Royal Mail profits down, Amazon & Whistl blamed

Royal Mail saw a drop in profits in the first half of 2014. Operating profits (excluding transformation costs) declined to £279m (21%) in the six months to 28th September.

Whilst parcel volumes grew by 2%, pricing pressure (remember they reduced some prices?) meant that Royal Mail’s UK parcels revenues declined 1% to £1.5bn in the period. UK letter revenues rose 1% to £2.2bn but volumes dropped 3%. Revenues were aided by price increases and election mailings (for the European Election and the Scottish Referendum).

The cause of the drop, according to Royal Mail was stiff competition. Amazon’s own efforts were cited as hampering growth and whistl (previously known as TNT) also called outs a key competitor.

Moya Greene, Royal Mail’s chief executive, said: “The UK parcels market remains challenging. As the pre-eminent UK parcels delivery company, we are targeting a number of new, growing areas, and delivered 2% volume growth in a competitive market. We had a better than expected performance in UK letters.”

Of course, one of the real problems has been Royal Mail’s slow innovation. Even a year into privatisation is hasn’t proved nimble in utilising its assets to respond to the new trends in delivery: same-day, convenient pick-up points, weekends.

I find it particularly absurd that the opening times at my local sorting office, so I can pick up parcels I’ve missed, only offer one time after 14:30 a week and are closed entirely on a Sunday.

Royal Mail also noted that the universal service was proving a burden to their competitiveness, Tamebay wrote about that earlier.