Royal Mail launches new print services

Jo Francis
Thursday, May 19, 2016

Royal Mail has announced a new direct marketing hybrid print tool aimed at SMEs and a new photo printing app alongside its year-end results.

The group’s shares fell by 5% in early trading after it reported that overall sales at the business in the year to 27 March rose by 1% to £9.25bn.

Within that, sales at its UK Parcels, International & Letters (UKPIL) were down 1% at £7.66bn while its General Logistics Systems (GLS) parcel business on the continent grew by 9% to £1.58bn.

Operating profit margins in PIL reduced from 6.1% to 5.4% after the division posted an operating profit of £417m after transformation costs of £191m were taken into account. GLS operating margins were maintained at 7.4% and it made an operating profit of €160m (£122.5m).

The adjusted overall group operating margin reduced from 6.4% to 6%.

Subsequent to the year-end, Royal Mail also paid out €55m to settle an investigation by the French Competition Authority over alleged antitrust breaches by its French subsidiary.

Chief executive Moya Greene said letter volumes were down 3% while marketing mail revenue was flat despite 3% growth in the first half of the year. Greene said this reflected “a slowing in UK economic activity”.

She said Royal Mail was “extremely disappointed” to miss its 93% performance target for First Class mail, where it achieved 92.5% next working day delivery.  

Ofcom is launching an investigation into its service.

“We believe the full year outcome was impacted by events outside our control,” Greene stated. “These include 'Cyber Week', which this year fell outside the Christmas exemption period, and significant disruption in parts of the network due to poor weather and road closures.

“Royal Mail believes that if the 2015-16 performance was adjusted for these two factors, an additional 0.31% would be added to the 92.5% performance. We are asking Ofcom to take these issues into consideration.”

Separately, Ofcom's fundamental review into the regulation of Royal Mail and its role in the provision of the Universal Service is expected to be completed early next year. 

Greene also announced that more than 3 billion letters have now been sent using its Mailmark tracked mail system.

In its UK parcels business, Royal Mail is expecting overall market growth to be 4%, but it also cautioned about the potential impact of Amazon’s Amazon Logistics offering.

Amazon is currently Royal Mail’s largest single customer and accounts for circa 5% of parcel revenues.

Royal Mail has signed up new blue-chip contract parcels customers including John Lewis and Marks & Spencer, and has expanded its service offering with new options for eBay sellers and other sellers using online marketplaces.

The new MailshotMaker appears to be a more sophisticated version of the Mailshots Online service originally launched in 2008.

It allows users to choose from three formats: postcard, letter or sealed mailer and customers can also use the Royal Mail database to create targeted mailing lists as well as using their own.

Royal Mail also said it would be extending the digital stamp indicia range of designs for business customers.

The new Swapshots app, which will launch next week, “aims to capture growth in the printed image market” and Royal Mail claims to be the first European postal operator to launch such a service.

It promises to print, post and deliver photos within three days. An individual photo costs 85p.

It’s not yet clear whether fulfilment for the new services will be carried out by Romec in Swindon, or by third-party suppliers.

Further details were unavailable at the time of writing.

Royal Mail is now the sole shareholder in Romec after buying the 49% previously owned by Cofely Workplace in March.

Romec’s facilities management, manufacturing and printing facilities made up the majority of £141m in inter-segment revenues last year. Royal Mail said the firm’s trading performance had improved in the year.

Royal Mail is also diversifying its service offering and is launching a pilot service targeting the £3.4bn vehicle service and repair market, by offering external customers access to its 100 fleet workshops. Royal Mail has more than 47,000 vehicles on the road.

The group’s share price settled at 491.9p after the announcement. The 52-week high is 526.24p, low 416.79p.

The proposed full year dividend is up 5% at 22.1p per share.

 

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