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LONDON (Alliance News) - Royal Mail Thursday reported higher profit for its last financial year as a better-than-expected performance in reducing costs in the UK offset lower-than-expected revenue in its parcels business, and the company said it will step up its transformation plan in the face of a challenging trading environment.

Amid a declining letters business and a cut-throat parcels market highlighted by the failure of City Link and Amazon's plans to launch its own delivery network, Royal Mail said it would stay focused on its transformation plan and cost cutting.

"Our trading environment remains challenging, but we are now poised to step up the pace of change to drive efficiency, growth and innovation, while maintaining a tight focus on costs," Chief Executive Moya Greene said.

Royal Mail reported a pretax profit of GBP569 million for the year ended March 29, up from GBP421 million a year earlier, even though revenue declined to GBP9.42 billion from GBP9.46 billion. It raised its full-year dividend to 21.0 pence from 20.0 pence.

Revenue was flat in the company's UK parcels and letters business, as letter revenue fell 1% while parcel revenue grew by the same amount, although operating profit before transformation costs improved to GBP615 million from GBP608 million as it cut costs. Revenue in its European logistics business grew 7%, more than the company expected, and operating profit improved to GBP115 million from GBP108 million.

Royal Mail said it still expects volume growth in the UK addressable parcels market to fall to about 1% to 2% a year in the short-term, although this will depend on how quickly Amazon Inc rolls out its own delivery network.

The company said trading so far in the new financial year is meeting the company's expectations, and as always, its performance will be weighted to the second half of the year and the key Christmas trading period.

Analysts said the results had met expectations, and the growth of the European logistics business was a positive, but expressed concern about the company's outlook and its reliance on cost-cutting to drive earnings growth.

"Whilst the exit of both City Link and Whistl may have removed some of the competition, it also serves to underline how tough this sector can be. Meanwhile, the competitive threat of Amazon looms large, with Royal Mail recognising that there will be an impact to its business and, even ahead of this, there was a slight decline in revenues," said Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers.

"With limited revenue growth potential in the near term, it's down to on-going cost control to improve earnings," Panmure Gordon analyst Gert Zonneveld added.

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Markets: The FTSE 100 is trading flat mid-morning supported by mining stocks, while the market continues to digest somewhat doveish comments by the US Federal Reserve. The pound rose to a two-day high against the dollar after data showed that UK retail sales recovered at a faster-than-expected pace in April.

US Stock futures are pointing to a broadly lower open on Wall Street. The DJIA and S&P 500 are currently indicated to open down 0.2%, and the Nasdaq 100 down 0.3%.

