Royal Mail has reported a further fall in the number of letters it delivers for businesses, after new data privacy laws reduced the amount of junk mail sent.
In a trading update ahead of its annual meeting in Sheffield on Thursday, where it could face a shareholder revolt over executive pay, the FTSE 100 company said letter revenues fell 7% in the three months to 24 June, with volumes down 6%. Excluding the boost from last year’s election mailings, letter revenues declined 5% year on year.
The General Data Protection Regulation (GDPR), introduced in May to protect European citizens from the misuse of their personal data, has deterred some businesses from sending junk mail, said Royal Mail.
“We are monitoring any potential impact closely,” it said. “We continue to work with customers to find solutions for their marketing mail needs.”
The group warned in May that the number of letters delivered would fall by between 4% and 6% this year. It said on Tuesday: “Due to the potential impact of GDPR and, or, if business uncertainty persists, we still expect to be at the higher end of the range of decline for 2018-19 and may fall outside the range in a period.”
Royal Mail’s parcel revenues rose 6% in the quarter, boosted by the growth of e-commerce. Overall revenues at its UK business fell by 1%. Royal Mail also has an international parcels business, where volumes rose 10% and revenues were up 11%.
The outgoing Royal Mail chief executive, Moya Greene, will step down from the board after the AGM. The postal service has come under fire for awarding her successor, Rico Back, who took over in June, a £640,000 salary, 16.8% higher than Greene’s. Two influential investor advisory groups have also called on shareholders to oppose Greene’s £900,000 termination bonus.
The company said Back’s and Greene’s overall fixed pay, including pension and benefits, was broadly the same. It defended the bonus for Greene, calling her an “exceptional executive”.
Royal Mail had been locked into a long dispute with the Communication Workers Union over pay, pensions and conditions, but Greene struck a deal in February, and Royal Mail said it was making progress with trials and initiatives under the agreement.
Back added that the company was working with the union and the government on the introduction of a collective defined contribution pension plan, to replace the more expensive final salary scheme closed this year.
Ed Monk, the associate director at Fidelity Personal Investing’s share dealing service, said the company “scored a big victory” when it persuaded the union to back its pension plans. “It may not be enough, however, to soothe investors who have been increasingly wary that Royal Mail can’t win all its battles,” he said. “The shares have fallen by a fifth in the past two months.”
Richard Hunter, the head of markets at online trading platform Interactive Investor, said: “The fact that letters and cards are slowly being consigned to history has long been known, but Royal Mail has, for the most part, been able to replace this lost business within a burgeoning parcels market. In particular, its European business, GLS, continues to shine.”
However, he flagged rising competition in parcels delivery from Deutsche Post and Amazon.
Royal Mail shares rose 3.5% in early trading.