Royal Mail Issues Cautious Outlook

Royal Mail results show they achieved growth of 1% revenue with their domestic parcels; the growth was helped mainly by its European parcel business GLS. This counteracted the decrease in letters that are being sent which had a 1% decrease in revenue. European parcels business GLS saw its revenue rise 7% year-on-year, ahead of expectations to £1.65bn, while operating profit rose 6.4% to £115m. Volumes were up 8% year-on-year at GLS. Results from the past 12 months showed underlying revenue up 1% to £9.42bn, but pre-taxed profits were down by 35% to £421m compared to the same period last year. Nevertheless earnings per share were up 39% to 42.8p.

The company is now trying to expand their growth further by improving their efficiency. Moya Greene, the Royal Mail chief executive, said: “We have delivered operating profits in line with our expectations. Our continued focus on efficiency resulted in a better than expected UK cost performance, offsetting lower than anticipated UK parcel revenue. At the same time we have delivered a large number of innovations at pace as we transform our business.”Our trading environment remains challenging, but we are now poised to step up the pace of change to drive efficiency, growth and innovation, while maintaining a tight focus on costs.”

In the past year Royal Mail have lost some of its significant rivals including parcel carrier city link and the end-to-end delivery business however Royal Mail have stated that the parcel and letter market in the UK is still very competitive. Richard Hunter, head of equities at Hargreaves Lansdown said: “Royal Mail has posted numbers which indicate measured progress in a treacherous environment.

“Whilst the exit of both City Link and Whistl may have removed some of the competition, it also serves to underline how tough this sector can be. Meanwhile, the competitive threat of Amazon looms large, with Royal Mail recognising that there will be an impact to its business and, even ahead of this, there was a slight decline in revenues.”