Britain’s Royal Mail, lined up for privatisation, said today it tripled its operating profit in thehalf-year to September 25, 2011, thanks from profits from European parcels subsidiary GLS and the
post office network and despite continuing losses in the core letters business.The state-owned company improved its operating profit (after modernisation costs but beforeother exceptional items) to £67 million from £22 million one year earlier. Were it not for profitsfrom GLS (£58 million) and Post Office Limited (£55 million), however, the group overall would havemade a loss. Overall, Royal Mail made a half-year net profit of £176 million compared to a £146million deficit in the first half of 2010. Revenues were 5 per cent higher at £4,606 million.
The Letters business unit, which provides the core Universal Service to the UK’s 29 millionaddresses, remained loss-making, Royal Mail said. But as a result of tight cost control and priceincreases introduced last spring, the half-year loss was reduced to £41 million from a £55 millionloss a year ago.
UK letter volumes fell 6 per cent compared to a year ago but UK packet volumes rose 5 percent in tough market conditions. Revenues at the UK Letters & Parcels and Internationalbusiness unit, which includes Parcelforce Worldwide, increased to £3,414 million from £3,277million last year.
GLS increased revenues by 6 per cent to £778 million in the half-year and its operatingprofit rose to £58 million from £51 million. “GLS delivered growth in virtually every country inwhich it operates and parcel volumes increased by 4 per cent,” Royal Mail said in its half-yearreport. But costs increased due to volume growth and due to increased conveyance and distributioncosts, while economic uncertainty in Continental Europe means the outlook in the second half ismore challenging.
The biggest profit jump was made by Post Office Ltd, which improved from £18 million lastyear to £55 million in the first half of 2011. Its revenues rose slightly to £406 million from £398million.
CEO Moya Greene said: “Our financial performance at the Group level in the first half of ourfinancial year, including our cash flow, shows some improvement on the same period a year ago. Thenecessary measures we implemented earlier in the year – increasing our prices and tight costcontrol – are a key part of our strategy to return Royal Mail to sustained financial viability.They are beginning to deliver results. But, we have a great deal to do.
“We are half way through our financial year and are operating within a difficult andchallenging business environment. The economic downturn is proving to be prolonged and, like manyother predominantly UK and European-based companies, our trading conditions are challenging. Ourfocus therefore remains on returning to sustained financial viability. We will continue to reduceour costs wherever possible without compromising the six–days-a-week service.
“We look forward to working with Ofcom to secure a new regulatory approach as the need to doso is pressing. Furthermore, it will be essential for Royal Mail that the European Commissionapproves the Government’s State Aid application to relieve the Company of its historic pensionliability and allow restructuring of the Royal Mail balance sheet.”
