Royal Mail said on Tuesday the trading performance in its first financial quarter was "good" as it posted a rise in revenue, although revenue and volume from UK letters continued to fall.
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Shares in Royal Mail were up 3.1% to 411.10 pence on Tuesday morning, the best performer in the FTSE 100.
For the quarter ended June 25, group revenue rose 1% compared to the same period the previous year, which Royal Mail said was driven by a "strong" performance in the General Logistics Systems (GLS) business and offset a 1% decline in UK parcels, international and letter revenue.
Group parcel revenue increased 3% with a 5% rise in volume due to new contract wins and increased traffic from existing customers.
The international parcel business gained from cross-border traffic from Asia into Europe and contributed about 2% of the parcel volume growth and 1% in parcel revenue.
FTSE 100-listed Royal Mail said Parcelforce Worldwide also saw an improvement in recent trends with volume up nearly 1% in the quarter.
Whereas addressed letter volume fell 6% in the UK in the quarter, excluding the impact of political parties' election mailing for the June UK general election, letter volume did benefit from certain mailings associated with the election, which Royal Mail said had around a one percentage point positive impact.
UK letter revenue declined 4% even though it benefited from higher than expected revenue associated with election mailings.
The company said it will continue to monitor the impact of overall business uncertainty in the UK on letter volume.
Meanwhile, GLS revenue rose 6%, and including the impact of recent acquisitions revenue was up around 18% on a constant currency basis.
Royal Mail said the "strong" performance of GLS reflected the timing of Easter and other public holidays across Europe.
In addition, the company said its cost savings programme is on track to deliver around GBP190.0 million of UKPIL operating cost savings in 2017-18 and it expects its total net cash investment will be around GBP450.0 million for the full year.
Royal Mail also said its outlook for the UK letters and parcels trends and other guidance is unchanged from the end of the previous year.
In May, Royal Mail said it expected a decline in addressed letter volume of between 4% to 6%, excluding political parties election mailings, over the medium term, but cautioned it would expect this to be at the higher end of the range of decline in the year ahead if the current climate of business uncertainty persisted.
Meanwhile, the company reiterated that the Royal Mail pension plan will close to future accrual on March 31, 2018, and it is offering plan members a choice between a defined benefit cash balance scheme and a defined contribution scheme. ■