Royal Mail is to make deeper cost savings across the business, as its half-year results report a 1% rise in group turnover.

For the six months ended 25 September, Royal Mail saw group turnover increase from £4.39bn to £4.58bn.

Operating profit (before transformation costs) dipped 5% from £342m to £320m, with adjusted pre-tax profit up 5% from £240m to £252m.

UKPIL, the group's domestic letters and parcels division, saw turnover dip 1% to £3.64bn and operating profit (before transformation costs) drop 14.8% from £290m to £247m.

Moya Greene, CEO, said the results were “broadly in line with expectations” driven by a strong parcels performance in its international division GLS and new contract wins and volumes growth on UK parcels.

Indeed, UK parcels volumes rose by 2% and turnover by 3%, while Royal Mail’s international parcels arm GLS saw volumes up by 10% and turnover increase by 9%.

However, UK letter volumes continued to decline. Addressed letters were down by 4%, which Royal Mail said was within its predicted range of 4%-6% decline; marketing mail turnover was down 8%, as Royal Mail said uncertainty ahead of the EU referendum led to a reduction in overall UK marketing activity.

UKPIL collections, processing and delivery productivity increased by 2.2%.

As Royal Mail continues its drive to modernise its business, it intends to make further cost-cutting actions across the operation.

It now aims to reduce costs annually by £600m to March 2018, up from a previous target of £500m.

The business said it was “past the peak of investment”, with net cash investment expected to be no more than £500m per annum compared with an average of £615m over the past three years.

Transformation costs for the UK operation are expected to be between £130m and £160m for the 2016-2017 trading period.

“As always, our performance for the full year will be dependent on the important Christmas period,” said Greene. “Extensive planning, which began in the spring, will help us to manage our busiest time. This includes the recruitment of over 19,000 temporary staff and opening nine temporary parcel sort centres.”

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