Page last updated at 17:00 GMT, Thursday, 14 May 2009 18:00 UK

Royal Mail profits almost double

Royal Mail worker
Plans to part-privatise the Royal Mail are continuing

Royal Mail has seen its annual profits almost double, as all four parts of the business went into the black for the first time in 20 years.

The state-owned firm made a group-wide operating profit of £321m in the year to 31 March, up from £162m a year ago.

This came after its main letter delivery business and its Post Office arm returned to profitability.

The government is continuing plans to part-privatise the Royal Mail, saying outside funds are vital for its future.

Our people have delivered strong financial results and high quality customer service across all our businesses in the face of extremely challenging trading conditions
Chief executive Adam Crozier

The government says one key reason for the need of outside investment is the extent of Royal Mail's pension deficit.

According to Royal Mail's latest figures, this has more than doubled over the past year to £6.8bn, and it warned that a fresh valuation scheduled for later in 2009 could record an even higher figure.

The company had to put £850m into the pension scheme last year.

Royal Mail also warned that mail volumes declined 5.5% during the 12 months, and predicts they will fall by a further 10% in the current financial year due to the recession and the continuing growth of electronic communications such as e-mail.

"Today's figures show that while the headline profits are in the millions, the pensions deficit is in the billions and confirms that the Royal Mail remains in a precarious financial position," said Business Secretary Lord Mandelson.

"With today's results confirming that the pensions deficit has doubled this year and that mail volumes are expected to fall by as much as 10% every year, the need for urgent modernisation and fundamental reform is crystal clear."

Labour rebels

The government wants to sell off a 30% stake in Royal Mail, but ahead of a planned Commons vote on the bill next month, it is having difficulty winning over almost 150 Labour rebels.

One of the bidders for a stake in Royal Mail is likely to be the privatised Dutch postal group TNT.

Unions at the Royal Mail are also strongly opposed to the part-privatisation plans.

They are expected to call for strike ballots next week opposing the flexible working arrangements being implemented by the company's management.

Group-wider annual revenues at Royal Mail were up almost 2% to £9.6bn.

On a pre-tax basis, Royal Mail made an annual profit of £49m, compared with a loss of £77m a year earlier.

Royal Mail chief executive Adam Crozier said the firm had made a "huge effort" to modernise and improve its efficiency.

Annual profits at Royal Mail's letter delivery unit totalled £58m, compared with a loss of £3m for the year before.

The Post Office business made a profit of £41m, compared with a £34m loss a year earlier.

"Our people have delivered strong financial results and high quality customer service across all our businesses in the face of extremely challenging trading conditions," said Mr Crozier.

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