Royal Mail festive parcel volumes up 4% in “highly competitive” market

Royal Mail said today that it saw an improvement in its parcel business during the third quarter, with Christmas volumes up 4% year-on-year. However, the company said its challenges continued from the “highly competitive” UK parcels market, during a season when rivals City Link went into administration.

The UK universal service provider saw a 1% decline in its parcel revenue in the first half of the year, but today’s trading update showed the first nine months of the year matching parcel revenue from the same period last year, with volumes up 3%.

Parcel volumes benefited from growth in import parcels, and from initiatives launched earlier in the year targeting account customers in new market sectors, along with the expansion of the service at the weekend.

Royal Mail’s express-parcels business Parcelforce Worldwide saw its volumes up 10% year-on-year, but the company said its pricing has continued to be pressured by high levels of competition.

Moya Greene, the Royal Mail chief executive, said this year’s festive season saw one of the highest ever quality of service performances for parcel delivery.

“We started to plan for Christmas in April, putting investment behind extra sorting capacity with 10 temporary hubs and training around 19,000 extra people,” she explained.

“As a result, Royal Mail was able to provide customers with reliability, flexibility and high quality delivery at a competitive price.

“As the UK’s biggest parcels carrier we are proud that so many people and businesses the length and breadth of the country trusted us to deliver their Christmas. We handled around 120m parcels in the month of December alone, 4% more than last year.”

Letters

Today’s results update revealed that UK addressed letter volumes at Royal Mail fell 3% year-on-year in the nine months, but revenue remained level compared to the same period last year, in the absence of election mail volumes.

Greene said letters performed in line with expectations.

The company said the 3% volume decline was better than the 4-6% per year decline forecast, and was helped by an improved UK economy.

For Royal Mail’s UK business as a whole, revenue and underlying operating costs were flat compared to last year’s first three quarters.

GLS, Royal Mail’s European parcel business, saw both its volumes and revenue up 8% year-on-year in the nine months, with Greene stating that it had “performed well”.

For the Royal Mail Group as a whole, the nine months saw revenue up 1% year-on-year. Group results have been boosted by a £111m windfall from the sale of its London Paddington site.

“We are continuing to bear down on costs and expect that underlying operating costs before transformation costs in UK Parcels, International and Letters will be flat for the full year. Given our performance over the Christmas period, we are confident that the outcome for the full year will be in line with our expectations,” Greene concluded.