ROYAL Mail has said efforts to reach an agreement with the unions over pensions and pay could hit its second-half performance as profits fell by nearly a third.

The firm said pre-tax profits dropped 30 per cent to £77 million for the 26 weeks to September 24, down from £110m over the period last year.

Royal Mail chief executive Moya Greene said: "We had a good start to the year. Group revenue was up two per cent on an underlying basis. GLS (General Logistics Systems) delivered a strong performance with revenue up nine per cent.

"Our investment in our business is paying off. We have won new parcels business; volumes were up six per cent.

"There was a resilient letters performance. Our strategic focus on costs drove a one per cent underlying reduction in adjusted UKPIL (operating costs (before transformation costs).

"As previously announced, we are now in external mediation with the CWU. Our priority is to reach agreement with the CWU to help underpin the sustainability of the business."

On the Christmas period, she added: "Our performance for the full year, as always, will be dependent on the important Christmas period.

"We are opening six temporary parcel sort centres and recruiting over 20,000 staff. We are also extending opening hours at many of our Enquiry Offices to help retailers and consumers."

A Royal Mail spokesman said: "Royal Mail today announced an interim dividend per share of 7.7p.

"This means eligible full-time employees who have been with Royal Mail since privatisation will receive an interim dividend of around £70. Since privatisation, these employees have received dividends before tax of £714, including this interim dividend.

"We are proud to have a large and diverse shareholder base. Approximately 20 per cent of our company is owned by our employees and small retail investors. Our other main owners are pension funds, insurance companies and mutual funds. Pension funds need the dividends from shares like ours to fund pensions in payment.

"We are one of only a small number of companies which pays more into its pension fund than in dividends. Since privatisation, Royal Mail has paid £1.4 billion into employees' pensions and invested £1.5bn in the UK business. In the same period, Royal Mail has paid £800 million in dividends to shareholders (including colleagues)."