Royal Mail Reports Profits
By Haider Ali
Posted: 20th November 2012 09:36The Royal Mail have helped add to the minute feeling of glee that the UK’s economy may be picking up after reporting a gargantuan increase in profits after six months. Significant to this was the growth in the number of parcel deliveries being made around the country. However the bread and butter of the company has not bucked the trend and continued to decline ala letters being sent.
The operating profits are very impressive in the last six months running up to September. They have reportedly pulled in £144 million, a definite increase during the same period last year. Many feel that online shopping has taken a foothold in the consumer market, hence the decline in city centre shops. But this has only helped Royal Mail expand another avenue of its operating business that may lead to a growth in jobs. Their services to Amazon have been central to their drive in parcel postings.
Even more important is the fact not just how well Royal have performed but how they’ve managed to stave off the competition. Up until now they have struggled with private companies such as UK mail that began to increase its market share eating into Royal Mail’s profits.
Detrimental to the Royal Mail postal business was the decrease in letters sent. Previously such a prominent part of Royal Mail’s service was its first class delivery of letters. The decline can be attributed to a number of factors but the sending of emails and now smart phones with internet access have all but rendered the letter obsolete. The statistics back up this notion with letters decreasing 9%, with only a 2% profit due to the fact stamp prices had gone up from 45p to 60p.
Workers were being laid off as a result and talks were mooted by the coalition Business Secretary Vince Cable that Royal Mail could be partially privatised. Thanks to the increase in revenue these talks will be staved off for the time being and will be welcomed by unions who fear further job losses.
However talks from the top have left many workers worried. An interim report released today stated that “The Royal Mail’s transformation process will only occur with external capital.” These were the words of Royal Mail chief executive Moya Greene who alluded to the fact that despite profits coming in from the main avenues of its business, the company needed to adapt and keep evolving with the times.
She alluded to the losses that were incurred upon the Royal Mail when it was in a deep hole. Facts and figures stated Royal Mail lost £41 million in the same period last year but has turned that around to a pre-tax profit of £99 million. Marketing mail has also been a contributing factor behind Royal Mail’s resurgence in the current economic climate.
An advocate of privatisation, Moya Greene believes that the government has a pertinent role to play in this. Not only does the evolution of Royal Mail have to persist, but a partial sale to raise funds, picking the right company to make this transition and to not make redundancies headline news is a juggling act that has to be performed. Moya Greene believes this is beyond the capacity of the company itself because Royal Mail can’t “generate the investment it requires willy-nilly.”
Should the privatisation process commence it will represent a welcome opportunity to investors. For a decade the company was haemorrhaging losses and deterring investors from providing Royal Mail with a second glance. These profits however will definitely turn a few heads and attract the investment that some in the Royal Mail fraternity sought in order to help increase the company’s balances sheet in the black.