Royal Mail profits soar 1,200%

Royal Mail profits have rocketed by 1,200% – from £12m to £144m – in the first half of the year, although it has been hit by accusations that the rise has been triggered by an “avalanche of junk mail”.
With direct mail – both addressed and unaddressed – now representing half of all the 54 million daily postal deliveries, even the Local Government Association has branded the medium a menace.
Meanwhile long-term critic the Daily Mail – which is a major user of direct marketing – bemoaned: “An avalanche of junk mail: Nearly half daily postbag is now direct marketing… and the Royal Mail wants us to get even more!”
Consumer Focus chief Robert Hammond, however, pointed out the stark reality which many critics fail to recognise. He said: “Some consumers may find it frustrating that almost half of mail received now is direct marketing and that this will be contributing to higher profits.
“However, the hard fact is that without this revenue stream for Royal Mail and the associated profits, customers could in fact face paying more for their stamps.”
There has actually been a dramatic fall in the number of letters delivered by Royal Mail, but the total number of parcels sent rose 5.6% year on year to 491 million, while parcel revenues jumped 13%.
The increase in profits is no surprise, following widely reported predictions that Royal Mail’s turnaround was paying dividends, but few foresaw the extent of the recovery.
The Government is now likely to press ahead with privatisation plans. Business minister Michael Fallon said: “Parliament decided, via the Postal Services Act 2011, to inject private capital into the company in order to secure the future of the universal postal service. The structure and timing remain open, but Government is committed to doing that to ensure the ongoing viability of the company.”
Responding to criticism by the Daily Mail – and other sections of the press – DMA executive director Chris Combemale commented: “We see Royal Mail’s belief in advertising mail is a great growth opportunity. However, the industry must continue to improve its creative approach and use of data to ensure that direct mail remains relevant and of interest to consumers. Poor consumer insight leads to junk mail, which is bad for business. Cutting out unnecessary direct mail marketing will help to not only change consumer perceptions but also improve companies’ return on investment.”

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