Royal Mail sees 1% drop in revenues

Royal Mail has issued its latest trading update. Group revenue has increased by 1% while UK revenue has fallen by 1%.

Royal Mail’s European company GLS has “continued to perform well”.

Chief Executive Officer Moya Greene said in the trading update: “In what is traditionally a quieter trading period for the business, we saw no material change in overall trends. Group revenue was up 1% while in the UK revenue was down 1%. In Europe, GLS continued to perform well.

“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.”

Overall parcel volumes and revenue were up 2%, driven by the growth in import parcels and Royal Mail account parcels. There has also been an improving trend in the consumer and SME segment.

The national postal operator said: “As expected, Parcelforce Worldwide volume growth slowed to 2%, due to a very strong prior period.”

Royal Mail added: “ In international parcels, we continued to see the impact of high volumes of lower AUR import parcels, largely from China, but have started to see some positive impact from certain new initiatives. Higher AUR export volumes continue to be impacted by competition.”

Market analysis have said that the results were as expected, also speculating one what the future of Brexit may hold for the company.

Joshua Raymond, Market Analyst and FX Broker at XTB.com, said: “Royal Mail posted a 1% fall in UK revenues for the three months ending 23rd June in what it says continues to be a challenging environment. UK parcel revenue rose 2% but this growth was weighed down by a 3% fall in letter revenues in what is traditionally a quieter trading period for the firm. When you strip out certain one off impacts on letters such as the EU referendum, letter volumes actually fell 4%.

“Overall this trading update is broadly in line with market consensus and is unlikely to trigger a dramatic response from investors. The parcel industry remains highly challenging one, and Royal Mail must continue to focus on operational efficiencies to maintain a low cost base given the low inflationary environment. The effect of Brexit on consumer confidence is likely to have an impact on Royal Mail in the near term, and certainly parcel sales, which is something investors are watching carefully should guidance change in the near term.”

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