Royal Mail today unveiled a slide in earnings after June’s Brexit vote triggered a fall in marketing mail.
The group said business uncertainty both in the run-up and after the UK’s European Union referendum saw marketing activity cut back, with revenues from advertising mail falling 8 per cent in the six months to 25 September.
A resilient performance against a backdrop of low inflation and highly competitive marketsMoya Greene
This contributed to an 11 per cent decline in underlying earnings to £247 million across Royal Mail’s core letters and parcels business.
Royal Mail’s European parcels arm, General Logistics Systems (GLS), did better, with profits up 25 per cent at £89m. Despite group-wide underlying earnings falling 5 per cent at £320m, Royal Mail chief executive Moya Greene hailed what she called a “resilient performance against a backdrop of low inflation and highly competitive markets”.
The results came as the group lifted its three-year cost savings target to £600m, from £500m previously.
“As always, our performance for the full year will be dependent on the important Christmas period,” Royal Mail said, as it added that it would hire 19,000 temporary staff and open nine temporary parcel sorting centres for the festive period.
The group said that business mailshots were closely linked with the state of the economy, as a range of organisations such as the Bank of England and the CBI employers lobby group have forecast a contraction in GDP over the next two years.
“We are monitoring developments in the UK economy closely as we have already seen some impact of the softer economic conditions on our marketing mail revenue,” the Royal Mail said.
It said that the numbers of addressed letter mailings across the UK fell 4 per cent in the period – within its flagged expectations for a decline of between 4 and 6 per cent over the year.
Letter revenues fell 3 per cent, but turnover from parcel deliveries rose 3 per cent. Royal Mail said it was still feeling the impact of Amazon’s delivery network, but was beginning to replace the lost revenues by boosting its business-to-business account parcels offering.