Parcel volumes rise at Royal Mail

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Parcels revenue rose one per cent to £1.48 billion at Royal Mail in the half year to 27th September, offsetting a three per cent decline in letters revenue.

In the core UKPIL network, parcels volumes were up three per cent to 473 million, while there was a 17 per cent increase at Parcelforce Worldwide to 45 million parcels.

Total revenue at UKPIL was down one per cent to £3.65 bn, while operating profit at £284m was flat, before transformation costs of £94m (£47m last year).

Sales at General Logistics Systems, Royal Mail’s continental parcels business, were up eight per cent to €1 billion for the first half while operation profit rose from €69m to £72m. GLS volumes were up nine per cent to 204 million parcels.

Chief executive Moya Greene said: warned that while e-retail continues to drive parcel volume growth, “as a result of Amazon’s roll-out of its own delivery network, we estimate that volume growth in our UK addressable parcel market has, on average, been reduced to around 1-2 per cent per annum in the short term.

“Additionally, we estimate there is around 20 per cent annual spare capacity in the market. These factors are putting pressure on prices across the industry. While we have seen growth in account and import parcels, competitors continue to target the attractive consumer/SME and export parcels market segments.”

Looking ahead, Greene said: “As a result of an acceleration of our UK cost savings programme and a better than expected performance in GLS, Group operating profit before transformation costs was flat in the first half. Given our strategic focus on costs, we now expect underlying UKPIL operating costs to be down by at least one per cent for the full year.”

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