Royal Mail’s MarketReach team will be patting themselves on the back today after the company revealed a 5% increase in direct mail spend, although parcels – the group’s shining star – have taken a hit.
The figures for direct mail are one of the few highlights in the postal operator’s half-year results, which show overall group profits have fallen by a fifth, to £279m, mainly through increased competition in the parcels market.
The results show that letter revenue increased by 1% to £2.2bn, benefiting from the impact of price increases and the uplift from elections traffic. Direct mail revenue, which accounts for around a quarter of letters revenue, grew by 5% to £571m in the period. In May, its results showed direct mail spend had fallen £24m to £1.1bn.
The company stated: “We are the trusted carrier for election mailings across the UK. In the first half of the year Royal Mail delivered around 200 million candidate mailings, mainly due to European and local government elections in May 2014.
“For the Scottish Independence Referendum, we delivered over 7 million campaign mailings and over 5 million poll cards. We are proud to be the chosen partner across the UK for such important mailings.”
However, all is not well in the UK parcel unit, the area of the business which Royal Mail is pinning its hopes on for future growth. While volumes did rise slightly, up 2%, but revenues fell by 1%, with the postal operator citing “pricing pressure in the highly competitive market”.
The company warned about the slowdown earlier this year, blaming rival carriers “aggressively reducing prices”. It had previously warned on the impact of competition from the likes of Whistl (formerly TNT) but Amazon’s new same-day delivery service – unveiled last month – was singled out by the company today.
The online retailer uses a network of newsagents and high street stores to enable customers to pick up their parcels, available within hours of purchase.
Royal Mail chief executive Moya Greene said: “I am pleased with our overall performance. We have delivered 2% revenue growth together with margin expansion, in line with our expectations.
“The UK parcels market remains challenging. As the pre-eminent UK parcels delivery company, we are targeting a number of new, growing areas, and delivered 2% volume growth in a competitive market.”
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