financial 2021 and beyond.
Chief Executive Officer Rico Back said: "We are focused on protecting our people, company and the communities we serve during this unprecedented crisis. We are putting the health and wellbeing of colleagues and customers first. At the same time, we are delivering the parcels and letters that are a lifeline for those who cannot leave their homes.
"We are entering a period of significant uncertainty in a good financial position. We have a strong balance sheet. We have substantial levels of liquidity and low levels of debt. We are taking immediate steps to further reduce our costs and protect our cash flow."
For UKPIL, advertising mail has been particularly hurt by the pandemic, with marketing campaigns delayed or cancelled. Parcels volumes have been strong over the past two weeks with more people shopping online, but volumes through the Post Office have fallen in the past seven days due to movement restrictions.
GLS also has been hurt by Covid-19, particularly in Italy, France and Spain, where movement is most restricted.
"We are reviewing the timing and phasing of the group's investment programme. We are reviewing all capital expenditure, whilst being careful not to compromise the long-term prospects of the business. We are taking significant action to contain all costs and preserve cash," Royal Mail said.
At present, Royal Mail has more than GBP800 million in cash as well as a GBP925 million revolving credit facility.
It is not recommending a final dividend for financial 2020.
Stuart Simpson, chief financial officer and chief operating officer, will hand over UK operational responsibilities to Achim Dunnwald at the start of April. Dunnwald will become COO while Simpson will focus on his role as CFO.
"Achim is ideally placed to lead the UK operation, given his leadership role mapping out our Journey 2024 strategy," said Royal Mail.
Royal Mail had intended it publish its annual results on May 21 but now intends to defer them in response to UK Financial Conduct Authority guidance.
By Anna Farley; annafarley@alliancenews.com
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