Profits slide at Royal Mail

Domestic profits fell at Royal Mail by £14 million in the half year to 24 September. This was somewhat offset by strong profit growth at the postal operator’s international arm GLS.

GLS profit increased by 9% to £1.2bn and adjusted operating profit grew from £73 million to £90 million.

The Royal Mail domestic business, known as UKPIL, fell from £247 million in H1 of 2016 to £233 million in this period. Revenues fell noticeably too, from £3.64bn to £3.62bn.

Among UKPIL’s woes, addressed letter volumes fell by 5%. Better than expected revenue performance however meant that addressed letter revenue revenues were only down by 3%.

UKPIL’s parcel volumes partially offset growth in the parcels market. Account parcels (including Royal Mail’s biggest single customer Amazon) and import parcels amounted to a 6% increase in UKPIL parcel volumes. Parcel revenues as a whole were up 5%.

According to a statement from Royal Mail, “The group’s UKPIL cost avoidance programme is on track to deliver around £190 million costs avoided this year. We face increased cost pressures in the second half, including the potential impact of the industrial relations environment on the pace of change.”

Royal Mail Group chief executive Moya Greene said: “UKPIL revenue was broadly unchanged, having declined by two per cent in 2016-17. Our investment in our business is paying off. We have won new parcels business; volumes were up six per cent. There was a resilient letters performance. Our strategic focus on costs drove a one per cent underlying reduction in adjusted UKPIL operating costs (before transformation costs).

“Our performance for the full year, as always, will be dependent on the important Christmas period. We are opening six temporary parcel sort centres and recruiting over 20,000 staff. We are also extending opening hours at many of our Enquiry Offices to help retailers and consumers.

“As previously announced, we are now in external mediation with the CWU. Our priority is to reach agreement with the CWU to help underpin the sustainability of the business.”
 
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