Royal Mail Christmas parcel deliveries rise 4%

Royal Mail says it delivered 120 million parcels during December, a rise of 4% on a year earlier.

In its latest trading statement, it said that over the past nine months parcel deliveries were up 3%, with parcel revenues, worth half of group sales, flat over the period.

The number of letters delivered fell by 3%.

The company, which was privatised in 2013, said it expected to meet its full-year profit expectations.

Moya Greene, Royal Mail chief executive, said: "Royal Mail delivered one of its highest ever quality of service performances for parcel delivery to our customers over the month.

"This is because we started to plan for Christmas in April, putting investment behind extra sorting capacity with 10 temporary hubs and training around 19,000 extra people."

In November, the firm warned growth in the UK parcels market would fall from 4-5% to 1-2% for at least two years.

Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers, said: "The GLS [online parcel tracking system] division has again contributed strongly to growth.

"Less positively, the lucrative parcels business is still under pressure, with the emergence of the likes of Amazon providing new threats, even if the demise of CityLink removed some competition.

He added that the strong dividend yield of 5% would support Royal Mail shares although, "the initial euphoria following the float has worn thin, with the share price having dropped 28% in the last year, as compared to a 2% dip for the wider FTSE 100".

Investors welcomed Royal Mail's latest update, sending shares in the company up 4.5% to 450p in Thursday lunchtime trade.

Analysis: Emma Simpson, BBC business correspondent

Royal Mail has delivered some positive news. Its festive performance clearly went well, with parcel volumes up 4% in December compared with the previous year. Royal Mail managed to avoid the logistical problems which hit its smaller rival, Yodel.

It's a key month for the business as it delivers at least twice the amount of mail and parcels compared with other months. A poor December would've knocked its full-year earnings guidance off track. It may have stemmed the loss of business to competitors over Christmas, but revenues remain flat and Royal Mail still has its work cut out to grow its parcel business.