29th Jan 2019 08:50
LONDON (Alliance News) - Shares in postal and logistics firm Royal Mail PLC were under pressure Tuesday after nine-month revenue dipped amid weaker-than-expected performance in its letters business, despite strong growth from its parcels operations.
Shares in Royal Mail were 8.2% lower at 276.60 pence on Tuesday.
For the nine months ended December 23, revenue for the UK Parcels, International & Letters business fell 1% on an underlying basis. This was after revenue from letter delivery fell 6%, offsetting a 6% rise in parcel revenue. Letter volume fell 8% with parcel volumes up 6%.
The General Logistics Systems subsidiary saw revenue rise 8% and volumes expand by 5%.
Royal Mail Chief Executive Officer Rico Back said the FTSE 250-listed firm had a "busy" Christmas period in which it delivered 164 million parcels, up 10% on the year prior.
Overall, the firm explained its recent trading was "broadly in line with our expectations". Royal Mail confirmed it expects full-year operating profit before transformation costs of between GBP500 million and GBP530 million.
"In the UK, our parcels business continued to perform well, with volumes and revenue in the nine months both up 6%," Back added. "Addressed letter volumes, excluding the impact of elections, were down 8%, with total letter revenue down 6%, largely reflecting the continuing impact of GDPR and a relatively strong prior-year comparative period."
"GLS delivered another good performance with revenue up 13% including acquisitions," Back added. "Whilst GLS continues to see cost pressures, we confirm that we are targeting adjusted operating profit margins of over 6% for the full year. We will continue to focus on margin protection and as a result we expect to see a slowing in the rate of GLS volume growth next year."
For the year ending March, Royal Mail said it remained "on target" to deliver GBP100 million in avoided costs.
"Due to our letters performance to date, we expect addressed letter volume declines, excluding elections, to be in the range of 7-8% for 2018-19," CEO Back continued. "While the rate of e-substitution remains in line with our expectations, business uncertainty is impacting letter volumes. As a result, addressed letter volume declines, excluding elections, are likely to be outside our forecast medium-term range next year. Otherwise, we are reconfirming the outlook and other guidance for 2018-19 provided in our half-year results."
Related Shares:
RMG.L