(Reuters) - Britain's Royal Mail (LON:RMG) Plc said on Thursday it was on track to achieve its cost savings targets for the current year and revenues in the first nine months were in line with expectations after a strong performance over Christmas.
The former monopoly postal firm said in a trading statement revenue for the nine months ended Dec. 25 was flat overall, as 9 percent growth in GLS, its international unit, offset a 2 percent decline in revenue at its domestic parcels and letters unit where it continued to face stiff competition.
Royal Mail is battling competition from new entrants and former customers such as Amazon (NASDAQ:AMZN), which has started its own delivery system, as it seeks to modernise and regain business in the overcrowded parcels market.
Although the company has replaced all business lost to Amazon, pressures remain as Germany's Deutsche Post (DE:DPWGn) is expanding in the market with its acquisition of UK Mail Group, which was completed last month.
Royal Mail, floated in 2013, needs to make more money from parcels to offset falls in its mail business, with households and businesses sending fewer letters.
The company said on Thursday that Christmas had been even better than the previous year, with 138 million parcels handled in December alone, boosting UK parcels revenue and volumes, which were up 3 percent and 2 percent respectively over the nine months. Total UK letters revenue was down 5 percent with addressed letter volumes, excluding elections, declining by 6 percent.
Despite a good performance over the peak Christmas period and an "usually strong" third quarter, addressed letter volumes in the first nine months of the year were down 6 percent, in line with the numbers reported at the end of the first half.
A fall in spending by companies on promotional material, known as "junk mail", further hit first-half letter volumes, and Chief Executive Moya Green said then the letters business was very "sensitive to rates of economic growth".
The company said on Thursday the trend for revenues from its main advertising products within the letters unit was broadly similar to first-half levels.
Spending on advertising is set to fall 0.7 percent in 2017 as Brexit uncertainties weigh, the IPA Bellwether report showed earlier this week.
"Our outlook for UK letters and parcels trends and other guidance remain unchanged from that set out.. (at) the half year," Royal Mail said in its statement.