Parcels and politics help to lift Royal Mail revenue


(Reuters) – Election-related letters and growth from its continental European parcel business helped Britain’s Royal Mail (RMG.L) to eke out a 1 percent gain in first-quarter revenue, the resilience boosting its shares.

After years of underinvestment, the former monopoly was privatised in 2013 and has since reduced layers of management, upgraded technology and cut its property bill.

However, the company was left struggling last year as its domestic parcels business faced stiff competition and as uncertainty following Britain’s vote to leave the European Union worsened the rate of decline in its letters business.

Against this backdrop, Royal Mail said on Tuesday that increased revenue from political mail related to Britain’s June 8 general election meant that its postal business helped to limit the damage in the first quarter to June 25.

Revenue from the business fell 4 percent in the three months, versus a 3 percent decline a year ago but better than a 5 percent drop over last year as a whole.

“Royal Mail has emerged as the one clear winner of last month’s general election, with political mailings helping to slow the inexorable decline in UK letter volumes,” Hargreaves Lansdown equity analyst Nicholas Hyett said.

“However, increasingly it’s the international business which will be driving growth long term. The division put in another respectable performance this quarter, with recent acquisitions increasing its importance to the overall business.

The pan-European delivery business on Tuesday showed continued growth, with first-quarter revenue rising 6 percent despite some impact from the timing of Easter and other public holidays across Europe. Revenue was up 13 percent a year ago.

Royal Mail has been bulking up its GLS delivery business, as it has forecast continued challenging conditions in Britain and now faces an uphill battle negotiating pension arrangements with some of the country’s largest unions.

To expand the unit, Royal Mail bought Spain-focused ASM and U.S.-based GSO last year and U.S. overnight delivery company Postal Express in April.

“GLS continues to be a driving force for the group. Its ongoing, focussed international expansion is increasing our geographic diversification, scale and reach,” Chief Executive Moya Greene said in a statement.

The company’s shares were up 3 percent at 411.1 pence at 1030 GMT, making it the second-top gainer on London’s FTSE 100 index .FTSE. The stock has lost over a fifth in value over the past year.

Reporting by Esha Vaish in Bengaluru; Editing by Jason Neely/Keith Weir