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Royal Mail falls behind on turnaround plan; posts first half profit

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By Reuters
Royal Mail falls behind on turnaround plan; posts first half profit
FILE PHOTO: A Royal Mail postal worker stands in the yard of a sorting office in Altrincham, Britain October 12, 2017. REUTERS/Phil Noble   -   Copyright  Phil Noble(Reuters)

(Reuters) – UK’s Royal Mail <RMG.L>, which is embroiled in a dispute with its largest union, on Thursday said its transformation plan to expand its parcels business internationally was behind schedule, even as it posted a first-half operating profit.

The former British postal monopoly, which had announced a five-year turnaround drive in May, said it was investing more ahead of the general election and Christmas, which would impact productivity for the rest of the year.

Shares of the FTSE 250 company dropped 11% in early trade.

Overall operating profit for the six months ended Sept. 29 benefited from higher parcel volumes and came in at 61 million pounds, compared with a loss of 4 million pounds last year.

The company, which targets high growth over the next few years from its ground-based parcel network — GLS, said the division posted a near 17% jump in adjusted operating profit including acquisitions, bolstered mainly by markets in Germany, France and Italy.

However, London-based Royal Mail, which temporarily staved off a postal strike by the Communications Workers Union (CWU), said it expects further margin pressure in UKPIL next year, with lower productivity as a threat of potential strike remains.

The company, which was fined 50 million pounds ($64.62 million) in 2018 by regulator Ofcom, reported a wider operating loss of 25 million pounds in first half at its core UK parcels, international and letter division due to a provision for the fine.

(Reporting by Yadarisa Shabong and Shashwat Awasthi in Bengaluru; editing by Uttaresh.V)