Image credit: Flickr/Nik Morris

Royal Mail share price falls 3% as it warns on, er, parcels

Not a great morning for the newly privatised business: its parcels arm isn't doing as well as expected, and letters volumes are down.

by Emma Haslett
Last Updated: 22 Jul 2014

A parcels warning, rather than a profit warning, from Royal Mail this morning: in first quarter results posted (geddit?) by the company this morning, it said revenues from its parcels arm might be lower than expected this year because of, er, surprisingly strong competitors. Competition? In the parcels business? Who knew?

The problem is, now we're all into new-fangled things like texting and TwitFace, none of us send letters any more. So the company has pinned all its hopes on its parcels business. And it would have got away with it, too, if it wasn't for those pesky competitors: although parcels volumes increased 1%, revenues declined 1%. Those ain't the sorts of numbers shareholders like to see.

But chief executive Moya Greene suggested the business might make up for lost time in the second half of the 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.' So fingers crossed Santa decides to use Royal Mail this year.

On a more positive note, revenues from letters rose 3% - although that was more to do with the fact stamp prices have gone up than anything else. Letters volumes actually fell 3% (and Royal Mail added it expects volumes to fall 4%-6% per year from now on).

Its outlook for parcels was also pretty realistic: 'We anticipate that the UK parcels market will continue to be highly competitive which will have a downward impact on average unit revenues. In addition, we expect that the continued strength of sterling and increasing competition in the export market will impact export parcels revenue for the rest of the year.'

So no wonder shareholders weren't impressed: the company's share price dropped more than 3% in early trading. What's worrying is that the business doesn't have much of a rescue plan.


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