Royal Mail reports parcel growth

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Royal Mail has announced a rise in annual profits after revenues growth from parcel deliveries more than offset a further decline in letter volumes.

In its first set of results since its controversial £3.3bn stock market flotation in October, the company said operating profits after transformation costs were £430m in the year to March 30, against £403m a year earlier.

It said its letters performance was at the better end of expectations, with revenues down two per cent to £4.6bn on a year earlier.

Addressed letter volumes declined by four per cent, but the trend improved over the year due to stronger economic conditions and one-off impacts such as energy companies writing to customers about price rises.

Parcel revenues increased by seven per cent but in volume terms the one billion items delivered in the period was flat compared with the previous financial year.

Chief executive Moya Greene said: “The competitive environment on the parcels side is more intense. We are taking steps to remain the leader in this growing market.”

As the Universal Service provider, Royal Mail is required to provide access to competitors such as TNT for final mile deliveries.

Ofcom is investigating a complaint from TNT over Royal Mail’s decision to change conditions and increase the prices it charges to deliver post collected and pre-sorted by its competitors.

Royal Mail believes an investigation into this complaint will lead to a long period of uncertainty around the prices it charges other postal operators.

Ms Greene called for “timely regulatory action” to prevent the impact of direct delivery competition from undermining the economics of the Universal Service.

She said: “TNT Post UK can cherry-pick easy-to-serve urban areas, delivering easy-to-handle post to homes less frequently than Royal Mail and to no defined quality standard.

“Royal Mail is required to deliver six days a week, overnight, throughout the whole country, to stringent quality standards and at a uniform, affordable tariff.

“Moreover, we are also required to deliver any items TNT Post UK does not consider economic to deliver itself. If TNT Post UK is successful in delivering its stated objectives, this could threaten the fundamental economics of the Universal Service.”