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Royal Mail warns of threat to UK-wide letter deliveries | |
(35 minutes later) | |
Royal Mail has warned that rival delivery firms are endangering its government-mandated Universal Service, which guarantees delivery of letters to all of the UK. | |
"The threat is now," the company's boss, Moya Greene, told the BBC. | |
The company also said increased parcel delivery competition, from firms such as Amazon, could wipe hundreds of millions of pounds of its revenues. | |
The caution came as Royal Mail reported a fall in pre-tax profits. | |
They dropped to £218m for the six months to 28 September, from £233m in the same period last year. | |
Royal Mail named delivery service Whistl, formerly known as TNT, as a direct threat, saying the new firm could wipe £200m off Royal Mail's revenue by 2018. | |
The firm also warned that online retailer Amazon's direct delivery service could hurt Royal Mail's growth by as much as 2% in the next couple of years. | |
Royal Mail also called for the government to reconsider the Universal Service obligation, which ensures mail is delivered nationwide, six days a week at one fixed price. | |
Flat revenues | |
In the past six months, the company's letter business saw volumes drop by 3%, although this was not as steep a fall as had been expected. | |
The slower decline was due to election pamphleteering, particularly relating to the Scottish Referendum, for which Royal Mail delivered seven million campaign mailings and over five million poll cards. | |
The company's UK parcel delivery division saw revenues decline by 1%, largely due to increased competition. | |
However the firm's international parcel delivery service, GLS, fared well, with revenue up 7%, helping the company's overall revenue to rise by just £5m to slightly above £4.52bn. | |
Analysis: Kamal Ahmed, BBC Business Editor | |
Lurking on page 8 of today's numbers is the real story in Royal Mail's results - that the business is warning of a "material risk" to the universal service obligation". | |
Now, some may dismiss this as special pleading from a company that does not much like competition. | |
But I have just spoken to the Royal Mail's chief executive, Moya Greene, and she is clear - if action isn't taken now, Royal Mail's ability to fund the six day letter delivery service across the UK will come under possibly unmanageable strain. | |
"The threat is now," she told me. | |
While sounding a warning about new competitors, Royal Mail boss Moya Greene emphasised that the firm's performance remains in line with expectations. | While sounding a warning about new competitors, Royal Mail boss Moya Greene emphasised that the firm's performance remains in line with expectations. |
"But as always," she added, "this depends on us delivering another great Christmas, for which we are fully prepared." | |
Chris Beauchamp, an analyst at IG, said Royal Mail's warning about reduced parcels growth "will send a winter chill down the spine of investors". | |
"The impression given from the statement is that Amazon is likely to become a permanent fixture in Royal Mail's reporting, much like the weather (whether warm or cold) is for retailers," he added. | |
Royal Mail has been under increased public scrutiny since it was privatised in October 2013. | |
In July, a group of MPs voiced concerns that the taxpayer may have lost out by about £1bn after Royal Mail shares were "undervalued". | In July, a group of MPs voiced concerns that the taxpayer may have lost out by about £1bn after Royal Mail shares were "undervalued". |