GDPR tempers Royal Mail letter volume expectations

By Rhys Handley, Tuesday 17 July 2018

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Royal Mail Group continues to anticipate letter volume declines related to the potential impact of GDPR and its continued effect on business uncertainty in the postal group’s latest trading update.

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Letter volumes at Royal Mail were down 6% in the last three months

Covering the three months to 24 June, the group’s update saw a 2% boost in overall revenue, assisted by a 6% rise in parcel revenue and 11% in its General Logistics Systems (GLS) arm, though a 7% decline hit its letters revenue and its UK Parcels, International & Letters (UKPIL) arm fell by 1%.

A fall in letter volumes by 6% was attributed to the introduction of GDPR, which took place on 25 May, leading to uncertainty among the group’s customers about its application. Royal Mail said it would continue to monitor any impact closely.

Group chief executive Rico Back, who succeeds the outgoing Moya Greene, said: “Overall, trading in the first three months of our 2018-19 financial year was in line with our expectations.

“Our performance in UK letters and parcels was as anticipated and GLS continued to perform strongly. In the UK, we are making progress with the trials and initiatives under our new pensions, pay and pipeline agreement. We, together with the Communication Workers Union, are working with government to enable the introduction of a collective defined contribution scheme.

“Our outlook and other guidance are unchanged from that set out in our financial report for the full year ended 25 March 2018.”

Swiss-domiciled German businessman Back took up his new position on 1 June, while Sue Whalley was also appointed as chief executive of UK post and parcels on the same date.

Moving forward into 2018-19, Royal Mail continues to anticipate 4%-6% decline in letter volumes per annum, with the exception of political parties’ election mailings, due to the uncertainty caused by GDPR. The group anticipates good performance from GLS, but is braced for an impact on margins by labour market-related pressures.

Results for the first half of 2018-19, ending 23 September this year, are expected to be published by the PLC on 15 November.

The group posted its 2017-18 results in May, reporting revenue up 2% to £10.2bn, while operating profit fell from £353m to £123m due to “transformation costs”.

Share prices for Royal Mail had gone up by 2% to 490.5p at the time of writing.

As the group unveiled its latest update, chairman Peter Long announced at the same time that he would, “after careful consideration”, stand down as non-executive chairman of Spanish stock exchange-listed leisure park operator Parques Reunidos Servicios Centrales in order to reduce his extraneous business commitments.

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