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Royal Mail – GDPR nerves weigh on postal volumes

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Royal Mail saw underlying revenue rise 2% in the first quarter, as a strong performance from international parcels business, GLS, offset continuing weakness in the UK.

The outlook for the full year remains unchanged.

The shares were broadly unmoved by the announcement.

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown:

“Royal Mail’s new CEO, Rico Back, may be one of the few people in the UK hoping the current political turmoil spills over into a general election – election mailings provide Royal Mail with a useful boost and 2018 looks like it could be the first year since 2013 without a major vote in the UK. The letters business isn’t being helped by tough new penalties around data protection, introduced under GDPR, which are making marketers nervous about direct mailings.

Changes in the mix of UK parcels means revenue isn’t keeping pace with volume growth, but that’s not the end of the world so long as margins aren’t being trashed. Meanwhile the bright spot in Royal Mail’s numbers remains the GLS international business, which looks to be going from strength of strength, particularly in Europe.

All-in-all these are reasonable numbers, but with cost cutting a major focus at Royal Mail it’s difficult to get too excited without some indication of what’s happening to margins. For that we’ll have to wait for the half year.”




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