Royal Mail failed to grow sales in the first three months of its financial year as “challenging” trading continued to see letter revenues fall.
The number of letters delivered fell 5% and sales dropped 4% in the quarter to June 28 in a tough environment as email continues to eat in to the traditional letter market. The figure excludes election mailings.
The parcels unit saw sales by volume lift 3% and revenues rise 2% in the period, as recent cost cutting and other new initiatives took effect.
The update came after shares in Royal Mail fell sharply on Friday after regulator Ofcom confirmed the scope of a “fundamental review” in to 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 international parcels business GLS enjoyed a better-than-expected performance in the first quarter with volumes up 9% and sales lifting 8%, 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.”
Ofcom’s inquiry will look at whether current regulation secures “the efficient and financially sustainable provision” of the country’s universal postal service.
The universal service is the Royal Mail’s commitment to make deliveries to all parts of the UK at a flat rate, six days a week.
The watchdog is concerned at the weakening of competition in parts of the letters and parcels markets.
The letter delivery arm of Whistl and parcel firm City Link have both folded within the last seven months, leaving Royal Mail with no national competitor in this market.
New regulations are expected to be in place next year.