Royal Mail Doubles Earnings as Web Retailing Boosts Parcels

Royal Mail Group Ltd., the state-owned postal service that the U.K. government is looking to sell, said full-year profit more than doubled as growth in web-based shopping spurred parcel deliveries.

Operating profit for the 52 weeks ending March 31 was 403 million pounds ($611 million), versus 152 million pounds a year earlier, Royal Mail said in a statement. While sales gained 5 percent to 9.28 billion pounds, parcel revenue rose 9 percent.

“Parcels are a major contributor,” Chief Executive Officer Moya Greene said in the release. “Our strong brand, extensive networks and high quality of service makes us well placed to benefit from our leading position in the parcels market.”

Royal Mail, one of Britain’s biggest employers with about 150,000 staff, has sought to adapt its letter-focused network to more lucrative package delivery in the face of competition from TNT Express NV of the Netherlands and Deutsche Post AG’s DHL Express unit. The 360 year-old company handled 1.46 billion parcels in the year, spurred by demand from e-retail clients.

‘Encouraging’

The U.K. government said the earnings figures indicated efforts to put Royal Mail on a sustainable footing were succeeding and confirmed plans for a share sale in the fiscal year ending March 31 to bring access to private capital.

“These results from Royal Mail are another encouraging step,” Business Minister Michael Fallon said in an e-mailed statement. “We are committed to a sale but its structure and timing remain open.”

Royal Mail this month appointed Equitini Group to manage the distribution of 10 percent of its shares to employees following any sale.

The company reports operating profit after “transformation” costs. Before those expenses it had earnings before interest, tax, depreciation and amortization of 915 million pounds, of which 665 million pounds was reinvested, mainly into expanding parcel activities and “managing the decline” of letter volumes.

A modernization plan to automate letter handling has seen the closure of nine mail centers this year and 25 in total.

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