Royal Mail Surges On Opening Following Oversubscribed IPO

Royal Mail says the company's performance "fully met" its expectations over the past nine months, following a "great Christmas".

It said it handled 130 millions over the Christmas period, up 6% on last year. Over the nine months, parcel volumes were up 4% compared with the same period a year earlier. There was a 3% drop in the number of letters it handled, but Royal Mail said it is now on course to achieve its cost cutting targets.

The positive trading figures resulted in Royal Mail's share price rising 3.5% in the morning trade.

Moya Greene, Royal Mail's chief executive, said: "Once again we delivered a great Christmas - even better than last year's strong performance."

Royal Mail has endured a tough time since it was privatised by the government in 2013. It is now the subject of a review into the 'efficiency and sustainability' of its universal postal service by Ofcom.

With competition from smaller delivery firms that are able to charge more for deliveries in harder-to-reach places, and declining letter volumes across the industry, Royal Mail has argued that it should not be bound by law to deliver a universal service.

Charles Huggins, investment analyst at Hargreaves Lansdown strockbrokers said Royal Mail is better placed to "weather the storm" of the "challenging" UK parcel market. Because of its 50% market share, "it can invest more in technology and service", he explained.

Mr Huggins added: "There is plenty of scope to reduce costs, having spent so long in public hands. This should help to support profits, at a time when rivals are seeing margins squeezed."