Royal Mail has seen its revenue jump as it shook off rising employment costs and declining letter volumes. 

The postal service saw revenue climb 2.6 per cent to £8.4bn in the year to March, as operating profit remained “broadly flat” at £5m. 

Royal Mail said this growth came despite “the impact of national insurance increases” and the high volume of general election mail in the previous year, which could have skewed comparisons.

Its owner, International Distribution Services (IDS), said the firm’s biggest area of growth is delivery to non-home addresses, where volumes grew by 40 per cent.

The postal company operates across its network of about 30,000 lockers and shop collection points and has partnered with Vinted and Ebay in recent years to capitalise on the booming e-commerce market.

Royal Mail partners with Ebay, Vinted

Royal Mail saw parcel volumes jump seven per cent to 1.4bn despite a 10 per cent drop-off in the volume of addressed letters.

The declining popularity of letter-sending “reinforces the need” for Royal Mail’s recent overhaul, which saw it ditch 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,” IDS chief executive Martin Seidenberg said.

Royal Mail said it is investing in technology and AI to make its deliveries “faster and more reliable.”

IDS group profit falls

The postal company has come under pressure to improve its quality of service. It was fined a record £21m by Ofcom in October last year for missing its delivery targets. 

In May, Royal Mail revealed that it had missed targets for another consecutive year, with only 75.7 per cent of first class mail arriving on the next working day.

Revenue across the IDS group jumped by 3.6 per cent to £13.6bn in the year to March, while operating profit fell by 20 per cent to £222m.

Operating profit fell at its GLS parcel arm slumped to £237m after it was hit by regulatory changes in Italy and a challenging trading environment in Canada.

IDS had been listed on the FTSE 250 before it was bought by Czech billionaire Daniel Kretinsky for £3.6bn in April last year.