Royal Mail profits down, revenues up

Revenues are up but profits are down at Royal Mail, which gave its annual financial report today. Revenues were £9.25 billion in 2016-17 but profits fell by 6% to £712 million.

Commenting on the results, Moya Greene, Chief Executive Officer, said: “We have made good progress against all of our strategic priorities. This has been a more challenging period for UK businesses and we have come through it well.

“Our multi-year focus on costs is a key priority. We are on track to avoid around £600 million of annualised costs in UKPIL by 2017-18. We are past the peak of investment; we now expect net cash investment of around £450 million in 2017-18.

“GLS is performing very well and is growing revenue organically and through acquisitions. Its deep expertise and focus on B2B parcels in multiple geographies – now 41 European countries and seven states in the US – positions it to be a greater force for growth for the Company. We will continue to invest in careful and focused international expansion by GLS.

“Through a combination of our strategic approach to costs and more efficient investment spend, we will support our progressive dividend policy with the in-year trading cash generation of the Group.”

GLS helped Royal Mail revenues considerably. The European delivery business saw revenues increase by 9% to £2.12bn and achieved growth in most of its markets. UKPIL’s revenues however fell by 2% to £7.66bn, chiefly as a result of a 5% fall in letter revenues. Parcel volumes for UKPIL were up by 3%, driven mostly by Royal Mail account parcels.

In its 56 page report, Royal Mail noted: “Our first parcel sorting machine is now in operation in Swindon. It can sort and scan around 10,000 small parcels per hour. Machines are currently being installed at Home Counties North, Greenford and Chelmsford Mail Centres. Subject to successful deployment of the first set of  machines, further machines are planned to be installed over the next two years. We have worked closely with our unions on this.

“We have a denser network of parcel access points for shipping, returns and collections than our competitors. Sending customers can use approximately 11,500 Post Office branches and around 1,200 Royal Mail Customer Service Points to drop off pre-paid items for delivery within the UK. Over 250 Customer Service Points are now open on a Sunday, covering 38 per cent of all delivery points across the UK.

“Parcelforce Worldwide, our express parcels business, has improved services for heavy and bulky parcels. Parcelforce has introduced two new next day services for contract customers. It has also extended the express48large service for consumers. It builds on Parcelforce’s position as a premium quality carrier within the courier express market.”

And on the parcel locker front, Royal Mail added: “GLS has also rolled out its ParcelLockers in four countries across Eastern Europe – the first parcel provider to do so. More than 70 terminals have been installed, offering consumers an easy to use and secure way of receiving their parcels. Other options include collecting parcels from a GLS ParcelShop or delivery within a certain time frame.”  
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