Member Article

Parcels boost Royal Mail profits

Growth in parcel deliveries has helped Royal Mail deliver significant profit growth, ready for flotation.

The company said operating profits after transformation costs had risen to 144 million from 12 million a year ago.

The profits were fuelled by growing demand for parcel carrying, which accounts for nearly half of overall Group revenue.

Letter volumes experienced a decline of 9%, but thanks to price rises letters derived a 2% revenue increase.

Group chief executive, Moya Greene, commented that Royal Mail’s UKPIL business had been turned around, having posted a loss of £41m in September 2011, now converted to profit of £99m.

In her review of the interim report, she said: “Given the challenging economic conditions in a number of its European markets and a weaker Euro, GLS has delivered a resilient performance.

“Royal Mail has experienced the negative impact of e-substitution, which is driving the structural decline in the traditional letters market.

“Conversely, we are seeing the positive impact that online retailing is having on our parcel volumes. They have grown significantly at a time when the economic environment is challenging. They increased by 4.2 per cent across the Group in the first half to 673 million items (September 2011 646 million) and by 5.6 per cent in UKPIL.”

Business Minister Michael Fallon added: “Today’s results from Royal Mail are encouraging, showing how Royal Mail staff and management together with the Government’s reforms, have put the company on the road to sustainable health and long term viability.

“Parliament decided, via the Postal Services Act 2011, to inject private capital into the company in order to secure the future of the universal postal service. The structure and timing remain open, but Government is committed to doing that to ensure the ongoing viability of the company.”

Dave Ward, Communication Workers Union deputy general secretary, said: “These results are proof that positive change and modernisation can be made in the public sector. There is no need for privatisation as a solution to business transformation.

“Change is being successfully delivered by postal workers daily throughout the company. Postal workers are Royal Mail’s greatest asset and should be recognised as such.

“Royal Mail is doing its bit to change, but the regulator must now step in to protect the universal service. Competition from private companies is undermining Royal Mail’s ability to provide an affordable service to every part of the UK.”

This was posted in Bdaily's Members' News section by Tom Keighley .