By Kyle Morris
Royal Mail PLC said Wednesday that its fiscal first-quarter group revenue fell 11.5% on year and that it was committed to reaching an agreement with a union after a ballot on strike action on Tuesday.
The British letter-and-parcel courier said its revenue for the three months ended June 30 was 3.00 billion pounds ($3.60 billion) compared with GBP3.16 billion a year earlier, reflecting weakening retail trends, lower test kit volumes and a return to structural decline in letters.
The adjusted operating loss for the three months was GBP92 million, due to inflexibility in the cost base to adjust to lower volumes and disappointing delivery of further efficiencies.
Adjusted operating profit for the year, excluding any impact from industrial action, is likely to be breakeven, if it can make progress on the weaker parcels market and lower-than-anticipated efficiency savings.
The company also said progress on Pathway to Change cost saving program has stalled, with a GBP100 million risk to GBP350 million of benefits identified for fiscal 2023.
Royal Mail said parcel volume was down 15% and parcel revenue was down 15.1% compared with the prior year. Total letter revenue was down 6.7% on year, with addressed letter volume excluding elections down 6%, reflecting a return to the long-term structural decline in letters.
In its general logistics systems business, volumes declined 3% on year in the quarter, but revenue grew 7.8% in sterling after benefiting from better pricing and higher freight revenue.
Macroeconomic trends--such as high inflation and the increased cost of living for consumers--were seen in its first-quarter performance, it said, as well as the unwinding of exceptionally high volumes of parcels seen during Covid-19 restrictions.
The company said it was aware of the strike ballot by the CWU on Tuesday, and it remains committed to reaching an agreement with the union. Performance in the first quarter highlights the need to act promptly to create a more agile and sustainable relationship with the CWU, it said.
Royal Mail said it will also change the name of the holding company to International Distributions Services PLC to reflect the increased importance of GLS in the group and strength in markets outside the U.K. The move won't have an impact on the brands Royal Mail and GLS, it said.
"The pandemic boom in parcel volumes bolstered by the delivery of test kits and parcels is over. Royal Mail is currently losing one million pounds per day and the efficiency improvements which are needed for long term success have stalled," Chairman Keith Williams said.
Write to Kyle Morris at kyle.morris@dowjones.com
