Results round-up

Royal Mail posted better-than-expected full year pre-tax profits of £538m, despite a 3% fall in addressed letter volumes, as cost controls took effect.

Overall revenues were down 1% to £9.2bn. Parcel revenues rose by the same amount, while volumes in that division climbed 3%.

A final divdend of 15.1p a share will give a total of 22.p for the year, up 5%.

Adjusted operating profits before transformation costs were up 5% to £742m. Adjusted operating profit margin after transformation costs declined by 10 basis points as a result of increased transformation costs due to Royal Mail's cost avoidance and efficiency programme.

The parcels division has suffered due to competitive pressures from sector peers such as UK Mail, FedEx and UPS. Amazon’s expansion of its UK operations provides another stumbling block for Royal Mail.

Analysts said the main issue has been that rivals have opted to push investment in technology while Royal Mail is lagging behind.

Forecasts had estimated a 7.4% increase in pre-tax profit to £430m. The actual figure of £538m was £30m lower than 2015.

Chief executive Moya Greene said Royal Mail had delivered a “resilient performance in challenging markets”.

The company said its Outlook for UK letter and parcel market trends remained unchanged.

It said the UK parcels, international and letters cost avoidance programme was on track and expected to “avoid a similar level of costs in 2016-17 as the prior year”.

“We continue to seek opportunities to drive efficiency, with transformation costs currently expected to be around £160m in 2016-17. Rate of revenue growth in general logistics systems is expected to slow in 2016-17. We expect total net investment spend to be within £550m -£600m per annum in the medium-term,” it said.

Electricity and gas network operator National Grid posted a jump in pre-tax profit for the year to the end of March, with a particularly strong performance at the interconnectors business.

Pre-tax profit rose 15% from the same period in 2015 to £3.03bn. Adjusted earnings per share were up 10% to 63.5p, while adjusted operating profit increased 6% to £4.1bn and the company recommended a full year dividend of 43.34p compared with 42.87p the previous year.

The company said its growing portfolio of "other" activities delivered a strong year, particularly the interconnectors business, which benefited from increased auction revenues.

"Other" activities contributed £183m more to operating profit than last year at constant currency, led by increased revenues in the French interconnector business due in part to higher price arbitrage between the UK and mainland Europe.

Chief executive John Pettigrew said: “In 2015/16, alongside the strong performance, we also made good progress with important rate filings in the US, and the start of a process to sell a majority interest in the UK Gas Distribution business, which is expected to complete in early 2017.

“The needs of our customers remain at the centre of our business, demonstrated by the significant investment in critical infrastructure in the UK and the US, and over £330 million of savings generated for customers in the UK in the last three years.”

In terms of the outlook, the company said it expects to maintain performance broadly at last year’s level in the UK.

In the US, returns will likely be maintained, ahead of rate revisions in Massachusetts and New York, which are expected to come into effect in late 2016 and early 2017.

National Grid said it does does not expect to repeat the level of performance seen in its "other" activities in 2015/16.

Overall, the performance is expected to remain in line with the group's expectations.