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DECLINE IN UK LETTERS "WORRYING"

31 Jan 2019, 15:58

https://postandparcel.info/100114/news/ ... -worrying/

Royal Mail Group has issued a nine month trading update for the period ending 23 December 2018. UK and international parcels continued to trade well but the decline in usage in UK letters has accelerated. Robin Byde, director of industries and transport research at Cantor Fitzgerald Europe has said the “sharper decline in UK letters is worrying”.

Rico Back, Group Chief Executive Officer, Royal Mail plc, said: “Overall, our recent trading performance was broadly in line with our expectations. We now confirm that we expect to deliver adjusted Group operating profit before transformation costs of £500-530 million for 2018-19.

“In the UK, our parcels business continued to perform well, with volumes and revenue in the nine months both up 6%. Addressed letter volumes, excluding the impact of elections, were down 8%, with total letter revenue down 6%, largely reflecting the continuing impact of GDPR and a relatively strong prior year comparative period.

“Due to our letters performance to date, we expect addressed letter volume declines, excluding elections, to be in the range of 7-8% for 2018-19. While the rate of e-substitution remains in line with our expectations, business uncertainty is impacting letter volumes. As a result, addressed letter volume declines, excluding elections, are likely to be outside our forecast medium-term range next year. Otherwise, we are reconfirming the outlook and other guidance for 2018-19 provided in our half year results.”

Commenting on the Christmas season he said: “In the UK we recruited 23,000 seasonal workers and opened six temporary parcel sorting centres to make sure we had the capacity to handle the high volumes of parcels and cards through our network. In the December trading period alone we handled 164 million parcels, up 10% compared with last year. Our people delivered a great Christmas. I thank them for all their efforts.

“GLS delivered another good performance with revenue up 13% including acquisitions. Whilst GLS continues to see cost pressures, we confirm that we are targeting adjusted operating profit margins of over 6% for the full year. We will continue to focus on margin protection and as a result we expect to see a slowing in the rate of GLS volume growth next year.”

Robin Byde, director of industries and transport research at Cantor Fitzgerald Europe said: “The sharper decline in UK letters is worrying and this may lead to downgrades to FY20e consensus forecasts. How RMG adapts to this accelerated decline in its letters business is key to the investment case, in our view. Indeed, current policies on dividends and pension contributions may not be sustainable. RMG will hold a pivotal Capital Markets day around the time of the full year statement in May, setting out a new five-year strategy. The attractive dividend yield probably sets a floor for the stock at current levels but we see no compelling BUY case pending the strategy update.”

RMG summary operating performance

Underlying change1

Group revenue
2%

UKPIL revenue
(1%)

Parcels volumes
6%

Parcels revenue
6%

Addressed letter volumes
(8%)

Letters revenue
(6%)

GLS volumes
5%

GLS revenue
8%


DECLINE IN UK LETTERS "WORRYING"

31 Jan 2019, 20:00

Does anyone know how much money we make from D2D? Our office gets a steady stream, but is that a good sign or has the market rate on them plummeted?

DECLINE IN UK LETTERS "WORRYING"

01 Feb 2019, 00:19

I have no idea how much they make from D2Ds but our DOM has told us RM makes good money from us delivering them. If you think how much we used to get paid years ago per item especially for the large items and take inflation into consideration RM must be making a pretty penny from them.

DECLINE IN UK LETTERS "WORRYING"

01 Feb 2019, 08:42

Celgar wrote:I have no idea how much they make from D2Ds but our DOM has told us RM makes good money from us delivering them. If you think how much we used to get paid years ago per item especially for the large items and take inflation into consideration RM must be making a pretty penny from them.

I wonder how viable it would be for RM to have 1 maybe 2 duties per office that would only do d2d if RM is making good money from them

DECLINE IN UK LETTERS "WORRYING"

02 Feb 2019, 12:44

SpacePhoenix wrote:
Celgar wrote:I have no idea how much they make from D2Ds but our DOM has told us RM makes good money from us delivering them. If you think how much we used to get paid years ago per item especially for the large items and take inflation into consideration RM must be making a pretty penny from them.

I wonder how viable it would be for RM to have 1 maybe 2 duties per office that would only do d2d if RM is making good money from them

This would be mean a management admission that D2D's actually do involve extra work and time on your duty, so it will never happen.

DECLINE IN UK LETTERS "WORRYING"

03 Feb 2019, 11:10

The RM particularly like the current system where all our 'products' are delivered together so I don't foresee some ideas such as letters or D2Ds being delivered separately being implemented. Regarding automation in MCs I think we are coming to the end of any more such as eg sequencing flats if RM is unwilling or unable to increase that mail. I do think its probable, and maybe a necessity in terms of prep time, to automate sorting of D2Ds into sets.
My predictions for the big business decision in March are:
1) Plan to automate/collate D2Ds into sets which will save time therefore enabling the SWW commitment.
2) Move all postbox collections onto walks all year. Devise smaller number of SAs and/or hybrid duties to cover post office & firms collections. Significant cost savings.
3) Continue or increase amalgamation of DOs and closure of post offices where practical or possible to reduce current leasing expenditure as most sites no longer owned by RM.
4) Formulate plan to renegotiate the regulation and competition regime which is unfair and results in RM being the most expensive, although best in terms of service, option.

Others have suggested changes to the USO such as different prices or delivery options for distant parts of the UK, an 'every other day' service or a five day operation. These ideas have been floated for years but I would argue our current delivery system is the best and an enviable service.
So in this scenario possibly the most economic changes will be enabled by renegotiating the regulation and competition regime. If the UK leaves the EU this will be made far easier to attain or even something that definitely will happen.

DECLINE IN UK LETTERS "WORRYING"

03 Feb 2019, 12:10

Celgar wrote:Regarding automation in MCs I think we are coming to the end of any more such as eg sequencing flats if RM is unwilling or unable to increase that mail.


There's barely enough flats now to justify any mechanised sorting of them, let alone sequencing. I reckon that we could see RM decommissioning all the T2K machines at some point. With arrival patterns and letter volumes it can only be a matter of time before wave 2 of sequencing gets sent out as manual at every MC in the country everyday

Celgar wrote:3) Continue or increase amalgamation of DOs and closure of post offices where practical or possible to reduce current leasing expenditure as most sites no longer owned by RM.


I reckon that any DO that can't handle 17tonners will either move to a new site that can or be merged into another DO that can

DECLINE IN UK LETTERS "WORRYING"

03 Feb 2019, 17:24

With arrival patterns and letter volumes it can only be a matter of time before wave 2 of sequencing gets sent out as manual at every MC in the country everyday


Our wave 2 already is.
How RM can justify sequencing 50-60 items of mail is beyond me.

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