Royal Mail returns to profit for first time in three years

Royal Mail has returned a profit for the first time in three years as the company attempts to turn around its fortunes under new owner, Czech billionaire Daniel Kretinsky.

In its first set of results since being taken over by Mr Kretinsky's EP Group in April, the company reported annual profits of £12m, excluding voluntary redundancy (VR) costs, compared with losses of £336m the previous year.

Last month, Royal Mail stopped delivering second-class letters on Saturdays in some areas as a cost-cutting measure, and estimates it will take 12 to 18 months to implement the changes across its network.

It said in the year to 31 March, parcel volumes increased 6%, while letters declined 4%.

The company has had a difficult few years, losing money and market share amid a steep decline in letters being sent. It has also been hit by staff strikes and a steep fine for missing delivery targets.

The 500-year-old firm is making attempts to modernise, shifting its focus to more profitable parcel deliveries.

Martin Seidenberg, chief executive of International Distribution Services (IDS), which owns Royal Mail, said the return to profit marked an "important milestone in the company's turnaround".

"Under the ownership of EP Group we will continue to invest in the rapid expansion of our out of home network across both businesses to meet the changing needs of our customers around the globe," he added.

Taking into account redundancy costs, Royal Mail made a loss of £8m in the year to March.

Last week, Royal Mail said it would roll out 3,500 solar-powered postboxes across the UK to enable customers to deposit small parcels.

The takeover by Mr Kretinsky, who owns stakes in West Ham United football club and supermarket Sainsbury's, marked the first time Royal Mail has been taken into foreign ownership.

Royal Mail was founded by Henry VIII and still carries the royal cipher on its vans.

EP Group has agreed to maintain the one-price-goes-anywhere Universal Service Obligation (USO), which currently means it has to deliver letters six days per week, Monday to Saturday, and parcels Monday to Friday.

But the USO is currently under review, with Royal Mail suggesting to regulator Ofcom that reducing second-class deliveries to every other weekday would save up to £300m a year and give the business "a fighting chance".

The conditions agreed by EP Group include keeping the brand name and Royal Mail's headquarters and tax residency in the UK for the next five years.

The government retained its so-called "golden share" in Royal Mail, which requires it to approve any major changes to the company's ownership, HQ location and tax residency.