Royal Mail Posts 30% Fall In Six-Month Profits

Royal Mail (LSE: RMG.L - news) 's first-half profits have fallen 30% to £116m - hit by redundancy costs while revenues also fell.

It (Other OTC: ITGL - news) blamed higher transformation costs - saying profits would have been flat but for a £94m hit over the six months to 27 September as it continued to make efficiencies and 3,000 staff left the business - a portion of them through voluntary redundancy.

Revenue fell slightly compared to the same period last year, with 4% growth in UK and European parcels offsetting a 4% decline in UK letter revenue.

Operating profits, which exclude transformation costs and reflect pure trading, fell 2% to £342m - a figure that beat market expectations.

Its shares opened more than 4% higher on the FTSE 100 in the wake of the update.

The company said its full-year outcome was dependent on the crucial Christmas season amid stiff competition in the parcel delivery sector.

Royal Mail said it was expecting a decline of up to 2% from Amazon's delivery network but it was winning business from other retailers, including John Lewis and Asos (LSE: ASC.L - news) .

Chief executive Moya Greene said: "We have delivered a resilient performance in the first half, demonstrating our ability to respond to a competitive trading environment.

"We delivered parcel volume and revenue growth in the UK, which continues to be a challenging market. Addressed letter volume decline was at the better end of our forecast range.

"We are driving through a range of product innovations and service improvements at pace, as well as targeting new areas of growth and enhancing our offering."

The group - now back in private hands following the completion of its privatisation - said it had saved £200m in annual costs over the last three years and aimed to save another £500m by 2017-18.

Royal Mail's financial update was announced just 24-hours after rival delivery firm UK Mail (LSE: UKM.L - news) posted an 81% fall in first-half profits .

It took a £10.6m hit from its troubled move to a new automated warehouse, which has struggled coping with odd-shaped parcels (Other OTC: UBGXF - news) .