'Operational changes' stressed as Royal Mail returns £3m profit

Royal Mail has declared a pre-tax profit of £3 million for the first half-year the financial year for the first time in five years.

The company returned a £55 million profit on day-to-day operations, compared to a £147 million loss in the same period last year, although the trading profit amounted to a return of 1.3% on a six-month turnover of £4,120 million.

Welcoming the return to profitability at the mid-point of the three-year renewal plan, Royal Mail Chairman Allan Leighton said that although Royal Mail had not yet achieved a turnaround, the company's head was above the water. But he warned that there was "still a long way to go before we achieve sustainable profitability".

He said: “Crucially, Royal Mail has still not implemented key operational changes in most of the letters business.”

The one pence rise in basic First and Second Class postage introduced in May was credited as the prime driver pushing the profit on operations in the letters business to £161 million in the first half of the year.

But Mr Leighton said: “We did not earn this profit from efficiency gains through much-needed operational changes. Royal Mail is facing very heavy additional costs. In October, we paid the first 3% of a 14.5% pay increase to Royal Mail’s 165,000 postmen and women, and we have to cover the cost in excess of £340 million a year for this higher pay package. In addition, we will be making increased payments of significantly more than £100 million a year to ensure the pension fund continues to meet all its obligations."

However, while the Post Office and Parcelforce Worldwide both made "significant progress" in the six-month period to September 28 but they remained loss-making. Parcelforce Worldwide’s losses on operations were slashed by 40% - down to £59 million in the half year, compared to £98 million in the same period a year ago. The Post Office reduced its loss to £91 million in the half year, a 13% improvement driven mainly by cost reductions as nearly 500 urban branches were closed as part of a plan to axe 3,000 offices.

Also, the unofficial strike action, followed the Royal Mail's financial half-year and the impact of the strike action was not reflected in the results.

Mr Crozier said: “We must now rebuild customer confidence in Royal Mail in addition to the existing work of pressing ahead with the renewal plan.”

(SP)