PostNL in buoyant mood after axing Mondays

PostNL in buoyant mood after axing Mondays

Moving from six to five days of delivery per week has helped profits surge at the Dutch postal service, PostNL. The company currently attempting to give Royal Mail a challenge in the UK, through its TNT Post UK unit, is contending with an 11.5% annual drop in addressed mail volume as customers switch to electronic alternatives.

But it nevertheless achieved stable revenues (at EUR 1.03bn) in the first quarter of the year, while turning last year’s Q1 loss of EUR 99m into a EUR 23m net profit.

PostNL said it saved EUR 41m with a “smooth” transition to its new five-day delivery model, in which the least popular day — Monday — was dropped from the delivery schedule.

The company has also benefited from the downsizing of its network in the Netherlands, which cut costs in the first quarter. Some 11 depots were closed in the quarter as the company continued its centralisation strategy.

Herna Verhagen, the PostNL chief executive, said today that it has been a “good start to the year” for her company.

“The reorganisation delivered strong cost savings that came in early, thanks to the excellent execution of the transition from a six to five days delivery model and the implementation of a leaner overhead structure in Mail in the Netherlands,” she said.

“The cost savings, together with the price increases more than compensated for the volume decline in Mail in the Netherlands. Phasing effects over the remainder of the year will make it more difficult to replicate the strong performance of the first quarter.”

Verhagen said the parcels business was performing “as expected”, with new early pick-up and evening delivery services introduced, while the international business was growing, but not quite so well as last year.

Not including business in the UK, the company said it was expecting its cash operating income for the full year at the “high end” of a forecast range between EUR 180m and EUR 220m.

Divisions

Among the PostNL divisions, the domestic mail unit, Mail in the Netherlands, saw its underlying revenue for the first quarter falling 3% to EUR 497m, with underlying operating income boosted by 50% to EUR 84m.

The Parcels unit was driven by e-commerce growth to see revenue up 2% year-on-year to EUR 201m, while with a 5.3% volume growth, cash operating income grew 4% to EUR 25m.

PostNL’s international unit saw revenue up 1% year-on-year to EUR 409m in the first quarter. Cash operating income was down from EUR 6m to EUR 2m in the quarter as the result of competitive challenges in Germany and the investment in expanding TNT Post UK’s end-to-end mail delivery service in the UK.

UK revenue was EUR 179m, 2.3% up on last year’s first quarter, with German revenues down 6% to EUR 124m as the Postcon business was squeezed by competitors. The company’s Italian business saw revenue up 11% year-on-year to EUR 63m.

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