21st Jul 2015 06:11
LONDON (Alliance News) - Royal Mail PLC on Tuesday said its group revenue was flat in the first quarter of its current financial year, with a good performance in its parcels and logistics businesses but weaker revenue from its letters business.
The FTSE 100 postal service operator said its group revenue for the three months to June 28 was flat. Royal Mail said revenue in its UKPIL division, which covers its UK parcels and letters delivery business, was down by 2%, as revenue in its UK parcels arm rose by 2% but revenue from its letters business fell by 4%. UK parcels volume rose by 3% in the quarter, while letters volume fell 5%.
Revenue in its GLS pan-European logistics business was up by 8%, however, on the back of 9% volume growth.
Royal Mail said its outlook remains unchanged for the full year and said its performance will be weighted to the second half, with a dependence on the important Christmas trading period.
"In the first three months of our financial year we have seen a continuation of the overall market trends we saw last year. We have benefited from the parcel initiatives that took effect in the second half of last year and a good performance from GLS. Our trading environment remains challenging and we are stepping up the pace of change to drive efficiency, growth and innovation, while maintaining a tight focus on costs," said Moya Greene, Royal Mail's chief executive.
The trading update from the postal service operator comes after Ofcom, the UK media and communications regulator, last week outlined the scope of its review into the regulation of Royal Mail, including whether any price controls should be imposed on the company given the lessening of competition in the postal services market.
Ofcom said in June that it had widened its review of the regulation of Royal Mail in light of the decision by competitor Whistl Ltd to halt its own direct delivery services in the UK. It said at the time that it would look at whether the commercial flexibility Royal Mail was given following the last regulatory review in 2012 was still appropriate and whether any pricing controls should be imposed.
The publication of the scope of the review, issued on Friday, confirmed that this remains on the table as an option, with Ofcom saying it will examine whether Royal Mail's wholesale costs and retail prices are affordable and sufficient to cover the costs of the universal service and whether the company's commercial flexibility remains appropriate within the changing market, including whether wholesale or retail charge controls may be appropriate.
The review also will examine whether any changes to the current postal regulatory framework could be appropriate in order to maintain the universal postal services and will study how to ensure Royal Mail continues to become more efficient given the absence of any significant end-to-end competition for the letters market.
Ofcom expects to complete its work and to have any revised regulatory framework put in place in 2016.
By Sam Unsted; [email protected]; @SamUAtAlliance
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