Royal Mail profits up, modernisation "beginning to deliver results"

Royal Mail has reported improved financial performance in the first half of its fiscal year, with revenue up 5% and pre-tax profits more than triple those seen in the same period in 2010. Group revenues for the six months up to September 25, 2011, rose GBP 204m to a total of GBP 4.6bn, while operating profits including modernisation costs increased by GBP 45m to GBP 67m.

However, operating costs grew 1%, and Royal Mail said its core postal services were still losing money, though not to quite an extent as last year.

With cutbacks and May’s price rise, the universal service for 29m addresses in the UK lost GBP 41m in this year’s first half, an improvement on last year’s GBP 55m loss. Letter volumes fell 6% year-on-year, but parcel volumes increased 5% “in tough market conditions”.

Profits from the retail network, under Post Office Ltd, and parcel subsidiary GLS, kept the Royal Mail as a whole in profit, the company said.

Royal Mail said today that modernisation was “painful” for it staff, with more than 5,000 leaving in the last 12 months.

CEO Moya Greene said the measures implemented to restore sustained financial viability at Royal Mail were “beginning to deliver results”.

“We have a great deal more to do,” she added. “The economic downturn is proving to be prolonged and, like many other predominantly UK and European-based companies, our trading conditions are challenging.

“Our focus therefore remains on returning to sustained financial viability. We will continue to reduce our costs wherever possible without compromising the six-days-a-week service.”

Royal Mail is currently awaiting EU State Aid clearance for the UK government to take on its historic pensions liability and help restructure its balance sheet.

CWU

The Communication Workers’ Union, which is currently in talks with Royal Mail for a new labour contract, said today that with profits up at Royal Mail, the improvement in financial performance should be shared with workers in the form of higher pay and an end to compulsory job losses.

David Ward, the CWU deputy secretary, said modernisation at Royal Mail, including new equipment and changes to workplaces, as well as voluntary job losses, had been “difficult” for postal workers and customers and it was time for Royal Mail to reward staff.

“Royal Mail workers know what’s going on in terms of competition and change in the industry,” said Ward. “The crucial thing is to reward and motivate postal workers.

“Any redundancies must be voluntary, not forced, and the postal service must be protected. Without that it doesn’t matter what you do.”

Ward added that the progress at Royal Mail proved what could be achieved under public ownership, and “clearly shows” the importance of keeping the Royal Mail Group integrated.

“Breaking this business up would be a disaster for UK postal services,” said Ward.