A trading update from Royal Mail has shown that revenues have remained flat in the three months to June 28th.
In June, the UK government sold half of its 30 per cent stake in the 500 year-old company, raising £750 million for the Exchequer. The latest trading report has been released ahead of the final sell-off of the government's remaining 15 per cent stake.
The update indicated that the volume of letters has continued to decline – they dropped by five per cent during the quarter and revenue was down four per cent. These figures were all in-line with forecasts.
Meanwhile, parcel volumes for the UK were up three per cent and rose by nine per cent in Europe. This led to revenue increases of two and eight per cent respectively.
In a statement, Royal Mail said its outlook for letter and parcel volumes remained unchanged from the information that was published in its annual May results.
The May report also indicated a six per cent increase in full-year profits compared to the previous year, bringing the total to £740 million.
The company noted that it would continue to focus on driving costs down this year and added that its performance would be weighted to the second half of the year, as its annual results are largely dependent on the busy Christmas period.
GLS, Royal Mail's European parcel deliveries services achieved better-than-expected performance. This was largely due to strong growth in Germany and Italy.
However, the company also says it is monitoring market reactions to changes in the German minimum wage legislation – profit margins are expected to be affected by around 50 to 100 basis points this year.
Commenting on the results, Royal Mail chief executive Moya Greene said that the market trading environment remained challenging. She explained that the company was working hard to drive growth, efficiency and innovation.
Earlier this the year, Royal Mail rival Whistl withdrew from the direct delivery letters market. This removed the only source of national competition for direct delivery of letters. Regulator Ofcom has said that Royal Mail would be reviewed to "ensure regulation remains appropriate and sufficient to secure the universal postal service".
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.