Royal Mail reports flat revenues

A trading update from Royal Mail has shown that revenues have remained flat in the three months to June 28th.

In June, the UK government sold half of its 30 per cent stake in the 500 year-old company, raising £750 million for the Exchequer. The latest trading report has been released ahead of the final sell-off of the government's remaining 15 per cent stake.

The update indicated that the volume of letters has continued to decline – they dropped by five per cent during the quarter and revenue was down four per cent. These figures were all in-line with forecasts.

Meanwhile, parcel volumes for the UK were up three per cent and rose by nine per cent in Europe. This led to revenue increases of two and eight per cent respectively.

In a statement, Royal Mail said its outlook for letter and parcel volumes remained unchanged from the information that was published in its annual May results.

The May report also indicated a six per cent increase in full-year profits compared to the previous year, bringing the total to £740 million.

The company noted that it would continue to focus on driving costs down this year and added that its performance would be weighted to the second half of the year, as its annual results are largely dependent on the busy Christmas period.

European business

GLS, Royal Mail's European parcel deliveries services achieved better-than-expected performance. This was largely due to strong growth in Germany and Italy.

However, the company also says it is monitoring market reactions to changes in the German minimum wage legislation – profit margins are expected to be affected by around 50 to 100 basis points this year.

Commenting on the results, Royal Mail chief executive Moya Greene said that the market trading environment remained challenging. She explained that the company was working hard to drive growth, efficiency and innovation.

Earlier this the year, Royal Mail rival Whistl withdrew from the direct delivery letters market. This removed the only source of national competition for direct delivery of letters. Regulator Ofcom has said that Royal Mail would be reviewed to "ensure regulation remains appropriate and sufficient to secure the universal postal service".