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Royal Mail: operating profit falls but results show modernisation is working

Royal Mail Group has announced that its operating profit fell to £52 million (US$84 million) in the six months to the end of September as mail volumes continued to decline and competition from rival operators and electronic media increased.

The operating profit in the first half of the 2010-11 financial year represented a return of just over 1% on Group-wide revenues of £4.4 billion (US$7 billion).

The Letters business of the Group moved from operating profit to loss during the first half of the year with letter volumes falling to an average daily postbag of 68 million items – 16 million fewer than the average daily volume just five years ago, when volumes peaked. The average postbag is now at levels last seen in the mid 1990s.

The fall in mail volumes was by far the single biggest factor behind the drop in Group revenues. Revenues fell by significantly more than the operating profit fall – demonstrating that the modernisation of operations with new technology and more efficient working practices is having a positive impact but also underlining the crucial need to step up the pace of transformation.

First and Second Class mail, Standard parcels and key business mail services are beating their targets according to the latest preliminary figures with the company determined to strengthen yet further its focus on delivering excellent customer service. 

Moya Greene, Royal Mail Group’s CEO, said: “Trading conditions over the last six months have been exceptionally tough. I pay tribute to our frontline employees for the way they are getting on with the essential modernisation changes we are introducing.

But with widespread predictions in the postal world that mail volumes will continue falling, perhaps by up to 40% over the next five years in the UK, it’s absolutely vital we step up the pace of modernisation to become more efficient to ensure we preserve the all-important, one-price-goes-everywhere Universal Service for all our customers and keep providing the services our customers need and want.”


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