The DMA is urging Royal Mail to continue to modernise its business as the company’s latest results show its share of direct mail spend has plummeted £24m in the last 12 months alone.
The 2013 results saw direct mail spend increase 2% to £1.135bn but it has fallen back to £1.111bn this time round. However, the figure is still a significant improvement on 2012, when spend tumbled to £1.063bn.
Royal Mail used the results announcement to warn about increased competition for parcel deliveries; an issue it is already trying to address by trialling Sunday deliveries.
However, its main concern is over what it sees as unfair competition from TNT Post for final mile deliveries. Moya Greene, chief executive, said: “Without timely regulatory action, direct delivery could undermine the economics of the Universal Service.”
The company has already called for Ofcom to investigate the matter, but it has so far refused. The regulator is in fact currently investigating Royal Mail after TNT complained about proposed changes to the pricing of third-party mail deliveries.
Overall, Royal Mail reported a 12% rise in operating profits before modernisation costs to £671m although parcel volumes remain flat.
DMA executive director Chris Combemale said: “Commercial users account for a significant portion of Royal Mail’s turnover. Royal Mail should continue to invest in modernising the business to bring further growth and innovation to its commercial customers.”
The City seemed less than impressed. Nick Hungerford, chief executive Nutmeg Investment Management told BBC Breakfast: “We were all hoping that the parcel volume would increase. There has been more profitability but we haven’t seen any growth. Overall Royal Mail hasn’t been a great stock to invest in – it’s under performed the FTSE 100 by 3% – and the majority of analysts say it will fall further. These are dangerous signs for investors.”
Royal Mail trials Sunday service
Royal Mail demands TNT probe
Ofcom probes Royal Mail charges
Royal Mail reveals price hikes
TNT doubles workforce in London
TNT expands final mile deliveries
Royal Mail ad blitz targets e-sellers
Royal Mail hunts big data experts
Postal deal ‘great news for DM’
Plan for mail ‘Google Analytics’
Parcels boom fuels Royal Mail jobs
Royal Mail Xmas ad hails TV return
Royal Mail profits up; direct mail too