Royal Mail posts strong profits after “challenging” year in UK

The Royal Mail (LON:RMG) has posted its annual revenues at £9.8 billion. Whilst the annual profits have jumped by 25 percent, the group have described the UK operations as “challenging”.

As Britons are sending fewer and fewer letters, direct mail volumes are down by 10 percent and print advertising has fallen by 13 percent.

“This [fall] reflected the levels of business uncertainty following the EU Referendum and a strong prior year which saw a one-off return of direct delivery volumes,” the FTSE 100 company said.

UK operations were not all bad, the firm’s parcel business with £3.3 billion of sales, up three percent on the year before.

The oversea’s operations are more promising, operating profits increased by almost a fifth.

“We have made good progress against all of our strategic priorities. This has been a more challenging period for UK businesses and we have come through it well,” said Chief executive Moya Greene.

“Our multi-year focus on costs is a key priority. We are on track to avoid around £600m of annualised costs in UKPIL [UK operations] by 2017-18… We are past the peak of investment; we now expect net cash investment of around £450m in 2017-18.”

“GLS is performing very well and is growing revenue organically and through acquisitions.”

However, despite the strong performance abroad, the Royal Mail described its French and Italian businesses as “challenging”. It has also lost out in Germany due to a rise in the minimum wage.

Overall, an impressive result for the501-year-old firm, with the share price increasing by almost four percent in early trading, sending the stock to a four-month high of 446.8p.

The Royal Mail is facing potential strikes in the UK over its plans to close its defined benefit pension scheme in 2018 after saying it is no longer affordable. The Communication Workers Union said the Royal Mail’s latest offer is “an insult to its employees”.