Member Article

Royal Mail pretax profits fall amidst 'challenging market conditions'

The Royal Mail has posted a mixed set of annual results to the stock exchange this morning as the continued fall in letter revenues begins to bite.

The postal firm saw adjusted pretax profits drop by around 5% in the year up to 27 March, down to £538m from £569m the previous year, with the numbers propped up by growth in its parcel revenue and volume.

Worryingly for the London-headquartered company, which has a history dating back to 1516, is the 3% decline in addressed letters and continued overall decline in letter revenue which dropped by 2%. In contrast, parcel revenue actually jumped by 1% with volumes up 3%.

While letters figures are above forecast, which Royal Mail had predicted would drop by 4 to 6% a year, the numbers still demonstrate the problems the firm faces in making up the ever-increasing shortfall in letters posted in the UK.

In a statement, Chief Executive Officer, Moya Greene, praised the business’ ‘resilient performance’ in ‘challenging markets’ and said the firm was continuing to look at ways to invest to ensure that it continues to grow and remains abreast of changing customer needs.

She added: “We are introducing new and improved products and services and responding quickly to changing customer needs.

“These measures, alongside our emphasis on customer focus and delivering a value for money service, have helped us to maintain our pre-eminent position in UK letters and parcels and driven growth in GLS.”

Yet despite this ‘pre-eminent position’, the firm is still struggling to adapt to changing customer habits, as letter post enters a terminal decline due to email and online options twinned with the continued dominance of online shopping over the high street.

However, most pressingly for Royal Mail, is the pressure to remain profitable and competitive with rival postal companies now that it is entirely privately-owned, as the likes of Amazon and Yodel continue to build logistics networks which could soon rival even the Royal Mail’s reach.

Such are the difficulties that the Independent’s postal economist, Ian Senior, has remarked that the firm’s long-term prospects are ‘not very good’ and that it ‘should only deliver three times a week’.

Speaking to the BBC’s 5live this morning, he said: “You have to realise that value of delivering a parcel is going up, the value of delivering a letter is going down. The great majority of letter mail is not time sensitive anymore.”

He believes that were the Royal Mail to drop from its current six day-a-week service to just three days the postal business would stand to make ‘a huge saving’.

In response, Dave Ward, general secretary at the Communication Workers Union, has urged Ofcom to introduce measures to protect daily deliveries as part of its wider postal review which is due to be completed this year.

He added: “The continued fall in letter volumes and the significant level of competition Royal Mail already faces should serve as a reminder to Ofcom that protecting daily deliveries should be the number one priority of its review.”

Looking to promote your product/service to SME businesses in your region? Find out how Bdaily can help →