ONGOING brutal competition and declining letter volumes led to plunging profits at Royal Mail as Britain’s oldest delivery service continued to seek further savings.
Admitting the trading environment “remains challenging”, Royal Mail reported stagnant revenue growth for the year ending 29 March, at £9.3bn. The top-line figures come as the company recorded a four per cent fall in letter volumes during the period. Royal Mail sought to automate its delivery and sorting system as part of a cost-cutting drive in that time.
Despite delivering 1bn parcels during the year, volumes increased by just half of what was expected at three per cent, with parcel revenue inching up only one per cent. The disappointing growth in parcel revenue comes as the firm came under renewed pressure from companies such as Amazon, which has forced down pricing.
Internal restructuring at the firm resulted in £42m of cost savings, with the company expecting to double this figure next year. But efficiency savings and a 2.5 per cent increase in productivity were not enough to prevent pre-tax profits tumbling 76 per cent on a reported basis to £400m, down from £1.7bn the previous year.
Royal Mail said trading for the early stages of the current year is in line with expectations but warned the parcels and letters markets in the UK remain highly competitive. It expects performance to be weighted towards the second half of the year due to Christmas growth.