Royal Mail receives boost from general election mailings

Royal Mail said it had made a 'good start' to its financial year. Picture: Johnston Press
Royal Mail said it had made a 'good start' to its financial year. Picture: Johnston Press
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Royal Mail today said it narrowed the decline in letter deliveries thanks to a boost from general election political mailings, but confirmed revenues remained under pressure.

The group said total letter revenues fell by a better-than-expected 4 per cent in the three months to 25 June after that month’s snap election.

But with the benefit of the political mailings stripped out, letter volumes still fell 6 per cent in the group’s first quarter.

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Its UK parcels arm continued to help offset the ongoing decline in letters, with volumes up 5 per cent and revenues up 3 per cent. This left overall underlying turnover from the letter and parcels arm 1 per cent lower.

Its Europe-wide parcels business GLS continued to see solid growth, with underlying revenues up 6 per cent, but with the benefit of recent acquisitions included, Royal Mail said turnover soared 18 per cent in the quarter.

Royal Mail said the GLS performance helped drive a 1 per cent rise in total group-wide underlying revenues.

Moya Greene, chief executive of Royal Mail, said the group had a “good start to our financial year”.

She added: “GLS continues to be a driving force for the group. Its ongoing, focused international expansion is increasing our geographic diversification, scale and reach.

“Our performance in letters was better than we expected, despite continued business uncertainty in the UK.”

The update comes after Royal Mail last week sought to avert the threat of strike action by announcing a new proposal for pension scheme changes.

The privatised group had planned to close its defined benefit pension scheme next year, which resulted in fury from Unite and the Communication Workers Union (CWU).

But on Friday, Royal Mail said that after “extensive talks” with unions, Unite is planning to hold a consultative ballot of its members on a new plan, which it insisted was a “significant improvement” on an earlier proposal.

The changes will see it offer scheme members a choice between a new defined benefit cash balance scheme and an improved defined contribution scheme.

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Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Royal Mail has emerged as the one clear winner of last month’s general election, with political mailings helping to slow the inexorable decline in UK letter volumes.

“UK parcels also looks like it’s turning a corner with steady volume growth, albeit at lower prices than previously.”

But he said the “wrangling” over the new pension scheme plans would remain a source of “uncertainty” for Royal Mail until all unions are on-side.

While Unite has said it believes the pensions proposal is the “best available deal”, the CWU union has rejected the plans, arguing it “does not meet our aspiration of a wage in retirement pension scheme”.

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