FTSE 100: flat at 7,004.31
FTSE 250: down 0.1% at 18,120.12
AIM ALL-SHARE: down 0.1% at 762.24
GBP: up at USD1.5683
EUR: up at USD1.1158
GOLD: flat at USD1,209.67 an ounce
OIL (Brent): up at USD65.87 a barrel
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Other Top Corporate News
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Smiths Group said its outlook for the current financial year remains unchanged, as its underlying revenue and headline operating profit fell slightly year-on-year in the nine months to May 2. The engineering company said the slight fall in revenue and profit reflects continued like-for-like revenue growth in Smiths Medical and its Flex-Tek unit which is being offset by declines in Smiths Detection, Smiths Interconnect and John Crane. However, it said headline operating profit cash conversion is strong at 96% in the financial year to date.
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United Utilities Group reported annual results that beat analyst expectations and its dividend was increased as expected, but pretax profit after exceptional items fell substantially. The water company's pretax profit for the year ended March 31 fell to GBP341.6 million from GBP543.3 million a year earlier, while before exceptional items, pretax profit came in at GBP447.0 million, up from GBP388.0 million, as revenue rose to to GBP1.72 billion from GBP1.68 billion. United Utilities lifted its final dividend to 25.14 pence, resulting in a total dividend for the financial year of 37.70 pence from 36.04 pence, and it reiterated its commitment to grow the dividend in line with inflation over the next five years.
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National Grid reported profit before exceptional items that beat analyst expectations but said pretax profit after those items fell. The power grid operator increased its dividend as expected, but not as much as analysts had forecast. Pretax profit was GBP2.62 billion in the year ended March 31, down from GBP2.74 billion a year earlier. Before exceptional items and remeasurements, pretax profit rose to GBP2.87 billion from GBP2.58 billion, as revenue rose to GBP15.20 billion from GBP14.80 billion. National Grid will pay a final dividend of 28.16 pence per shares, up from 27.54 pence, leading to a full-year dividend of 42.87 pence, up 2% from 42.03 pence.
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Halliburton said it has reached an agreement with BP Exploration & Production, part of BP, to resolve remaining issues, which includes indemnities between the parties and dismissal of all claims against each other, relating to the April 20, 2010, Deepwater Horizon well explosion in the Gulf of Mexico.
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Booker Group confirmed that it will buy Musgrave Retail Partners GB, which comprises the Londis and Budgens convenience store chains, from Irish food wholesaler Musgrave Group, while also reporting growth in profit in its recently-ended financial year. Booker said it will purchase Musgrave Retail Partners for GBP40 million in cash. Londis operates 1,630 convenience stores, while Budgens operates 167 stores. Booker expects the acquisition to be earnings neutral in the first year of ownership, but will be earnings enhancing thereafter. Booker Group reported a pretax profit of GBP138.8 million in the year to March 27, up 14% from GBP122.1 million the prior year, boosted by a 2% increase in revenue to GBP4.8 billion from GBP4.7 billion. Booker Group will pay a total dividend of 3.66 pence, a 14% increase on the year before.
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Dairy Crest shares dropped after it reported a huge fall in profit in its recently-ended financial year as it booked various costs relating to investments and disposals, and as revenue fell due to further struggles in its Dairies and its Spreads And Butter businesses. The dairy company reported a drop in pretax profit for the year ended March 31 to GBP22.1 million, less than half the GBP54.2 million profit it made the prior year, as it booked a GBP36.3 million charge associated with investments, site disposals, the sale of its Dairies operations and the consolidation of Spreads and Butter production in Kirkby and Severnside.
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Just Eat said it will launch a placing and open offer of shares to raise GBP445 million to back its acquisition of Australian online takeaway company Menulog Group Ltd, announced earlier this month. Just Eat said the funding will be raised via an accelerated bookbuild, run by JPMorgan Securities PLC and Goldman Sachs International.
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Automotive retailer and distributor Inchcape said it has started 2015 in line with its expectations on the back of growth across its markets and solid demand in both its vehicles and aftersales businesses. Inchcape said its revenue in the four months to the end of April was GBP2.19 billion, down 0.9% year-on-year due to the weakness of the euro but up 4.1% in constant currencies. Like-for-like revenue was down by 0.3%, but up 4.9% in constant currencies.
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SSP said it will pay its maiden interim dividend for the first half of its financial year after pretax profit rose as an improvement in its operating margin offset a slight fall in revenue. FTSE 250-listed SSP, which operates food and drink concessions such as Upper Crust in airports and train stations, said its pretax profit in the six months to the end of March rose to GBP16.4 million, from GBP10.9 million a year earlier. The rise in profit meant the group declared its maiden interim dividend of 2.1 pence per share.
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Electrocomponents announced that Finance Director Simon Boddie will be stepping down at the end of the first half of its current financial year, as it posted a decline in pretax profit for its recently-ended financial year due to continued declines in the UK. The electronics company said that its performance had been "disappointing", with investments not yet delivering an expected step-up in revenue growth and with its UK business remaining in decline. Electrocomponents posted a pretax profit of GBP96.1 million for the year to end-March, down from GBP101.1 million a year before, as revenue declined to GBP1.266 billion from GBP1.27 billion. Electrocomponents maintained its final dividend at 6.75 pence per share, and its total dividend at 11.75 pence.
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QinetiQ Group reported a higher pretax profit for its last financial year after the previous year was hit by a big impairment, while revenue fell as it continued to be hit by the withdrawal of US military from Afghanistan. The defence services company reported a pretax profit of GBP105.4 million for the year to end-March, up from GBP84.0 million a year earlier when it had booked a GBP41.9 million goodwill impairment that wasn't repeated. Underlying operating profit fell to GBP11.3 million, from GBP113.7 million as revenue declined to GBP763.8 million from GBP782.6 million, as growth in its EMEA Services division was offset by a drop in revenue in the Global Products unit that's being hurt by the winding down of recent conflict zone operations by the US military.
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Electra Private Equity said its diluted net asset value per share rose by 12% in the first half of its financial year and it will pay an interim dividend. Electra said its diluted net asset value per share rose to 3,548 pence, while its share price rose by 19%, against a total return of 5% on the FTSE All-Share index.
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The Rank Group said all of its businesses have continued to make progress and it expects its full year results to meet management expectations, as increased visitor numbers at its casinos pushes up revenue while its Mecca bingo clubs show little growth. Like-for-like revenue grew 4% in the 46 weeks to May 17, with total revenue rising 3%. In the 20 weeks to May 17, like-for-like revenue rose 5% and total revenue 4%. In the 46 weeks, revenue rose 7% at Grosvenor Casinos thanks to a rise in customer visits and venue revenue, whilst Mecca revenue remained fairly flat. Casinos revenue was up 8% in the 20 weeks, while Mecca was up 1%.
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Bwin.Party Digital Entertainment said its revenue in the first quarter to the end of March was down, echoing other bookmakers in bemoaning punter-friendly football results which ate into gross win margins, as the online gaming operator also said it expects takeover talks with its various suitors to complete in the next few weeks.
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AIM Movers
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Tristel shares are up after it said it traded ahead of its expectations in the first ten months of its financial year and has raised its pretax profit guidance on the back of the good performance. Concurrent Technologies is also doing well after it said it expects revenue in the first half of 2015 to be ahead of its forecasts and significantly up on they year as the good momentum seen in the second half of 2014 continued into the new year. Tungsten Corporation has lost a fifth of its value after it said it is in talks on a proposed joint venture with an unnamed global financial institution and is actively exploring strategic options for its Tungsten Bank business. Alkane Energy is down after Ofgem opened investigations to see if five generators that took part in the December 2014 capacity auction provided false or misleading information to National Grid about planning consents for some of their proposed generating units. Alkane Energy said it "does not believe it is in breach of the capacity market rules" and said it will co-operate with the investigation.
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Other Top Economics And General
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UK retail sales recovered at a faster-than-expected pace in April, on the back of non-food store sales, data from the Office for National Statistics showed. The volume of retail sales including auto fuel expanded 1.2% month-on-month reversing a 0.7% fall in March. Sales were expected to grow 0.4%. Likewise, excluding auto fuel, sales increased 1.2% after staying flat in March. Economists had forecast a 0.2% rise for April.
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A new UK government-owned company has been created to sell off more than GBP23 billion in assets this fiscal year, Chancellor of the Exchequer George Osborne said. Speaking at the Confederation of British Industry's annual dinner, Osborne said Shareholder Executive, the body responsible for the government's holdings in companies such as Royal Mail and uranium enrichment company Urenco, will be unified with UK Financial Investments, which takes charge of the taxpayer's holdings in bailed out banking assets. The new company, named UK Government Investments, will be tasked with getting good value for taxpayers as shares in Lloyds Banking Group, UK Asset Resolution assets, Eurostar and some loans made to students are sold off.
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Only a "few" Federal Reserve members anticipate raising US interest rates in June, according to the minutes of the central bank's April 29-30 meeting. Back in March, "several" members said the Fed was on track to raise rates in June, but policy makers appear more reluctant to tighten given the fragile nature of the economic recovery. April's dismal retail sales report came out days after the meeting and was therefore not factored in, meaning the Fed is even less likely to seriously consider a summertime rate hike than these minutes would indicate. Fed members say they will be keeping a close eye on incoming economic data.
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The manufacturing sector in China remained in contraction in May, albeit at a slower pace, the latest survey from HSBC revealed with a two-month high PMI score of 49.1. That was shy of expectations for a score of 49.3, although it was up from 48.9 in April. It also remained beneath the line of 50 that separates expansion from contraction. "The Flash China Manufacturing PMI pointed to a further deterioration in operating conditions in April, with production declining for the first time in 2015 so far," said Markit economist Annabel Fiddes.
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The Eurozone economy lost growth momentum for a second successive month in May, flash data from Markit showed. The composite Purchasing Managers' Index dropped to 53.4 in May from 53.9 in April. The reading was expected to remain unchanged at 53.9.
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The euro area current account surplus declined for the second consecutive month in March, with the drop more than the expectations of economists, due to a decrease in the surplus on goods trade and lower primary income, data published by the European Central Bank showed. The current account surplus dropped to a seasonally adjusted EUR18.6 billion from EUR27.3 billion in February. Economists expected a bigger surplus of EUR26 billion.
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Iraqi government troops were digging into the town of Khaldiya as they tried to prevent further advances by Islamic State forces in the western province of Anbar after the extremist militia captured its capital at the weekend. Security forces, backed by local militiamen and US-led warplanes, were engaged in fierce fighting against the jihadists near Khaldiya, about 30 kilometres east of Ramadi, which fell to Islamic State forces Sunday, according to Majeed al-Fahdawi, a leader of Anbar's Bufahd tribe.
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Afternoon Watchlist (all times in BST)

