Royal Mail has posted an increase in underlying annual profits as a squeeze on costs helped offset a lacklustre performance from its parcel division.
Results today show that adjusted operating profit before transformation costs was up 6 per cent to £740 million for the year to the end of March. Including pension accounting charges, the figure was 9 per cent lower at £611m.
Chief executive Moya Greeene said operating profits were in line with expectations.
She added: “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.”
She said trading in the current financial year was in line with expectations but overall performance would be dependent on the crucial Christmas period.
The full-year dividend for shareholders is to rise by 5 per cent to 21p.
Royal Mail said its core UK business saw flat revenues at £7.76 billion, with underlying profits up 1 per cent to £615m.
There was a 1 per cent decline in letters and growth of 1 per cent in parcels, reflecting the competitive market.
Parcel volumes were up by 3 per cent, with a better performance in the second half, while addressed letters were down 4 per cent, though the group said this was “at the better end of our forecast range”.
During the year, the group, which faces competition from the roll-out of Amazon’s delivery network, cut thousands of posts from its UK business.
Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: “Royal Mail has posted numbers which indicate measured progress in a treacherous environment.
“Whilst the exit of both City Link and Whistl may have removed some of the competition, it also serves to underline how tough this sector can be.
“Meanwhile, the competitive threat of Amazon looms large, with Royal Mail recognising that there will be an impact to its business.”