Royal Mail Posts Fall in Profit As EU Uncertainty Hits Junk Mail--Update

(Adds detail and analyst comment)

By Rory Gallivan

LONDON--Royal Mail PLC (RMG.LN) said Thursday that uncertainty around the Brexit vote led to a fall in the volume of marketing letters it handled as it reported a fall in interim profit.

Net profit for the 26 weeks ended Sept. 25 fell to 86 million pounds ($106.6 million) from GBP114 million over the similar period the previous year. Revenue rose to GBP4.58 billion from GBP4.4 billion as growing parcel volumes offset the continuing decline in letters.

Royal Mail's profit had been boosted the previous year by non-recurring income including a property disposal. Underlying profit fell 5% from last year to GBP320 million.

The formerly state-owned U.K. postal service said revenue from marketing mail was down 8% as companies held back on campaigns amid uncertainty before and after the referendum to leave the European Union on June 23.

Shares in Royal Mail were down nearly 10% in afternoon trading at 449 pence, valuing the company at around GBP4.5 billion.

The company said it is now targeting savings of GBP600 million a year over the three years ending 2017/18, up from its previous target of GBP500 million.

"As always, our performance for the full year will be dependent on the important Christmas period," said Chief Executive Moya Greene.

Analysts at Jefferies said the deteriorating mail trends leave the outlook for the year uncertain. They added that the company faces further pressure from increased competition when Deutsche Post DHL Group completes its GBP242.7 million takeover of Royal Mail's smaller rival U.K. Mail Group PLC (UKM.LN).

Write to Rory Gallivan at [e-mail]; Twitter: @RoryGallivan

(END) Dow Jones Newswires

November 17, 2016 10:01 ET (15:01 GMT)

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