24th Jan 2014 15:20
LONDON (Alliance News) - Royal Mail PLC Friday reported a 2% increase in like-for-like revenues for the first nine months of its financial year driven by growth in its parcels revenues, but parcel revenue growth actually slowed in the third quarter which contains Christmas.
Like-for-like parcel revenues were up 8% over the nine months to end-December, driven by the new pricing structure Royal Mail introduced in April last year. However, the company had reported a 9% rise in parcels revenues in the first half of its financial year, meaning growth in its key business slowed in the third quarter.
In November, the company had warned that a previous threat of strike action had slowed its rate of business customer acquisitions in parcels since the end of the half year in September and caused switching of some volume to competitors in anticipation of the strike action. The strike didn't happen after the company reached a deal in principle with the Communications Workers Union on pay and conditions.
It had said in November that depending on the strength of the seasonal parcels volume growth in late November and December, that may result in Royal Mail reporting broadly unchanged parcel volumes but significant revenue growth for the nine months period.
Friday, it said parcel volumes were flat over the nine month period.
"We saw good growth in account parcel volumes, despite some customer reaction to possible industrial action, and Parcelforce Worldwide grew strongly. However, there were declines in consumer volumes, including large uneconomic items that exited the core network following the introduction of size-based pricing," it said in a statement.
It is charging more for large parcels that have to be delivered by van.
In recent weeks, retailers have reported a sharp increase in online sales around Christmas. While some of that was done via click-and-collect services, where shoppers buy online and then collect the goods from stores themselves, Royal Mail benefitted from the surge in online sales and resulting increase in parcels being sent out.
Royal Mail said it handled 115 million parcels in December, a like-for-like increase. However, it didn't give a comparative figure.
"We handled significantly more parcels than any other carrier in the UK parcel market," it said of the Christmas period.
Smaller rival UK Mail Group PLC earlier this month reported 15% growth in parcels volumes in the three months to end-December, although growth moderated from a year earlier. It reported 6% growth in overall revenues as it also grew letter volumes and revenues.
Parcels now account for 51% of Royal Mail group total revenues. They also account for 41% of the revenues of its UK Parcels, International and Letters unit, up from 38% in the first nine months of its last financial year.
Revenues and volumes in the company's letters business both fell, continuing a long-standing trend. It said like-for-like revenue was down 3% in the nine-month period, while addressed letter volumes were down 5%. The volume fall was better than the 6% decline reported for the first half of the financial year, thanks partly to a high level of energy company mailings in the third quarter, and the like-for-like revenue decline was better than the 4% decline in the half year.
The company, which only listed in the Autumn of 2013 in a high-profile privatisation, said it expects the trends, including the revenue and volume trends in the UK parcels business, to continue during the rest of the financial year and expects to deliver results "consistent with our key value drivers for the full year."
Costs in the first nine months of the year were "consistent with underlying performance in the first half," it added.
Royal Mail said it expects to report its full-year results May 22.
The company's shares were down 2.2% at 575.375 pence Friday afternoon.
By Steve McGrath; [email protected]; @SteveMcGrath1
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