European business continues to fuel Royal Mail

Royal Mail’s European parcels division remained the business's driving force in the nine months ended 24 December 2017, while its UK letter volumes and turnover continued to dwindle.

GLS saw both its volume and turnover grow by 10% in the period, against a group revenue increase of just 2%.

In a trading update, Royal Mail said growth was particularly strong in Italy, Denmark and Eastern Europe, but warned that cost pressures in some European and US labour markets could impact the division’s full year margins.

On the UKPIL side, parcel volume grew by 6% year-on-year in the nine months, as did the number of parcels it handled in December, reaching a record 149 million.

Turnover from UKPIL parcels grew by 4%. The business said 1% of this growth came from international parcels off the back of a new cross-border initiative, in which Royal Mail processes and handles customs requirements for parcels flown into Heathrow from Asia and sends them on to mainland Europe.

The business also attributed 2% of the 6% volume increase to this initiative.

Royal Mail said that the 5% drop in addressed letter volumes (which excludes political campaigning material for the general election) was gentler than expected.

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Turnover in UK letters fell by 3%.

Royal Mail also used the trading update to reiterate its optimism around its ongoing talks with GMB over the long-running pension and pay row.

It said the parties have agreed on the “fundamental principles on some of the key issues” and that “talks are ongoing to finalise these and other areas”.

Royal Mail chief executive Moya Greene said the business had put in a “good performance” during the festive period and praised the “hard work and dedication” of her employees.

“They pulled out all the stops to deliver a great Christmas for the UK,” she said.

Greene added: “Given our performance to date, we expect to see broadly similar volume and revenue trends in UK parcels and letters for the full year as in the nine months. In GLS, we expect underlying revenue growth for the full year to be broadly in line with the first half.”

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