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Royal Mail shares fall sharply on concerns over competition | Royal Mail shares fall sharply on concerns over competition |
(35 minutes later) | |
Shares in Royal Mail have fallen by more than 8% after the firm warned that rivals - including Amazon - were eating into its parcel delivery business. | Shares in Royal Mail have fallen by more than 8% after the firm warned that rivals - including Amazon - were eating into its parcel delivery business. |
Royal Mail said the rise of delivery firm Whistl could wipe £200m off sales. | Royal Mail said the rise of delivery firm Whistl could wipe £200m off sales. |
It also said competition was endangering its government-mandated Universal Service, which guarantees a single price postal service that delivers to all UK addresses. | It also said competition was endangering its government-mandated Universal Service, which guarantees a single price postal service that delivers to all UK addresses. |
The caution came as Royal Mail reported a small fall in pre-tax profits. | The caution came as Royal Mail reported a small fall in pre-tax profits. |
They dropped to £218m for the six months to 28 September, from £233m in the same period last year. | They dropped to £218m for the six months to 28 September, from £233m in the same period last year. |
Amazon warning | Amazon warning |
In its financial statement, Royal Mail named Whistl, formerly known as TNT, as a direct threat to future profits. | In its financial statement, Royal Mail named Whistl, formerly known as TNT, as a direct threat to future profits. |
The company also said it faced increased parcel competition and that Amazon's recently-launched delivery service could singlehandedly dent its business by as much as 2%, in the short term. | The company also said it faced increased parcel competition and that Amazon's recently-launched delivery service could singlehandedly dent its business by as much as 2%, in the short term. |
In the past six months, Royal Mail's UK parcel delivery division saw revenues fall by 1%. | In the past six months, Royal Mail's UK parcel delivery division saw revenues fall by 1%. |
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. | 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. |
Royal Mail's letter business saw volumes drop by 3%, although this was not as steep a fall as had been expected. | Royal Mail'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 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. |
'Unfettered competition' | 'Unfettered competition' |
Royal Mail boss Moya Greene told the BBC that increased competition was threatening the company's ability to deliver letters to all parts of the UK - a service mandated by law. | Royal Mail boss Moya Greene told the BBC that increased competition was threatening the company's ability to deliver letters to all parts of the UK - a service mandated by law. |
She added that the "cherry-picking" of urban mail routes by competitors "undermines the economics" of its nationwide delivery service. | She added that the "cherry-picking" of urban mail routes by competitors "undermines the economics" of its nationwide delivery service. |
Royal Mail has long called for the regulator, Ofcom, to consider expanding the Universal Service mandate - which ensures mail is delivered across the UK, six days a week, at one fixed price - so that it includes rivals such as Whistl. | Royal Mail has long called for the regulator, Ofcom, to consider expanding the Universal Service mandate - which ensures mail is delivered across the UK, six days a week, at one fixed price - so that it includes rivals such as Whistl. |
That may include forcing competitors to also deliver letters to rural areas at an affordable price - a service for which companies can make little or no profit. | That may include forcing competitors to also deliver letters to rural areas at an affordable price - a service for which companies can make little or no profit. |
"We believe the current regulatory framework does not fully address the problem posed by unfettered direct delivery competition," Royal Mail said. | "We believe the current regulatory framework does not fully address the problem posed by unfettered direct delivery competition," Royal Mail said. |
"We think there is an urgent need for a new framework that will secure the sustainable provision of the Universal Service for the future." | "We think there is an urgent need for a new framework that will secure the sustainable provision of the Universal Service for the future." |
In response, a spokesman for Ofcom said the regulator's own evidence "clearly shows that the service is not currently under threat". | |
"We would assess any emerging threat to the service quickly, in the interests of postal users," he added. | |
Royal Mail has been under increased public scrutiny since it was privatised in October 2013. | 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". |
Royal Mail shares rose above 600p in the months after its flotation, but have been steadily declining since the early summer, to 433.5p. | Royal Mail shares rose above 600p in the months after its flotation, but have been steadily declining since the early summer, to 433.5p. |
Analysis: Kamal Ahmed, BBC Business Editor | 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. | 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. |
Some may dismiss this as special pleading from a company that does not much like competition. | 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. | 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. | "The threat is now," she told me. |