Royal Mail Group more than doubled its operating profit from £86 million to £177 million in thefirst half of the 2008-09 financial year thanks to strong cost-cutting and despite a further fall
in mail volumes. Parcel businesses GLS and Parcelforce each increased their profits.The company’s continued focus on reducing overheads as competitive and economic pressuresmount played a significant role in the financial uplift with reductions in IT and other costs inthe Post Office network and efficiency gains in the Royal Mail Letters business, Royal Mail said ina statement. The strong financial performance came alongside a rise in customer quality of servicewith the most recent figures showing the vast bulk of mail hitting or exceeding its targets, itadded.
Group operating profit, before exceptional items, grew by £91 million to £177 million in thesix months ending September 30 compared to the same period last year. Group revenues rose to £4,648million from £4,475 million.
Royal Mail Letters saw a 4% drop in volumes in the first half-year due to an overallstructural decline in UK postal volumes, the impact of the slowing British economy and the loss ofmarket share to competitors. Its operating profit improved to £46 million from £5 million despitestagnating revenues of £3,265 million.
The European parcel business GLS again improved its performance with a half-year operatingprofit of £59 million compared to £45 million the previous half-year. Revenues rose to £715 millionfrom £565 million. On a like-for-like basis, including when the impact of a favourable exchangerate in favour of the Euro against Sterling is taken out, the company has recorded underlying salesgrowth of 4.5% and profit growth of 6%, Royal Mail said.
Parcelforce Worldwide, the British domestic parcel business, doubled its operating profit to£4 million and its revenues grew by 5.7% to £184 million in an exceptionally tough market.
The retail network, Post Office Ltd, reversed long-running losses, making an operating profitof £28 million on turnover up 2.7% to £461 million compared to a £7 million loss 12 months earlier,after taking account of the government’s annual £150 million Social Network Payment to subsidisethousands of loss-making Post Office branches.
Royal Mail Group’s chairman Allan Leighton said: “These are good results that demonstratethat real progress has been made in what are clearly difficult economic circumstances. This strongperformance has been delivered against a backdrop of falling mail volumes, increased competition,an unsatisfactory regulatory regime and the challenge of meeting the heavy demands of our pensionscheme.”
Chief Executive Adam Crozier added: “The increase in our profitability that we are reportingunderlines the huge effort that has been made across the company to drive up quality of service, tocut our costs and to improve our current financial performance. However we are also facing hugepressures with the Universal Postal Service still loss-making, competition intensifying stillfurther both from electronic communications and rival operators – and the increasingly heavy costsof servicing the historic pension deficit.”
