Royal Mail itself has registered a decrease in pre-tax profits, which fell 6% in H1 2014. Royal Mail has argued that Amazon’s move to switch some of its ecommerce deliveries to the new in-house delivery network will reduce the growth rate for the UK addressable market to 1-2% for about two years, up to half its estimate for UK parcel volume growth in the medium term. Royal Mail said that along with impacts of competition with other carriers, its UK parcel business saw revenue down 1% year-on-year in H1 2014, to GBP 1.46 billion, although parcel volumes were up 2%.
The mailing company’s revenue grew 2% year-on-year to GBP 4.53 billion thanks to growth in the European business, GLS, with the domestic business remaining flat compared to 2013 on a GBP 3.7 billion revenue as domestic operating profit after transformation costs fell 23% to GBP 172 million.
The UK letter business actually achieved 1% growth in revenue, to GBP 2.24 billion, mainly thanks to 200 million election mail pieces delivered ahead of European and local elections in May 2014, and 13 million ahead of Scotland’s independence referendum. Royal Mail said the letter volume dropped 3% year-on-year inH1 2014, better than the expected 4-6% decline.
GLS, Royal Mail’s Amsterdam-based European parcels network, saw its revenue up 7% year-on-year to GBP 13 million, with operating profit up 6% to GBP 56 million. Royal Mail said that overall its labour costs grew 2% year-on-year, to GBP 2.6 billion, with other operating costs flat compared to H1 2013, as “tight” cost controls were implemented. The firm said productivity improved by 2.1%..
Royal Mail said that online shopping is driving UK parcels market volume growth, and that including both business-to-consumer, consumer-to-consumer and business-to-business deliveries, the market as a whole is seeing annual volume growth rates of about 4% in the medium term.
In May 2014 there were later acceptance times and weekend collections introduced for retailers and ecommerce merchants, which produced extra volume. Royal Mail has also extended access to its click and collect service with the Post Office, Local Collect.
Royal Mail said that looking forward, it is expanding tracking capabilities for parcels, with the investment in 76,000 new hand-held scanners. The “majority” of parcels will include barcodes by Christmas 2015.
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