Royal Mail reports 1% drop in UK revenues

Royal Mail has issued a trading update for the three months ended 26 June, which shows a 1% increase in group revenue but a 1% decrease in UK revenue. In Europe, added Royal Mail, the parcel delivery arm General Logistics Systems (GLS) “continued to perform well”.

Moya Greene, Royal Mail’s Chief Executive Officer, was quoted on the Trading Update as saying: “In what is traditionally a quieter trading period for the business, we saw no material change in overall trends. Group revenue was up 1% while in the UK revenue was down 1%. In Europe, GLS continued to perform well.

“We continue to face the challenges caused by the current low inflationary environment and our highly competitive markets. We remain, however, very focussed on operational and financial efficiency and delivering a high quality service for all our customers.”

Parcel volumes and revenue were both up 2%, with growth driven by import parcels and Royal Mail account parcels, as well as an improving trend in the consumer/SME segment.

“As expected,” said Royal Mail, “Parcelforce Worldwide volume growth slowed to 2%, due to a very strong prior period.”

Royal Mail added: “In international parcels, we continued to see the impact of high volumes of lower AUR import parcels, largely from China, but have started to see some positive impact from certain new initiatives. Higher AUR export volumes continue to be impacted by competition.”

Responding to the Trading Update, market analysts said that the results were “as expected”, and they also speculated on what the future impact of Brexit might be for Royal Mail.

Joshua Raymond, Market Analyst and FX Broker at XTB.com, told Post&Parcel: “Royal Mail posted a 1% fall in UK revenues for the three months ending 23rd June in what it says continues to be a challenging environment. UK parcel revenue rose 2% but this growth was weighed down by a 3% fall in letter revenues in what is traditionally a quieter trading period for the firm. When you strip out certain one off impacts on letters such as the EU referendum, letter volumes actually fell 4%.

“Overall this trading update is broadly in line with market consensus and is unlikely to trigger a dramatic response from investors. The parcel industry remains highly challenging one, and Royal Mail must continue to focus on operational efficiencies to maintain a low cost base given the low inflationary environment. The effect of Brexit on consumer confidence is likely to have an impact on Royal Mail in the near term, and certainly parcel sales, which is something investors are watching carefully should guidance change in the near term.”