Royal Mail has made a profit for the first time in three years, its owner said in its first results since its £3.6bn takeover by the Czech billionaire Daniel Křetínský.
International Distribution Services (IDS), which owns Royal Mail, said the postal service made a pre-tax profit of £194m in its financial year ended in March, up from a loss of £143m last year, as parcel volumes increased.
The IDS chief executive, Martin Seidenberg, said it had been a “year of change” for the group.
The return to profit comes a year after Royal Mail’s parent company agreed to a takeover by EP Group, which is controlled by Křetínský.
The group completed a drawn-out £3.6bn takeover of IDS in April after a UK government review under national security laws. Křetínský owns a collection of businesses including energy assets, and stakes in Sainsbury’s and the football club West Ham United.
However, despite its improved financial performance, last month Royal Mail said it had missed its targets by delivering 75.9% of first class mail within one working day of collection. It is well behind the 93% target set by the regulator, Ofcom.
Ofcom recently gave Royal Mail the green light to drop Saturday deliveries of second-class letters, and to provide services on alternate weekdays from Monday to Friday rather than every day as it attempts to cut costs and make the service more reliable.
The regulator also lowered targets for first-class post to be delivered the next day from 93% to 90%, and for second-class within three days from 98.5% to 95%. The changes take effect from next April.
IDS said it had started “detailed work” before changes to second-class deliveries. It added it would continue to invest in postal lockers, with the company increasing its out-of-home locations by almost 70% to about 24,000.
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“Thanks to the hard work of our people and our investment in transformation, Royal Mail returned to profit for the first time in three years, marking an important milestone in the company’s turnaround,” Seidenberg said.
“With IDS’s acquisition by EP Group complete and universal service reform decided, now is the time for us to drive the business forward and capitalise on our momentum.”
The group also reported that its parcel delivery business GLS made an adjusted operating profit of £286m, down £34m compared with the year prior, which it blamed on “a challenging macroeconomic and regulatory environment in Germany and Italy and foreign exchange movements”.