Industrial strife clouds loom as Royal Mail posts better than expected profit

● Chief executive throws focus forward to key festive trading period for group

Royal Mail delivered a mixed bag to the City yesterday– profits down nearly a third but ahead of forecasts, and a warning that potential festive industrial action could hit its second half performance.

Strong growth at its European parcels arm helped Royal Mail’s revenues rise 2 per cent to £ 4.83 billion and achieve an interim pre - tax profit of £ 77 million in the six months to 24 September. That was down from £110 min the same period last year.

Revenues were flat at UKPIL, the UK letters and parcels business. Moya Greene, t he Canadian-born chief executive of the formerly stateowned group, hailed the performance of European parcels, known as General Logistics Systems ( GLS).

“GLS delivered a strong performance with revenue up 9 per cent. Outside the EU, GLS is also growing through selective acquisitions to capture higher growth markets,” she said.

Greene added: “UKPIL revenue was broadly unchanged, having declined by 2 per cent in 2016- 17. Our investment in our business is paying off. We have won new parcels busi - ness; volumes were up 6 per cent. There was a resilient letters performance.”

Royal Mail has been in dispute with the Comm uni cations Workers Union ( CWU) over plans to ditch the company’ sfinal salary pension scheme. The group said it was a “priority” to reach an agree - ment with the CWU, with the mediation process likely to run until Christmas or beyond.

While the company’s annual results hang on the crucial festive period, Greene said the “industrial relations environment” could knock its secondhalf performance.

“Our priority is to reach agreement with the CWU to help underpin the sustaina - bility of the business,” she said.

Revenue sat European parcels, which largely operates in Germany, Italy and France, rose to some £ 1.2bn, up from £942 matt he half-way stage last year.

UKPIL recorded marginally lower revenues of £ 3.62bn, down from£3.64bn.Foc us- ing on the forthcoming festive period, Greene said :“Our performance for the full year, as always, will be dependent on the important Christmas period.

“We are opening six temporary parcel sort centres and recruiting over 20,000 staff. We are also extending opening hours at many of our Enquiry Offices to help retailers and consumers.”

GeraldKhoo, an analyst with broker Lib er um, said: “The results were ahead of our forecasts, with an encouraging revenue performance in parcels.”