Royal Mail Plc (RMG.L), a provider of postal and delivery services in the UK, said it has delivered low single digit revenue growth for the first quarter, in line with its strategy. According to the company, trading has been characterized by a good performance in letters, with the decrease in addressed letter volumes better than its expected range, but a weaker than expected performance in UK parcels, driven mainly by the intensifying competitive environment in the account, consumer/SME and export channels. GLS continues to perform well in Europe. On costs, performance is better than anticipated.
Royal Mail's Chief Executive stated, "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."
Looking ahead, the firm still expects UK addressed letter market volumes, excluding elections, to decline by 4-6% per annum. For 2014-15, it continues to anticipate to be at the better end of this range. The UK parcels market is expected to continue to be highly competitive which would have a downward impact on average unit revenues.
Given the increasing challenges the company is facing in the UK parcels market, its parcels revenue for the year is likely to be lower than its earlier projection.
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