Financial News

  • 23 July 2014, 10:16

Royal Mail Warns Of Lower Parcel Revenues

Royal Mail has warned of a hit to its full-year revenue expectations because of growing competition for parcel deliveries.

In its first quarter results statement, the postal operator said that while total revenues had risen 2% - thanks to a 3% increase in cash from letters - UK Parcels revenue fell 1%.

It blamed growth among rivals for the performance and said it would have to rely on cost control measures and letters sales to meet full-year expectations.

The revenue growth from letters was put down to stamp price increases.

Letter volumes declined by 3%.

Its share price fell by 4% in early trading on the FTSE 100 in the wake of the trading update - taking the Group's value to its lowest level since its highly controversial privatisation last year.

Chief executive Moya Greene said: "In the first three months of our financial year we have delivered low single digit revenue growth in line with our strategy.

"Trading has been characterised by a good performance in letters, with the decline in addressed letter volumes better than our expected range, but a weaker than expected performance in UK parcels, largely driven by the intensifying competitive environment in the account, consumer/SME and export channels.

"On costs, performance is better than expected. Given the increasing challenges we are facing in the UK parcels market, our parcels revenue for the year is likely to be lower than we had anticipated.

"However, through cost control measures and with continued good letters performance we expect to be able to offset the impact on profit such that our overall performance would remain in line with our expectations for the full year.

"Our parcels revenue will be dependent on our performance in the second half, which includes the Christmas trading period, and on no further weakening in our addressable UK parcels market."

The results were released 24 hours before Royal Mail's AGM and four days after it warned it faces a possible fine in France for anti-competitive behaviour.

Ms Greene is now able to firmly focus on the day-to-day business following the company's flotation last autumn.

A critical report by MPs earlier this month prompted the Government to announce a review of how state assets are sold in future amid accusations the listing did not deliver taxpayer value.

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