Royal Mail narrows losses in mail delivery business

Royal Mail’s core “universal service” delivery division has narrowed its losses for the half year to the end of September.

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The business unit has reported a loss of £41m for the period, compared to a £55m loss for the same period in 2010.

It attributes the reduction in losses to “tight cost control and price increases introduced last spring”.

The division has seen UK packet volumes rise 5% in the half year to the end of September while letter volumes fell 6%.

Profits from European delivery business GLS of £58 million and Post Office Limited of £55 million have kept the overall Royal Mail Group in the black, with an operating profit of £67m for the period.

Royal Mail is trying to overhaul its businesses to attract private investment and its modernisation programme includes job cuts and working with Ofcom on a new regulatory framework.

Important to the group’s plans will be approval by the European Commission for the Government’s state aid application to tackle the company’s pension deficit.

Group chief executive officer Moya Greene says: “Our financial performance at the Group level in the first half of our financial year, including our cash flow, shows some improvement on the same period a year ago. The necessary measures we implemented earlier in the year – increasing our prices and tight cost control – are a key part of our strategy to return Royal Mail to sustained financial viability. They are beginning to deliver results. But, we have a great deal to do.

“We are half way through our financial year and are operating within a difficult and challenging business environment. The economic downturn is proving to be prolonged and, like many other predominantly UK and European-based companies, our trading conditions are challenging. Our focus therefore remains on returning to sustained financial viability. We will continue to reduce our costs wherever possible without compromising the six-days-a-week service.”

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