By Rory Gallivan
LONDON--Shares in U.K.'s dominant postal company Royal Mail PLC
fell more than 8% on Wednesday after it reported a fall in
half-year profit and warned that continuing competition from online
retailer Amazon.com Inc. will hamper growth.
Revenue in its fiscal first half ended Sept. 28 was near-flat at
GBP4.53 billion ($7.08 billion) compared with GBP4.52 billion in
the previous year, while net profit fell to EUR125 million from
GBP1.22 billion in the previous year, when it benefited from a
pension plan amendment.
Stripping out exceptional items such as the pension boost, net
profit fell to GBP163 million from GBP168 million.
Royal Mail said revenue in its core U.K. operation was flat,
reflecting a reduction in the rate of growth of the addressable
U.K. parcels market after Amazon launched its own delivery
network.
The impact of Amazon's own delivery service will also limit the
parcels market Royal Mail can address in the next two years, the
company said. They added the U.K. parcels market that Royal Mail
can address will grow by 1% to 2% a year for the next two
years.
Amazon has been ramping up its own delivery capabilities in the
U.K. in recent months. Last month it said it would tap into the
distribution network of newspaper delivery company Connect Group
PLC to launch a same-day pick up service for parcels.
Analysts at Jefferies said Royal Mail's results were better than
expected but added parcel revenue is likely to remain "stable at
best" given competition from Amazon.
"Our performance remains in line with our expectations for the
full year, " said Chief Executive Moya Greene.
"But, as always, this depends on us delivering another great
Christmas, for which we are fully prepared," she added.
Royal Mail, which was privatized last year, can trace its roots
back to 1516 when King Henry VIII ordered the creation of the first
national post service.
One bright spot in its results was growth in its European
parcels business, with revenue up 7% to GBP813 million.
Shares at 1216 GMT were down 34 pence, or 7.2%, at 435 pence
valuing the company at GBP4.4 billion.
Write to Rory Gallivan at rory.gallivan@wsj.com
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