Royal Mail is a business, their entire reason for existence is to make profit. If Domino's pizza offer them 1p per leaflet and they make a profit on that then they'll take the contract. Maybe if it was a state run entity and not for profit then they wouldn't take the contract.
I remember when I was a kid doing my paper round delivering the local paper, they told me they made most of their money from the 50 kilos of leaflets that broke my back every week.