Royal Mail's fiscal H1 operating profit rises to £283M from £144M a year ago as sales climb 3.8% to £4.52B; parcels accounted for 51% of group revenue

LONDON , November 27, 2013 () – Royal Mail Group Ltd., the U.K. postal service that sold shares in an initial public offering last month, said first-half earnings almost doubled, spurred by parcel deliveries for online retailers. Operating profit after some costs for the six months ended Sept. 29 rose to 283 million pounds ($459 million) from 144 million pounds a year earlier, Royal Mail said in a statement today. Sales climbed 3.8 percent to 4.52 billion pounds, with parcels accounting for 51 percent of group revenue.

The company sold shares for 330 pence each in October, in the U.K.’s biggest state asset sale since British Rail was broken up in the 1990s. The stock rose as high as 563.5 pence today. Royal Mail, one of Britain’s biggest employers with about 150,000 staff, has sought to adapt its letter-focused network to more lucrative package delivery in the face of competition from companies such as TNT Express NV.

“The online retail structural change is a durable change and that has really played to our strengths,” Chief Executive Officer Moya Greene said in a telephone interview. Internet shopping accounts for about 9 percent of Britain’s total retail spending and is likely to grow to 12 percent over the next two years, the executive said.

The stock climbed as much as 5.7 percent, and was up 4.9 percent at 559 pence as of 9:25 a.m. in London, giving the company a market value of 5.63 billion pounds. TNT Express rose 0.7 percent to 6.68 euros in Amsterdam and Deutsche Post AG climbed 1.8 percent to 25.30 euros in Frankfurt.

Parcel Deliveries

While online sales slow during the summer, volumes of parcel deliveries from businesses to consumers and from consumers will grow as much as 5.5 percent annually, Greene said. The executive declined to comment on the outlook for the Christmas period.

Royal Mail benefited from a one-time value-added-tax credit of 35 million pounds in the first half, as well as lower depreciation and amortization of 10 million pounds.

“Results proved better than expected, thanks to one-off items but also as a result of underlying cost containment and price increases,” Susanna Invernizzi, an analyst at Barclays, said in a note to investors today. “We believe the group will continue to benefit from revenue growth and margin expansion.”

The board intends to propose a final dividend of 133 million pounds for the full year, according to today’s statement. Royal Mail’s net debt retreated 183 million pounds in the first half to 723 million euros.

The postal service concluded an outline agreement last month with the Communication Workers Union on pay and job security beyond the three years previously offered. There has been “good progress” in talks with the union, Greene said today.

--Editors: Robert Valpuesta, Benedikt Kammel

To contact the reporter on this story: Kari Lundgren in London at

To contact the editor responsible for this story: Benedikt Kammel at

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