Parcels drive revenue growth at Royal Mail

Royal Mail boss Moya Greene said today she was confident of hitting the year’s financial targets, thanks to growth in the parcels business. The newly-privatised UK universal postal service provider revealed results today from the first nine months of its financial year, up to 29 December.

Group revenue was up 2% year-on-year, on a like-for-like basis (adjusting for currency and number of working days), with growth driven by parcels and by the European express parcels subsidiary GLS.

Greene said today that Christmas had given a boost to her company after its IPO last October, and that along with parcels growth, GLS’s progress in Europe was providing growth opportunities.

“Our financial performance to date is in line with our expectations and gives us confidence that we will deliver against our key value drivers for the full year,” she said.

Parcels driving growth

Royal Mail said its parcel volumes were actually flat compared to last year, after price rises, with some customers concerned about potential strike action that did not materialize last year, and with consumers responding to a new size-based pricing system.

However, parcel revenues grew 8% on a like-for-like basis in the nine months, with some growth in business parcels, and with large “uneconomic” parcels discouraged by new size-based pricing.

Parcels continue to account for a growing portion of Royal Mail’s overall business as the letters business continues to decline. Parcels now account for 41% of Royal Mail’s domestic business, compared to 38% in the same period in 2012.

UK letters revenue fell 3% during the first nine months of the fiscal year, while addressed letter volumes overall fell 5% on a like-for-like basis.

Royal Mail’s European business, GLS, saw its revenue up 6% year-on-year, with volumes up 5%. The company said good progress was being made in Italy and emerging European markets, and that its turnaround in France was continuing. The competitive German market, however, was continuing to face pressure on margins from increasing subcontractor rates.

Christmas boost

Christmas pushed up parcel volumes in December to 115m items, peaking at more than 10m on the busiest day.

The festive period also helped stamped mail volumes overall thanks to the sending of greetings cards.

“People continue to send seasonal good wishes, with Christmas cards underpinning a like-for-like increase in our December stamped mail volumes,” said Greene, “We remained the nation’s number one parcel delivery company, handling 115 million parcels in the month of December alone. That’s significantly more than any other carrier in the UK parcel market.”

Mount Pleasant

Royal Mail’s Mount Pleasant processing site is to be downsized

In a separate announcement yesterday, Royal Mail revealed that the Mayor of London has decided to take over its application process seeking planning permission to redevelop part of its Mount Pleasant site in central London.

The highly-valuable site had been potentially for sale as a whole, as Royal Mail adjusts its network to falling mail volumes.

Mount Pleasant was among potential property sales that caused some controversy last year as critics suggested its value had not been fully included in the company’s valuation ahead of floating on the London Stock Exchange last year.

However, it now appears that only half of the site will be sold once planning permission for property development is granted. The London Mayor’s plan is to create 700 new homes, including affordable housing to help with the city’s spiraling property prices.

Royal Mail said today that Mount Pleasant will remain “at the heart” of its operations in London, processing mail posted in the capital going to residents of the City and the West End. Some 3,200 staff are currently employed there.

The Mayor, Boris Johnson, said hopes were for the planning application to be considered in the summer.

Johnson said: “London is growing at an unprecedented rate and it is absolutely vital that we get on with the important work of building thousands of new homes as quickly as we can. By taking over this application it should be possible to speed up the decision making process. My team will be working closely with the local authorities and Royal Mail without further delay.”