UK factory output and orders rise but exports lag – business live

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Profits at Royal Mail have soared, as the pandemic drove a surge in demand for parcel deliveries from households during the lockdown.

But with uncertainty rife, the company has held back from providing a forecast for the current year, with parcel volumes dipping slightly last month compared to the first lockdown in April 2020.

After an extremely busy time for Britain’s postmen and women, Royal Mail has reported that pretax profits jumped to £726m in the 12 months to the end of March, up from £180m the previous year.

Adjusted operating profit more than doubled too, jumping to £702m from £325m.

It was driven by a 16% jump in revenues, in the 12 months to the end of March — driven mainly by strong parcel growth at both Royal Mail and its logistics firm GLS.

Indeed, revenue from parcel deliveries has surpassed letters for the first time last year. Royal Mail parcels revenue jumped by 38.7%, lifted by the boom in e-commerce shopping, while letters revenues declined by 12.5%.

But the pandemic also drove up costs, with Royal Mail’s operating costs up 9.2%.

And in April, parcel volumes dipped as the UK’s lockdown measures eased, and more shops reopened:

April 2021 trading: Royal Mail revenue up 24.1%, GLS up 22.3% year on year. Royal Mail parcel volumes down 2% and addressed letters (excluding elections) volume up 25%. Parcel volume growth at GLS remained strong until mid-April, with a subsequent slowdown given the high volumes observed last year.

Chairman Keith Williams explains how the pandemic has change the business:

Parcels now represent 72% of Group revenue. The pandemic has accelerated trends we have been seeing for years in our markets. Parcels, rather than letters, provided Royal Mail with the majority of its revenue for the first time in its five-century history.

Similarly, in GLS over half of our volume came from B2C, while only five years ago two-thirds came from B2B. GLS has managed this shift successfully, delivering its highest margin in thirteen years.

But, Williams also warns that a “number of uncertainties” could influence volumes and costs in the next year, so it is difficult to provide specific guidance for 2021-22 for Royal Mail.

He says the results are “well above initial expectations”…

However, we incurred significant additional costs associated with COVID-19 across Royal Mail and GLS.

In the UK, we also incurred additional costs associated with delivering more parcels and fewer letters and our UK management restructure.

Also coming up today,

After a chaotic trading yesterday, the crypto currency markets are looking calmer today. Bitcoin, which crashed 30% at one stage to $30,000, has now clawed back to nearly $40,000.

Bitcoin recovered after Ark Investment Management CEO Cathie Wood, who has invested in several crypto-related companies, said that Ark still held a $500,000 price target on Bitcoin.

She told Bloomberg TV.

“We go through soul-searching times like this and scrape the models and, yes, our conviction is just as high,.

I think we’re in a capitulation phase. That’s a really great time to buy, no matter what the asset is.”

Elon Musk, whose recent criticism of bitcoin’s energy use contributed to recent losses, also implied that ‘diamond handed’ Tesla won’t be selling.

But other crypto assets are still under pressure – ether is down 12% over the last 24 hours – as the sector absorbs yesterday’s turmoil.

European markets are set to rally this morning, recovering some of their losses yesterday when a fresh bout of inflation angst hit stocks.

In the transport world, UK railways are going through their biggest shake-up since the 1990s, with a long-awaited overhaul being published by the government today.

Great British Railways will end the franchise system introduced a quarter of a century ago; private companies will still run services, but under a management contract, similar to the system in place on the London Overground.

Our transport correspondent Gwyn Topham explains:

The rail industry will be simplified but still substantially privatised as a rebranded Great British Railways, the government will pledge when it publishes long-awaited overhaul on Thursday.

A white paper will place control of rail infrastructure and services under the new arm’s-length public body, with franchises replaced by contracts that will incentivise private firms on punctuality and efficiency rather than raising revenue.

Great British Railways will run and plan the network, as well as providing online tickets, information and compensation for passengers nationwide.

It will streamline and simplify fares, including extending contactless and pay-as-you-go systems to more parts of the country.

The agenda

• 11am BST: CBI industrial trends survey for May
• 1.30pm BST: US weekly jobless figures