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Parcel rivals rattle Royal Mail

Wednesday, May 21, 2014 - 01:59

May 22 - Newly privatised Royal Mail posts a 12 percent rise in full-year profit, But as Hayley Platt reports it is taking steps to address increasing competition in both parcels and letters.

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Posting a profit. The UK's newly privatised Royal Mail has reported a 12 percent rise on the year. It's the first set of results since the company's IPO last September and a big improvement on previous years of losses. But ETX Capital's Joe Rundle wasn't impressed. SOUNDBITE: Joe Rundle, Head of Trading, ETX Capital, saying (English): "They disappoint in two ways for me, the headwinds from increased competition in the letter delivery and also parcel delivery is becoming tougher with the margins decreasing. That's really where the growth area is." While its letter delivery business is falling between 4 and 6 percent annually as customers use email instead. The boom of online shopping has helped the parcel delivery market. It's now 51 percent of Royal Mail's turnover - but, unlike letters, there's a lot of competition in parcels Royal Mail's trying to match rivals with a new Sunday delivery service - the first in its near 500-year history. But Robert Cole of Reuters Breakingviews believes their problems go deeper. SOUNDBITE: Robert Cole, deputy editor, Reuters Breakingviews, saying (English): "It's not just the growth of the market that's the problem or the opportunity, it's the cost base. Royal Mail has a huge cost base because it's been obliged to deliver door to door and pick up from my beloved post boxes." Privatisation helped Royal Mail raise more than £3 billion. But many thought the 330p offer price was too cheap. SOUNDBITE: Joe Rundle, Head of Trading, ETX Capital, saying (English): "I think the underlying tone was that they needed a successful float because they've got to get rid of Lloyds and in the future RBS, so they couldn't have an unsuccessful float. So it was sold cheaply but I think the long term prospects for Royal Mail, the government's probably best rid of it." Shares in the group have risen more than 70 pence since the float. They fell 7% after the full year results.

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Parcel rivals rattle Royal Mail

Wednesday, May 21, 2014 - 01:59