Royal Mail reveals revenues inched up 1% but fortunes linked to economic growth could see it hit by a Brexit slowdown

[TrueBlueTerrier]

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Royal Mail monitoring wider UK economy as it will impact business
Parcel volumes up 2% in three months to June, but letters were 2% lower
Groups fortunes strongly linked to GDP and economic performance

Royal Mail's revenues nudged higher but the universal postal service revealed it is closely monitoring UK economic growth - as some economists forecast a sharp slowdown following the Brexit vote.

The former state-owned postal monopoly said its fortunes were strongly-liked to the economy and changes in GDP were key 'drivers' for its letter and parcel business.

The warning came as it reported a rise in parcel volumes of 2 per cent in the three months to the end of June, although letter volumes were 2 per cent lower.

In the traditionally quieter early summer period that is the group's first quarter of its financial year, revenue rose 1 per cent, while there was 13 per cent growth in revenue and volumes in its European parcels network, GLS.

The company said: 'Overall, trading in the three months ended 26 June 2016 was in line with our expectations, with no material change in overall trends.

'Movements in GDP are drivers for letter and B2B parcel volumes and we are monitoring the situation.

'We remain focused on operational and financial efficiency and delivering a high quality service for all our customers.'

The Communication Workers Union (CWU) sent out ballot papers today to more than 100,000 of its members, urging them to back a campaign of industrial action. Voting will close on October 16, with any action starting from a week later.

Rob Byde, analyst at Cantor, said Royal Mail's comments on GDP were only cautionary at this stage, adding that the company was on target to meet its expectations for the year ahead.

He continued: 'RMG has issued a cautious but in-line trading statement for the first quarter period. UK businesses are performing steadily but its European parcels activity continues to grow strongly. Our forecasts for the full year are unchanged with this update.

'The outlook for the UK economy in the short term is less certain but we think that RMG is a good potential safe haven.

'Core UK parcels and letters operations are sensitive to the economy but RMG's market position is strong.'

Shares in the FTSE 100 listed company were flat in early trading at 502.5p.

Moya Greene, chief executive for the past three years, has been busy pushing through plans to drive down costs.

The company said at its full year results in May that it is likely to incur transformation costs of around £160million in the current year.

Greene added: 'In what is traditionally a quieter trading period for the business, we saw no material change in overall trends.

'Group revenue was up 1 per cent while in the UK revenue was down 1 per cent. In Europe, GLS continued to perform well.

'We continue to face the challenges caused by the current low inflationary environment and our highly competitive markets.'

Royal Mail was floated in October 2013 with a public share sale that saw 60 per cent of it sold and a further 10 per cent go to employees.

The taxpayer held onto a 30 per cent stake which was then sold off with the firm moving into complete private ownership two years later.

Back in May, Royal Mail unveiled a steep fall in annual profits, raising question marks over whether delivering mail six days a week was a sustainable strategy.

Royal Mail also avoided harsh regulatory controls two months ago when Ofcom stopped short of imposing a price cap following a review into the postal market.

But Ofcom did propose measures aimed at improving competition in the 'access market', where rival operators collect and sort mail before handing it over to Royal Mail to complete delivery.

[Phantom]

First I've heard of a ballot for strike action? Is this getting mixed up with post office counter staff and their pension?

[RobertT]

First I've heard of a ballot for strike action? Is this getting mixed up with post office counter staff and their pension?

According to the article we're going to vote on whether the company should be privatised - it's nearly 3 years too late for that .

I think the Post Office workers pension is due to close on 31st March 2017 and they are threatening to strike, but there's only about 3,500 members who'll be affected. While our pension is expected to close a year later(although it could be sooner).

So basically it's a badly written article by someone who doesn't know what they're talking about.

[TrueBlueTerrier]

First I've heard of a ballot for strike action? Is this getting mixed up with post office counter staff and their pension?

According to the article we're going to vote on whether the company should be privatised - it's nearly 3 years too late for that .

I think the Post Office workers pension is due to close on 31st March 2017 and they are threatening to strike, but there's only about 3,500 members who'll be affected. While our pension is expected to close a year later(although it could be sooner).

So basically it's a badly written article by someone who doesn't know what they're talking about.

The privatised bit was a mask used by the original article for a graphic that they used back then, so I have removed it. But you are right on the rest, I wonder if HQs Tea Boy wrote it.