Royal Mail's profits tumble as letters unit hits low

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The Independent Online

Royal Mail's profits plunged by more than two-thirds after an "exceptionally tough" six months saw the number of letters posted fall to levels not seen since the mid-1990s.

The postal group said yesterday that operating profits had fallen to £52m in the six months to 26 September, from £184m a year earlier. It blamed a fall in the number of letters posted, as well as increased competition from rivals and electronic media.

The Government unveiled plans last month to privatise Royal Mail. But the Communication Workers Union hit back yesterday, saying the fact that the business was still making money in difficult circumstances was "the strongest argument yet for keeping Royal Mail publicly owned".

Profits at Royal Mail's Post Office arm halved to £20m, because of a fall in traditional businesses such as benefit payments. However, Royal Mail's letters division proved the biggest drag on the results, swinging from a £48m profit to a £66m loss. The average daily postbag now contains about 68 million items – 16 million fewer than five years ago and back to levels last seen in the mid-1990s.

Moya Greene, who took over as Royal Mail's chief executive in May, said: "Trading conditions over the past six months have been exceptionally tough." She is overseeing a modernisation drive at the business and pointed yesterday to "widespread predictions" that mail volumes could drop by up to 40 per cent within five years. She said: "It's absolutely vital we step up the pace of modernisation to become more efficient."

The group said it had already seen a positive impact from new technology and more efficient working practices. It also hailed the recent government announcement of a £1.3bn package to modernise the Post Office network as "great news".

Package businesses Parcelforce Worldwide and GLS boosted profits, despite increased competition. Ms Greene said both businesses "are unregulated, showing what we can achieve when we are allowed to compete fairly," and called for regulation "suffocating" Royal Mail to be lifted.