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Royal Mail profit falls, expects letter volume decline

Royal Mail reported a fall in annual profit on Thursday and warned the drop in letter volumes this year would be at the high end of a previous estimate if business uncertainty persists.

The former monopoly said adjusted operating profit before transformation costs fell 6 percent to 712 million pounds ($922 million) in the year to March 26, toward the top end of a company-compiled consensus of 681 million to 719 million pounds.

Royal Mail has seen a worsening of conditions in letters delivery, where uncertainty in the lead-up to and following the Brexit vote has dragged on marketing and business mail, and continues to face competition in its parcels business with Amazon using its own delivery network.

The company is also embroiled in talks with unions over plans to close its defined benefit pension scheme at the end of March 2018 after finding that it would have to double annual contributions to more than 1 billion pounds to keep it running.

The company, which was floated in 2013, on Thursday reiterated its forecast that addressed letter volume would decline by 4 to 6 percent per year, excluding the impact of political parties’ election mailings.

The decline would be at the higher of the end in the current financial year if business uncertainty persisted, it said.

Over the year ended March, comparable letters volumes were down 6 percent, in line with the decline seen for the first nine months.

The company said it remained on track avoid 600 million pounds in annualised costs over three years to March 2018 and it would generate net cash investment of around 450 million pounds this year as it surpasses its “peak” investment period.

“This has been a more challenging period for UK businesses and we have come through it well… Through a combination of our strategic approach to costs and more efficient investment spend, we will support our progressive dividend policy,” CEO Moya Greene said. (Reuters)

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