LONDON (Alliance News) - The decline in letter volumes that Royal Mail PLC has been battling in recent years worsened in the third quarter of its financial year, leaving the postal group's revenue flat and sending its shares lower in early trade on Thursday.
Royal Mail shares were down 4.3% to 430.00 pence, the worst performer in the FTSE 100.
Letter volumes have been in consistent decline due to the growth of electronic communications, which has trimmed the need for businesses to send physical letters to customers or target them through direct marketing campaigns.
Royal Mail has noted in the past that letter volumes are closely linked to gross domestic product movements and, on Thursday, said the uncertainty caused by the UK's vote to leave the European Union in June was contributing to a slowdown on advertising and business letter volumes.
The postal service operator said group revenue for the nine months to December 25 was flat, with a 2.0% decline in its UK parcels and letter delivery arm offset by 9.0% revenue growth at GLS, its international logistics business.
Addressed letter volumes fell 6.0% year-on-year in the nine month period, with revenue falling 5.0%, damaged by pricing pressures and trends in its customers "downtrading".
Royal Mail said the year prior had benefited from a one-off rise in direct delivery volumes and the third quarter in the previous financial year was "unusually strong".
Parcels revenue for the nine months rose 3.0% year-on-year and volumes increased 2.0%, largely driven by account customers and by good growth in consumer channels. The growth of online shopping has helped significantly to offset declining letter volumes for Royal Mail, though the parcel delivery market is a very competitive one in the UK.
Parcelforce Worldwide volumes, however, declined amid an increasingly competitive express parcels market, while international parcels volumes growth slowed, albeit this was offset by better average revenue per parcel.
GLS revenue rose 9.0% and volumes were up 8.0%, Royal Mail said, with growth in all key markets, and the group's recent acquisitions in Spain and California traded in line.
Royal Mail maintained its guidance for the full year to March 26 and will publish annual results on May 18.
It said its cost-cutting programme remains on track to deliver around GBP225.0 million in annual cost reductions in the UK business for the current financial year.
It added the outlook for parcel and letter trends remains the same.
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