Royal Mail has said its moves to slash second-class deliveries will take “many months” to roll out, as it reported its first annual profit for three years in its maiden results since its £3.6bn takeover by the Czech billionaire Daniel Křetínský.
Its parent group, International Distribution Services (IDS), is transforming the postal service after the sector regulator, Ofcom, gave permission in July to end second-class post on Saturdays and reduce the service to alternating weekdays from Monday to Friday.
The chief executive of IDS, Martin Seidenberg, said the changes were limited to a pilot running across 35 delivery offices so far, and the “massive task” of expanding them nationwide would continue well into 2026.
He said the group had “always said it would take many months” to implement the shake-up, adding: “We will take the time to get this right. We owe it to our customers that we are not flipping back and forth.”
IDS said Royal Mail made a pre-tax profit of £194m in its financial year to the end of March, up from a loss of £143m last year, as parcel volumes increased.
Seidenberg said it had been a “year of change” for the group. “We still have a lot to do to ensure we have a profitable and successful Royal Mail for the long term but it does put us in a good position at this point in time,” he said.
The return to profit was driven by a 6% rise in parcel volumes, a more sophisticated pricing system and better cost control, the company said.
The results come a year after IDS agreed to be bought by EP Group, which is controlled by Křetínský. The drawn-out £3.6bn takeover was completed in April after a UK government review under national security laws. Křetínský owns a collection of businesses including energy assets, and stakes in Sainsbury’s and the football club West Ham United.
However, despite its improved financial performance, last month Royal Mail said it had missed its targets by delivering 75.9% of first class mail within one working day of collection. It is well behind the 93% target set by Ofcom.
The regulator gave the green light to reducing second-class deliveries in response to a decline in posting letters and to help Royal Mail cut costs and make the service more reliable. It also lowered targets for first-class post to be delivered the next day from 93% to 90%, and for second-class within three days from 98.5% to 95%.
Under its universal service obligation, Royal Mail must continue to deliver first-class post Monday to Saturday and second-class letters within three working days.
IDS said it had started “detailed work” before changes to second-class deliveries. It added it would continue to invest in postal lockers, with the company increasing its out-of-home locations by almost 70% to about 24,000.
“Thanks to the hard work of our people and our investment in transformation, Royal Mail returned to profit for the first time in three years, marking an important milestone in the company’s turnaround,” Seidenberg said.
“With IDS’s acquisition by EP Group complete and universal service reform decided, now is the time for us to drive the business forward and capitalise on our momentum.”
The group also reported that its parcel delivery business GLS made an adjusted operating profit of £286m, down £34m compared with the year prior, which it blamed on “a challenging macroeconomic and regulatory environment in Germany and Italy and foreign exchange movements”.
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