Royal Mail reports flat revenues

Royal Mail has reported flat revenues in the three months to 28 June as UK letter volumes continued to decline.

The trading update comes ahead of the final sale of the government's 15% stake in the 500-year old company.

Royal Mail said UK letter volumes declined by 5% in the quarter with revenue down 4%. But that was in line with forecasts.

UK parcel volumes were 3% higher and rose by 9% in Europe, with revenue up 2% and 8% respectively.

The company said its outlook for letter and parcel volumes remained unchanged from guidance issued with its annual results in May.

Royal Mail said it remained focused on cutting costs at its UK business this year.

It added that, as in all previous years, its performance would be weighted to the second half of the year given the dependence on its traditionally busy Christmas parcels delivery period.

'Challenging' trading

Royal Mail's European parcel deliveries service, GLS, performed better than expected, the group said, largely driven by strong growth in Italy and Germany.

But the company added it was monitoring how the market reacted to changes to German minimum wage legislation.

Royal Mail chief executive Moya Greene warned that the trading environment remained "challenging".

The company was "stepping up the pace of change to drive growth, efficiency and innovation while maintaining a tight focus on costs".

Last month, regulator Ofcom said the regulation of Royal Mail would be reviewed after the withdrawal of rival Whistl from the direct delivery letters market. That removed any national competition for the direct delivery of letters.

Ofcom said the "fundamental" review would "ensure regulation remains appropriate and sufficient to secure the universal postal service".

The government sold half of its remaining 30% stake in Royal Mail in June, raising £750m for the Treasury.

In May, Royal Mail reported an increase in full-year profits to £740m, up 6% from a year earlier.

Workers' shares

The Department for Business Industry and Skills also outlined its plan to hand 10 million shares - worth about 1% of the company - to employees this financial year.

Royal Mail employees are being given shares equivalent to a 1% stake in the company.

GLS employees will be excluded from the scheme, as will employees at joint ventures.

Workers must also stay for three years after receiving their share allocation to be able to keep them, unless they retire, take redundancy, leave through illness or die.

Shares in Royal Mail closed down 0.3% at 510 pence per share, valuing the holding being distributed to workers at £51m.

Divided by 130,100 staff, the shares would be valued at about £392.