Royal Mail has reported its trading update for the nine months to the end of December 2022. Revenue was down 12.8% y-o-y in the nine-month period. Performance continues to be driven by a return to structural decline in letters, weaker retail trends, the impact of industrial disruption (18 strike days year to date), and lower test kit volumes. Royal Mail reported a year to date adjusted operating loss of £295m, estimating that the net cost of strike action in the nine-month period is around £200m.
Total letter revenue declined 6.1% y-o-y, with volumes for addressed letters excluding elections down 8%. Total parcel revenue reduced by 17.8% y-o-y, with volumes down 20% y-o-y. Domestic Parcels (ex. international) revenue declined by 19% y-o-y, with volumes declining 21%. International revenue declined by 12% y-o-y, with revenue falling by 6% y-o-y. Overall, the 9 months ended December saw a decrease in all categories of Royal Mail’s services.
Compared to pre-pandemic levels (9M 2019-20) addressed letter volumes (excluding elections) were down 25% and total letter revenue down 14.0%. Parcel revenue growth meanwhile increased by 8.6%, whilst volume declined by 6% in comparison with pre-pandemic levels, reflecting the fundamental change in volume and revenue mix. According to Royal Mail, parcels are now 54% of total revenue vs. 48% pre-pandemic.
For GLS, volume declined 2% y-o-y in the nine months, whilst revenue grew by around 9.6% y-o-y, as the subsidiary continued to benefit from better pricing and higher freight revenues. Compared to pre-pandemic levels, revenue has increased by 45.2%, and volumes by 29%.
According to Royal Mail, GLS saw revenue growth in almost all markets in the first nine months of 2022, but is grappling with continued cost pressures that are partially offset by a combination of specific pricing actions, service quality and targeted efficiency measures.
Looking forward, Royal Mail expects GLS to see high single digit y-o-y revenue growth for the full year 2022-23 results, and adjusted operating profit in the range of €380 to €400m.