Cost Savings Help Royal Mail Profit Rise

Royal Mail (LSE: RMG.L - news) said adjusted operating profit before transformation costs was £740m for the year to 29 March, up 6% on a year ago.

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

A squeeze on costs helped offset a lower than expected performance from its parcel business.

Chief executive Moya Greene said operating profits were in line with expectations.

"Our continued focus on efficiency resulted in a better than expected UK cost performance, offsetting lower than anticipated UK parcel revenue,” she said.

"At the same time we have delivered a large number of innovations at pace as we transform our business.

"Our trading environment remains challenging, but we are now poised to step up the pace of change to drive efficiency, growth and innovation, while maintaining a tight focus on costs."

The company said parcels, worth half of sales and a key focus for growth as the firm modernises its operations to better compete, saw revenue growth held back to 1% by tough price competition, with volumes up 3%.

UK letter sales fell 1% for the year with its European operations posting a 7% revenue rise.

Shares (Frankfurt: DI6.F - news) were down 2.1% in early trading.

Royal Mail's prospects were 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 that 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 £200m.

Royal Mail was privatised in October 2013.