Fall in junk mail leads to woes at Royal Mail

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Junk mail is one of the bugbears for most households, heading straight from the door mat to the recycling bin.
However, for Royal Mail, it is an important revenue driver. Now, a fall in spending, which is being blamed on post-Brexit uncertainty, has led to a drop in half-year profits for the postal service.
The firm has now said it is planning to cut investment along with looking at a further strategy for cost savings, in order to shore up falling revenues.
Royal Mail reported that there had been an eight per cent drop in sales in its marketing mail business.
The firm has blamed uncertainty caused by Britain’s decision to divorce Europe for its falling fortunes. Firms concerned by the fall in sterling have decided to make cuts from their advertising budgets and are therefore not leafleting or sending out speculative letters as much as they were previously.
Royal Mail announced pre-tax profits had dropped by 5.2 per cent to £110 million in the six months up until September 25. The figures were also partly as a result of the lower proceeds from property, equipment and business sales.
However, Royal Mail bosses said the results were “broadly in line” with what they had been expecting. Despite those reassurances, shares in Royal Mail dropped by 7.2 per cent, bringing them to 462.8p.
Royal Mail, which was privatised three years ago, has invested heavily in its infrastructure in order to buy new technology to make its processes more efficient.
However, it is facing a challenging and competitive market in parcels delivery. Royal Mail needs to deal with this arm given that there are far fewer letters being sent through the post. The firm is facing tough competition from the likes of Amazon and Deutsche Post-DHL.
However, the firm says it does have a strategy in place and will be cutting back on its annual capital expenditure by 23 per cent to £500 million.
It says it has now done what was required to modernise its equipment and will also be looking to shave a further £100 million from its annual budgets.
Royal Mail chief executive Moya Green said that the firm would now be ploughing investment only into growth strategies. The company’s European arm, GLS, however has been strong, following the purchase of a parcels firm in the US.

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