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Royal Mail letter revenues fall in 'challenging' trading Royal Mail letter revenues fall in 'challenging' trading
(about 2 hours later)
Royal Mail failed to increase sales in the first three months of its financial year as letter revenues fell amid “challenging” trading conditions.Royal Mail failed to increase sales in the first three months of its financial year as letter revenues fell amid “challenging” trading conditions.
It said the number of letters delivered was down 5% and sales dropped 4% in the quarter to 28 June in an environment in which the use of email continues to eat into the traditional letter market. This figure excludes the impact of election mailings.It said the number of letters delivered was down 5% and sales dropped 4% in the quarter to 28 June in an environment in which the use of email continues to eat into the traditional letter market. This figure excludes the impact of election mailings.
But at its parcels unit sales by volume rose 3% and revenues were up 2% in the period, as recent cost-cutting and other initiatives took effect.But at its parcels unit sales by volume rose 3% and revenues were up 2% in the period, as recent cost-cutting and other initiatives took effect.
Related: Ofcom to investigate Royal Mail dominanceRelated: Ofcom to investigate Royal Mail dominance
Shares in Royal Mail fell sharply on Friday after the regulator, Ofcom, confirmed the scope of a “fundamental review” of the firm’s operations that could see it impose a cap on prices.Shares in Royal Mail fell sharply on Friday after the regulator, Ofcom, confirmed the scope of a “fundamental review” of the firm’s operations that could see it impose a cap on prices.
The group said the outlook for its letters and parcels businesses for the full year remained unchanged, as it continued to clamp down on costs.The group said the outlook for its letters and parcels businesses for the full year remained unchanged, as it continued to clamp down on costs.
It said the group’s annual performance would be heavily dependent on Christmas, as usual.It said the group’s annual performance would be heavily dependent on Christmas, as usual.
Its international parcels business, GLS, enjoyed a better than expected performance in the first quarter, with volumes rising 9% and sales up 8%, due to good trading in Italy and Germany.Its international parcels business, GLS, enjoyed a better than expected performance in the first quarter, with volumes rising 9% and sales up 8%, due to good trading in Italy and Germany.
Royal Mail’s chief executive, Moya Greene, said: “We have benefited from the parcel initiatives that took effect in the second half of last year and a good performance from GLS.Royal Mail’s chief executive, Moya Greene, said: “We have benefited from the parcel initiatives that took effect in the second half of last year and a good performance from GLS.
“Our trading environment remains challenging and we are stepping up the pace of change to drive efficiency, growth and innovation, while maintaining a tight focus on costs.”“Our trading environment remains challenging and we are stepping up the pace of change to drive efficiency, growth and innovation, while maintaining a tight focus on costs.”
Brokers at Bank of America Merrill Lynch said trading was broadly in line with expectations with “mail performing slightly below expectations and with the GLS and parcels’ divisions performing slightly ahead”.Brokers at Bank of America Merrill Lynch said trading was broadly in line with expectations with “mail performing slightly below expectations and with the GLS and parcels’ divisions performing slightly ahead”.
Ofcom has said its inquiry will look at whether current regulation secures “the efficient and financially sustainable provision” of the country’s universal postal serviceOfcom has said its inquiry will look at whether current regulation secures “the efficient and financially sustainable provision” of the country’s universal postal service
, which is Royal Mail’s commitment to deliver to all parts of the UK at a flat rate, six days a week., which is Royal Mail’s commitment to deliver to all parts of the UK at a flat rate, six days a week.
Related: City Link’s army of self-employed workers count cost of business failureRelated: City Link’s army of self-employed workers count cost of business failure
The watchdog, which first said it would look at this area last month, has become concerned at the weakening of competition in parts of the letters and parcels markets.The watchdog, which first said it would look at this area last month, has become concerned at the weakening of competition in parts of the letters and parcels markets.
The letter delivery arm of Whistl and the parcel firm City Link have both folded in the last seven months. The collapse at Whistl – formerly known as TNT – left Royal Mail with no national competitor in the letters market. The letter delivery arm of Whistl and the parcel firm City Link have both folded in the last seven months. The collapse at Whistl – formerly known as TNT – left Royal Mail with no national competitor in this market.
Ofcom said it would also look at the firm’s position in the parcels market “and assess the company’s potential ability to set wholesale prices in a way that might harm competition”. Ofcom said it would also look at the firm’s position in the letters market “and assess the company’s potential ability to set wholesale prices in a way that might harm competition”.
The regulator has said it may roll back some of the commercial flexibility it granted Royal Mail in 2012, including the ability to raise its prices, as the business has strengthened over the last three years.The regulator has said it may roll back some of the commercial flexibility it granted Royal Mail in 2012, including the ability to raise its prices, as the business has strengthened over the last three years.
Royal Mail said last week it would continue to participate fully in Ofcom’s review. It is expected to be completed and any revised regulations put in place in 2016.Royal Mail said last week it would continue to participate fully in Ofcom’s review. It is expected to be completed and any revised regulations put in place in 2016.