Profits fall at Royal Mail despite parcels growth

UK parcel volumes and revenue were up six per cent in the first half, Royal Mail said as it unveiled its results.

However this was offset by a seven per cent fall in addressed letter volumes and revenue.

Revenue at UKPIL, the main UK parcels and letters business fell one per cent to £3.59 billion in the 26 weeks to 23rd September. Adjusted operating profit before transformation costs was down from £233m to £165m.

GLS, the international parcels business, increased revenue by nine per cent to £1.35m, but adjusted operating profit was down from £90m to £77m.

Chief executive Rico Back said: “We have put in place a range of actions to improve our performance. We are reconfirming our commitment to our revised £100 million cost avoidance target and adjusted group operating profit before transformation costs of £500 million – £550 million for the financial year.

“We will update the market next year on our strategy. There will be a greater emphasis on how we connect customers, companies and countries through our domestic and international businesses. There will be a clearer focus on financial performance and management accountability. In March, we will host our first Capital Markets day since IPO in 2013. We will share more detail then about our direction for the next five years.”

The group is forecasting that the decline in letters volumes for the full year will be in line with the first half, while UK parcel volumes and revenue growth will be better than last year.

Back highlighted the importance of GLS in the group’s plans, saying: “Product and geographical diversification is a key and ever-increasing part of our business model.”