19th Jul 2016 10:33
LONDON (Alliance News) - Postal service and logistics operator Royal Mail PLC reported a continuation of past trends in the first quarter of its financial year, with parcels revenue continuing to rise but the secular decline in letters volumes also still in evidence.
In the three months to June 26, group revenue for the FTSE 100-listed company grew 1.0% year-on-year. Revenue in its UK parcels and letters business declined 1.0%, with parcel revenue rising 2.0% but letter revenue falling 3.0%.
"In what is traditionally a quieter trading period for the business, we saw no material change in overall trends," said Chief Executive Moya Greene.
"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," Greene added.
Royal Mail added it was monitoring the potential impact Brexit could have on letter and business-to-business parcel volumes but it retaining a focus on operational and financial efficiency in the business.
Parcels volumes grew 2.0% in the quarter, helped by growth in import and account parcels business and improving trends in the consumer and SME segments. Volume growth for the Parcelforce Worldwide business slowed against a tough year-before comparative.
Royal Mail said it has continued to see uptrading by customers in its business accounts arm to tracked services, improving the revenue mix in the unit and boosting its performance by complementing new contract wins.
For its international parcels arm, Royal Mail said it has continued to take a hit from high volumes of lower-margin import parcels, particularly from China, while export volumes continue to face pressure from competition.
Letters volumes were affected by a direct delivery volume boost in the quarter the prior year and an increase in mailings in the just-finished quarter by mailings associated with the UK's European Union referendum. Excluding those effects, letter volumes were down 4.0% on a like-for-like basis.
The fall in letter revenue reflected low inflation in the UK, continued trends in downtrading by customers and declines in higher-margin consumer, SME and export letters. Revenue derived from political parties' election mailings was similar year-on-year, as the increase around the EU referendum matched that provided by the 2015 General Election.
GLS, Royal Mail's pan-European logistics business, saw revenue grow 13% in the quarter, with volumes rising by the same amount. Trading for the unit was boosted by the timing of Easter and other public holidays in Europe. Royal Mail said GLS delivered revenue growth in all its markets.
Royal Mail shares were up 0.7% to 505.68 pence Tuesday.
By Sam Unsted; [email protected]; @SamUAtAlliance
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