Post Office Ltd cost-cutting helps profits, but not sales
Britain’s Post Office Ltd cut its dependence on state subsidies last year, with underlying operational profits up 14%, but revenue was down across the board. The state-owned operator of the network of 11,500 post offices in the UK issued its latest annual report last week showing profits up thanks to greater cost controls.
Revenue was down 4% year-on-year to £979m, driven particularly by the loss of parcel business in the wake of increased Royal Mail prices, and a dip in government services revenue following a cut in fees for drivers’ license applications.
Paula Vennells, the Post Office Ltd chief executive, said the performance had been “pleasing” considering the economic conditions last year, as well as the disruption caused by strike action.
“The decline in Mails revenue was, of course, disappointing, but we remain confident that we have the right commercial strategy in place, and importantly the right retail mind-set, to ensure we respond to chancing customer requirements,” she said.
Mails and retail revenue fell by 4.6% to £390m during the year, with the Post Office stating that the revenue fall was primarily because of the reduction in parcel volumes in an “increasingly price-sensitive market”, as well as lower stamp sales.
It wasn’t just the Mails division that saw its revenue fall last year, however. Financial services revenue fell by £2m to £279m (0.7% down), government services revenue fell by £18m, while Telecoms revenue fell by 3.9% to £124m.
The Post Office is in the process of modernising its network and launching new services to generate revenue, however.
The second year of a three-year transformation programme has now seen more than 2,000 post office branches modernised. The original estimate was that over the three years, 6,000 branches would be turned into either “Main” branches with a full range of services or “Local branches” with a basic range of postal services available. Last November a further £640m was provided by the UK government to support the transformation of the Post Office business.
Vennells said customer satisfaction in the transformed branches was running “at over 95%”, with longer opening hours proving popular.
Last year saw new products launched including the Drop & Go mailing service and self-service kiosks to help customer access. This year, Post Office Ltd is planning on entering the mobile phone market making use of the EE network infrastructure.
The company has now completed the modernization of more than 2,000 post offices. Post Office Ltd had estimated that it would transform 6,000 branches by the end of March 2015.