13:30 US Jobless Claims
13:30 US Chicago Fed National Activity Index
15:00 US Philadelphia Fed Manufacturing Survey
15:00 US CB Leading Indicator
15:00 US Existing Home Sales
15:00 EU Consumer Confidence Preliminary
15:30 US EIA Natural Gas Storage change
16:00 US Kansas Fed manufacturing activity
18:30 US Fed's Stanley Fischer speech
18:30 EU ECB President Draghi's Speech
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Friday's UK Corporate Events

Close Brothers Group - Q3 Interim Management Statement
Jersey Electricity - Interim Management Statement
F&C Capital & Income Inv Tst - Half Year Results
Quintain Estates & Development - Full Year Results
Servern Trent - Full Year Results
Medicx Fund - Half Year Results
Sirius Real Estate - Full Year Results
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Friday's Key Economic Events (all times in BST)

00:00 US FOMC Member Williams speech
n/a Japan BoJ Monetary Policy Statement
04:00 Japan BoJ Press Conference
07:00 Germany Gross Domestic Product
07:45 France Business Climate
09:00 Germany IFO - Expectations
09:00 Italy Industrial Sales/Oorders
09:00 EU ECB President Draghi's Speech
09:30 UK Public Sector Net Borrowing
10:00 Italy Retail Sales
13:30 US Consumer Price Index
14:30 UK BOE's Governor Carney speech
14:30 Japan Bank of Japan Governor Kuroda Speech
14:30 EU ECB President Draghi's Speech
14:45 US Markit Manufacturing PMI Preliminary
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