Cost savings help Royal Mail deliver profit rise | Compare Business Costs Online Today

Cost savings help Royal Mail deliver profit rise

admin The Business Post
LONDON (Reuters) – Britain’s postal firm Royal Mail <RMG.L> said trading in its new fiscal year had started in line with expectations as cost cuts helped ease tough parcels trade to deliver a rise in full year profit.

The group, controversially privatised in October 2013, said adjusted operating profit before transformation costs was 740 million pounds for the year to March 29, up 6 percent on a year ago and ahead of forecasts of 712 million.

Including pensions accounting and other one-off items profit on a reported basis fell 8.7 percent on 2014 to 611 million pounds, off group revenue up 1 percent.

Royal Mail’s shares have fallen 19 percent below their post-privatisation peak on concerns over a squeeze on parcel prices caused by over capacity in the market, the threat of a rival letter-delivery service, regulatory disputes and concerns over its ability to cut heavily fixed costs in order to grow margins.

They were down 2.1 percent in early trading.

The firm said on Thursday that while moves such as longer business hours and improved service options had helped increase parcel volumes by 3 percent, price pressure had held revenue growth back to 1 percent. Parcels are worth half of group sales.

Letter revenues fell 1 percent for the year.

Royal Mail chief executive Moya Greene told Reuters she expected a similar trend in its new fiscal year, where the group will again focus on cost control to help improve profits.

A 1 percent fall in costs, helped by office closures, was ahead of expectations for a flat performance. Combined with efficiency improvements, Royal Mail’s operating margin rose 40 basis points to 7.9 percent.

The firm’s prospects were also given a boost last week when Whistl suspended a rival mail delivery service after losing financial backing for a UK-wide rollout.

Royal Mail had warned a Whistl rollout, focused on only the most profitable parts of the UK, could undermine its six-days-a-week universal service and hit revenue by 200 million pounds.

(Reporting by Neil Maidment; editing by Kate Holton) provides news articles from Reuters as a service to its readers, but does not edit the articles it publishes.Royal mail

Copyright 2015 Reuters.