Royal Mail is improving but it's no red-letter day

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Royal Mail shares have enjoyed something of a second coming of late, which is good news for those of us who held on to them post-privatisation. But beyond the elimination of competition from Whistl, which last month ditched its attempt to provide a rival letter-delivery service, the reasons for this are hard to divine.

In its latest trading update, Royal Mail said it was performing in line with expectations, but they weren't exactly high. Parcel volumes grew a bit (3 per cent in the three months to 28 June) but the figures were flattered by the fact that trading was rotten during the comparable period last year. Moreover, competition is tough so Royal Mail isn't earning much money from the extra deliveries it is making.

Letter traffic, by contrast, fell by 5 per cent, which was in the middle of the expected range despite Whistl’s demise. Worse still, regulators are worrying about monopolies and talking about price controls. It doesn't help that the two sides are unlikely to add to the volume of Christmas card traffic by sending them to each other.

Royal Mail talks boldly about “stepping up the pace” in innovation, efficiency and growth. It’s just that, on the evidence of these numbers, it isn't having much of an impact. Perhaps we’ll see some with the second post? Oh hang on, that was a casualty of innovation, efficiency and growth, wasn't it?