Royal Mail's profit rises 4% in H1

[TrueBlueTerrier]

http://uk.reuters.com/article/idUKTRE5B91VH20091210" onclick="window.open(this.href);return false;

LONDON (Reuters) - Royal Mail Group's operating profits rose 4 percent in the first half of this financial year, although declines in mail volume pushed revenues lower, the state-owned company said on Thursday.

Operating profit rose 7 million pounds to 184 million pounds in the first half of 2009/10 on the same period last year, helped by its modernisation programme, it said.

It said it was too early to assess the impact of recent strike action by its 121,000 staff but said the backlog was cleared quicker than in the past thanks to those postal workers who continued to work, greater automation and the use of temporary workers.

Postal workers last month suspended strike action until after Christmas but have yet to reach a definitive agreement to resolve a long-running row over jobs, pay and modernisation.

The Communication Workers Union (CWU) said the results showed its members deserved more, setting the stage for tough talks in the new year.

"Postal workers are now working harder than ever before. We believe they deserve to be rewarded for the success they have brought to this change process which has delivered a 4 per cent increase in half year profits," Dave Ward, CWU deputy general secretary, said in a statement.

"A pay freeze is no way to thank staff who have seen colleagues leave and workloads rise," he added.

Britain this year suspended plans to sell off up to 30 percent of Royal Mail, blaming adverse market conditions.

PENSION PROBLEM

The company said its pension plan consumed more than 800 million pounds in cash in the last financial year and that it remained a "daunting challenge to fund."

The pension fund deficit is being revalued with the historic deficit widely expected to be at least 10 billion pounds compared with 3.4 billion pounds at the last valuation three years ago, it added.

The economic downturn, intensified competition and increased electronic communication contributed to a fall of 73 million pounds in group revenues, it said.

Mail volumes in Britain were down about 8 percent, despite a strong performance from packets and parcels.

"The future for Royal Mail holds major challenges and the outlook remains uncertain as mail volumes continue to fall in the UK and around the world and as low interest rates affect sales of financial services through the Post Office," Adam Crozier, chief executive, said in a statement.

"But we also see great opportunities."

He pointed to packets and parcels in particular as being a potential stimulus for future growth, providing a significant proportion of revenues and profits.