With the rising incidence of positive COVID-19 tests from the Omicron wave, absence rates remained elevated during Q3 vs. the prior year and increased over Christmas and into early January 2022 to peak at around 12% (c. 15,000), double pre-COVID levels.
Domestic parcel volumes increased by 33% vs. Q3 2019-20, but fell by 7% year on year, given lockdown restrictions were successively reimposed during the prior period. Royal Mail saw a slower than expected increase in volumes around Black Friday, although December saw stronger growth, driven by a pick-up in B2C volume in the run up to Christmas. Royal Mail believes they are at least maintaining our share of the market.
In addition, Royal Mail was pleased to be able to respond quickly to Government requests to increase capacity for the delivery of COVID-19 testing kits due to increased demand. Test kits accounted for around a mid-single digit % of total parcel volume in the first 9 months.
Total parcel volumes increased by 15% vs. Q3 2019-20, but fell by 11% year on year, impacted by weakness in International as a result of a number of factors previously outlined including increased customs processing and conveyance costs.
Domestic parcel revenues grew by 43.9% vs. Q3 2019-20 due to volume growth and positive price/mix.
Total parcel revenues grew by 29.7% vs. Q3 2019-20. Year on year revenues decreased by 9.4%, primarily due to lower volumes, partially offset by positive product/channel mix.
Addressed letter volumes (excluding elections) in Q3 were down 17% compared to Q3 2019-20, broadly in line with the trend seen in the first half and reflecting the ongoing structural decline in letters. Year on year volumes decreased by 3%, a slower decline compared to the sharp volume declines seen in the prior period. Total letter revenue was broadly flat, driven largely by pricing initiatives.
Overall Royal Mail revenue decreased by 5.8% year on year, but grew by 9.8% over two years.
"As a next step, subject to consultation, we intend to further simplify and streamline our operational structures to ensure an improved focus on local performance, and devolve more accountability and flexibility to frontline operational managers.
"We are engaging with our unions on the proposals, which we expect will lead to a reduction of around 700 managers and deliver an annualised benefit of around £40 million, with around £30 million in FY 2022-23. ■