Royal Mail Posts £430m In Full-Year Profits

Royal Mail has reported an operating profit of £430m in its first full-year results since privatisation.

The figure for the 12 months to March, after transformation costs, is up from £403m in the previous year - a rise of 6.7%.

But the company warns it is facing a number of "headwinds" including increasing competition in parcels.

The Royal Mail also warned a move to direct delivery of letters by rivals TNT Post could threaten the financial sustainability of the universal service without action by the regulator Ofcom.

The company is legally obliged to deliver to every address in the country for a single price, and it warns the TNT plans could lose the firm £200m.

Chief executive Moya Greene said: "We can't just sit around waiting for the damage to be done, there has to be action now. Ofcom's duty is to secure the financial sustainability of the Universal Service Obligation."

But an Ofcom spokesman said: "We do not believe that there is presently a threat to the financial sustainability of the universal postal service.

"We have a duty to secure the universal service, and if we identify any future threat we have powers to step in to protect it.

"We would expect Royal Mail to take appropriate steps to respond to the challenge posed by competition, including improving efficiency."

Parcels now contribute more than 50% of Royal Mail's revenue - £4.82bn - after a 7% rise, although volumes remained flat.

On Wednesday, the firm announced it will start delivering parcels and opening delivery offices on Sundays, in response to the rapid growth of online shopping.

Ms Greene said: "The competitive environment on the parcels side is more intense. We are taking steps to remain the leader in this growing market."

The group's letters performance was at the better end of expectations, with revenues down 2% to £4.6bn on a year earlier.

The amount of letters fell by 4%, but the trend improved over the year due to better economic conditions and one-off factors such as energy companies writing to customers about price rises.

Shares in the firm opened more than 3% lower. However at 553p the stock is still much higher than the 330p valuation placed at the time of the flotation.

The Government still own a 30% stake in Royal Mail, which was sold off last autumn.

But the privatisation was heavily criticised for not delivering value for money for the taxpayer.

The Government robustly defended the sale against sharp criticism from the National Audit Office, which found that "deep caution" shown by ministers when pricing shares in the Royal Mail cost the taxpayer more than £1bn.

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