Royal Mail has warned that its six days a week deliveries are potentially at risk due to intense competition from across the industry, from the likes of Amazon, which now delivers its own parcels, as well as smaller companies.
The Royal Mail, which can trace its roots back almost 500 years to 1516 and the reign of Henry VIII, and was floated on the Stock Exchange just over a year ago, has seen its profits fall by around £74m. In the six months to late September, profits plunged by a shade over a fifth from £353m to just under £279m. Now it says rivals are 'cherry picking' highly profitable business contracts which could threaten its daily delivery service, potentially making it no longer financially viable.
Parcels make up half of RM's turnover, and it fears that Amazon alone could cut growth in this market from 4 to 5% a year to 1 to 2% annually.
This month, shares in Royal Mail dipped by more than 8% to 43op, although when the FTSE-100 listed postal service company floated they were priced at 330p.
Unlike the competition, and under the Postal Services Act 2011 which allowed it to be privatised, RM is obliged to deliver to everyone across the UK for the same price, and this universal service was protected under the Act until at least 2021. Royal Mail Chief Executive Moya Greene has described this obligation as 'precious.' But now it is urging Ofcom, the industry regulator, to re-assess the rules.
Potential changes could mean RM only delivers five days a week, or gets given a subsidy. In many areas, last collections of the day are already being made at earlier times.
In particular, arch rival Whist, previously TNT, could see Royal Mail's revenue plummet by £200m in as little as three years. It now delivers to doorsteps in some bigger cities, but not in rural parts of the country or on a daily basis.
To add to Royal-Mail's woes, in the first half of the year, the volume of letters sent fell by 3%, although this was better than the expected 4-6% decrease, and revenue from letter deliveries rose by 1% as increased prices offset the fall in volume.
At the same time, Ms Greene insisted (RM) was "fully prepared" for Christmas, clearly the busiest time in Royal Mail's year, following heavy investment in new technology over the last three years.
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