Royal Mail continues to suffer as ‘challenging’ trading sees letter revenues fall

Royal Mail failed to grow sales in the first three months of its financial year as “challenging” trading continued to see letter revenues fall.

Royal Mail failed to grow sales in the first three months of its financial year

It said the number of letters delivered fell 5 per cent and sales dropped 4 per cent in the quarter to June 28 in a tough environment that continues to see email eat in to the traditional letter market. This figure excludes the impact of election mailings.

But its parcels unit saw sales by volume lift 3 per cent and revenues rise 2 per cent in the period, as recent cost cutting and other new initiatives took effect.

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The update comes after shares in Royal Mail fell sharply on Friday after regulator Ofcom confirmed the scope of a “fundamental review” into the firm’s operations that could see it impose a cap on prices.

The group said the outlook for its letters and parcels businesses for the full-year remained unchanged, as it continues to clamp down on costs.

It added the group’s annual performance will be heavily dependent on the important Christmas season, as usual.

The business added that its international parcels business GLS enjoyed a better-than-expected performance in the first quarter with volumes up 9 per cent and sales lifting 8 per cent, due to good trading in Italy and Germany.

Royal Mail chief executive Moya Greene said: “We have benefited from the parcel initiatives that took effect in the second half of last year and a good performance from GLS.

“Our trading environment remains challenging and we are stepping up the pace of change to drive efficiency, growth and innovation, while maintaining a tight focus on costs.”

Brokers at Bank of America Merrill Lynch said that trading was broadly in line with expectations with “mail performing slightly below expectations and with the GLS and parcels’ divisions performing slightly ahead of expecta- tions”.