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Royal Mail warns on competition as profits rise

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Royal Mail has reported a rise in operating profits in its first set of full-year results since floating on the stock market.
Royal Mail warns on competition as profits rise

Profits at the group have increased 12 per cent from £598m a year ago to £671m, boosted by a rise in revenues from its parcel delivery business and a modest increase in sales.

Sales were up 2 per cent to £9.46bn, while revenues in the parcel delivery business rose 7 per cent.

However, the group saw flat parcel delivery volumes and a 4 per cent drop in letter delivery volumes, better than the predicted 6 per cent, but still a potential threat to the business.

The increase in profits comes after the group floated its shares on the UK market, despite the move being widely criticised for undervaluing the business with the float price.

After the initial float price of 330p, shares in the company rocketed as much as 87 per cent in the first few days after the IPO, suggesting the price was too low.

Royal Mail’s chief executive Moya Greene said the group still faces a “couple of headwinds” in the coming years, in particular an intense competitive environment for parcel delivery.

Revenues in the future could be affected by rival TNT Post’s plans to launch a direct delivery services business, the group warned.

Earlier this week, Royal Mail announced it is planning to trial Sunday deliveries of parcels in response to the increasing demand for goods ordered online.

Royal Mail shares fell almost 5 per cent shortly after the market opened, to 548p.


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