Friday 23 February 2018

Royal Mail warns on competition as profits rise

Royal Mail
Royal Mail

Neil Maidment

Newly privatised Royal Mail posted a 12pc rise in full-year profit on Thursday and said it was taking steps to address increasing competition in both parcels and letters.

The UK postal firm, which had long posted financial losses until two years ago, said operating profit before "transformation" costs - such as IT investments - rose to £671m in the year to March 30, in line with a company-compiled consensus forecast.

Group revenue rose 2pc to £9.46bn, helped by a 7pc rise in parcel sales - now worth 51pc of turnover - offsetting an expected 2pc fall in UK letter revenue, as customers increasingly turn to email and messaging.

Addressed letter volumes fell 4pc, while parcel volumes were flat, reflecting increased competition and a switch from weight to size-based pricing that dampened demand.

Royal Mail's growth prospects continue to split analyst opinion, with differing views over its ability to manage declining letter volumes and increasing competition.

Chief Executive Moya Greene said in a statement competition in parcels had intensified in the last year as the market booms on the back of online shopping, while its letters business could suffer financially if regulator Ofcom does not intervene with rival TNT Post UK's plans to roll out a rival direct mail delivery service.

The privatisation of Royal Mail was heavily criticised for short-changing the British taxpayer, with government ministers, banks and advisors hauled before lawmakers to explain why shares in the firm rocketed as much as 87pc above the 330 pence price at which Britain sold a 60 percent stake in October.

Shares in the group closed at 575 pence on Wednesday, valuing the business at £5.7bn.

The firm, which has shed some 50,000 jobs in 11 years to help reduce costs, said it continued to target single-digit revenue growth, margin expansion and underlying free cash flow growth for 2014-15.

Online Editors

Promoted Links

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Also in Business