Royal Mail said it is on track to meet cost reduction targets and reported a better than expected increase in parcel volumes of four per cent in the first nine months of its financial year.
Prospects for Royal Mail, which was privatised in 2013, hinge on its ability to cut costs and modernise its operations to help win more of a parcels market buoyed by a boom in online shopping.
Royal Mail said it handled 130 million parcels in December alone, reflecting strong Christmas trading, which was up six per cent on the previous year.
Chief executive Moya Greene said: "Once again, our postmen and women delivered a great Christmas – even better than last year’s strong performance.
"We remain on track to deliver at least a one per cent reduction in underlying operating costs before transformation costs ... for the full year."
Royal Mail shares traded 1.5 per cent higher at 428p this morning.
The company said quarterly group revenue rose one per cent, compared with a flat outcome in the first half, and that overall trading for the nine months to December 27 was in line with its expectations.
Royal Mail said it had seen a strong performance in its European parcels arm GLS, with volumes up 11 per cent and revenues climbing to 10 per cent in the third quarter, on the back of strong demand from Poland and Italy.
It had previously warned of challenging market conditions for the business, but said the improvement meant it was not anticipating a decline in GLS margins for the full year.
Volumes in its letter business also held up relatively well against an anticipated slowdown in the market, down three per cent in the third quarter which was ahead of the company's projected range of a four to six per cent annual decline.