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Greene says trading is challenging

Royal Mail facing tough parcels and letters markets

Royal MailRoyal Mail confirmed that the parcels and letters business remains competitive as it unveiled plans to continue the drive on costs.

The company said the letters market will continue to decline by between 4% and 6% a year, while parcels will grow by between 1% and 2%, although it expects this to be dependent on the speed and roll-out of  Amazon’s own delivery network.

Adjusted operating profits before transformation costs rose 6% from £729 million to £740m while stripping out these costs saw pre-tax profits plunge from £1.7 billion to £400m.

Group revenue at £9.4bn was flat, as was the core UK business at £7.7bn as a 1% decline in letter revenue was offset by a 1% increase in parcel revenue.

The payroll fell by 5,500 during the year to 130,100 and a management reorganisation programme produced savings of £42m. This is expected to rise to £80m this year.

Chief executive Moya Greene said: “We have delivered operating profits in line with our expectations. Our continued focus on efficiency resulted in a better than expected UK cost performance, offsetting lower than anticipated UK parcel revenue. At the same time we have delivered a large number of innovations at pace as we transform our business.

“Our trading environment remains challenging, but we are now poised to step up the pace of change to drive efficiency, growth and innovation, while maintaining a tight focus on costs.

“At this early stage of the financial year trading is in line with our expectations, but as in previous years our performance will be weighted to the second half and will be dependent on our important Christmas period.

“We remain committed to delivering value for our shareholders and the Board is recommending an increase in the full year dividend of five per cent.”

The board is recommending a final dividend of 14.3p per ordinary share giving a total dividend for the full year of 21p per share, up 5% over the notional 2013-14 full year dividend of 20p per share.

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