Royal Mail: “Performance in line with expectations”
Royal Mail has reported that its performance in the first nine months of the financial year was in line with its expectations. In its trading update issued today (19 January) for the nine month up to 25 December 2016, group revenue was flat, while UKPIL revenue was down 2% with parcel revenue up 3% and total letter revenue declining by 5%.
The growth in revenue was largely driven by Royal Mail account parcels. Parcelforce Worldwide volumes declined by 1%.
Addressed letter volumes decreased by 6% (excluding the impact of political parties’ election mailings) – although Royal Mail said that “letters performance in the prior period benefitted from the one-off return of direct delivery volumes and a good performance over the peak period”.
Of course there is a general trend for a decline in letters, but Royal Mail said that it is also “seeing the impact of overall business uncertainty in the UK on letter volumes, in particular advertising and business letters”.
Commenting on the results, Moya Greene, Chief Executive Officer, Royal Mail plc, said: “Our postmen and women delivered a great service at Christmas, even better than last year, with 138m parcels handled in December alone. Our comprehensive planning, which started much earlier this year, enabled us to deliver this service for our customers right across the UK.
“Group revenue in the first nine months was in line with our expectations, with 9% revenue growth in GLS offsetting a 2% decline in UKPIL revenue. UK parcel revenue was up 3% with volumes up 2%. Total letter revenue was down 5% with addressed letter volumes, excluding elections, declining by 6%.
“Our cost avoidance programme is on track. We continue to target a reduction of up to 1% in underlying UKPIL operating costs before transformation costs in 2016-17.”
Today’s trading statement referenced the consultation process that the group has started with staff regarding the Royal Mail Pension Plan. Market analysts have emphasised that the pensions issue is an important factor in the performance of Royal Mail shares on the market.
The market was generally underwhelmed by Royal Mail’s statement and its shares fell by more than 4% in early trading.
