Royal Mail profits up 12% to £671m - here are 3 big threats it faces

Royal Mail saw a 12% rise in annual operating profits to £671m from £598m in the year to March 30.

Group sales were up 2% to £9.46bn, thanks to a 7% increase in parcel sales.

However, letter delivery volumes dropped 4%.

Will Royal Mail’s stellar performance continue? Here are the three big threats it needs to watch out for:

1. Competition

Royal Mail profits may have surged but its chief executive Moya Greene admits the postal service is “facing a couple of headwinds”.

In a statement, Greene said: “Our performance was in line with our expectations. We are facing a couple of headwinds. The competitive environment on the parcels side is more intense. We are taking steps to remain the leader in this growing market.”  

She added: “On the letters side, the headwind is direct delivery and we have strategies in place to counter its adverse financial impact. However, without timely regulatory action, direct delivery could undermine the economics of the universal service.”

2. Privatisation

Royal Mail’s controversial privatisation is being scrutinised by the government. Last month, Business Secretary Vince Cable came under fire for flogging off the Royal Mail at a “ridiculous” low price.

3. Dispute with TNT

Royal Mail is in a bitter dispute with TNT over delivery charges. TNT has complained to Ofcom about Royal Mail’s charges to deliver items collected and sorted by TNT. Royal Mail has said that if TNT gets its way, Royal Mail could end up losing more than £200m in revenue within three years.


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