Royal Mail has reported a significant jump in revenue, shaking off rising employment costs and a steep decline in traditional letter volumes across its network.
The postal service recorded revenue growth of 2.6 per cent to £8.4bn in the year to March, with operating profit remaining “broadly flat” at £5m.
The company said its growth came despite “the impact of national insurance increases” and an unusually high volume of general election mail in the prior year, which complicated year-on-year comparisons.
Owner International Distribution Services (IDS) identified delivery to non-home addresses as its biggest area of growth, with volumes in that segment surging by 40 per cent.
Royal Mail operates across a network of approximately 30,000 lockers and shop collection points, and has partnered with Vinted and eBay to tap into the booming e-commerce market.
Parcel volumes climbed seven per cent to 1.4bn over the period, even as the volume of addressed letters dropped by 10 per cent, highlighting the ongoing structural shift in postal demand.
The declining popularity of letter-sending “reinforces the need” for Royal Mail’s recent operational overhaul, which included scrapping second-class letter delivery on Saturdays.
“Following Royal Mail’s agreement with the unions we are rolling out Universal Service changes across the UK which will lead to a more efficient, reliable and sustainable service for our customers,” said IDS chief executive Martin Seidenberg.
Royal Mail also confirmed it is investing in technology and artificial intelligence to make its deliveries “faster and more reliable,” as it seeks to modernise its infrastructure.
The postal company has faced sustained pressure to improve its quality of service, having been fined a record £21m by Ofcom in October last year for missing delivery targets.
In May, Royal Mail revealed it had missed those targets for another consecutive year, with only 75.7 per cent of first-class mail arriving on the next working day.
Across the broader IDS group, revenue rose 3.6 per cent to £13.6bn in the year to March, though operating profit fell sharply by 20 per cent to £222m.
Profit at the GLS parcel arm dropped to £237m after the division was hit by regulatory changes in Italy and a challenging trading environment in Canada.
IDS was previously listed on the FTSE 250 before being acquired by Czech billionaire Daniel Kretinsky for £3.6bn in April last year, taking the group private.