Royal Mail looks to DM to help reverse £120m loss

Royal Mail is set to ramp up its media and data services as it looks to reverse a £120m loss in its core business.

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The postal operator says revenue declined to £9.2bn in the financial year 2010/11, down from £9.3bn a year earlier. The loss was blamed on a 4% fall in core mail volumes.

The postal service’s UK Letters, Parcel and International business swung to a £120m loss from a £20m profit in 2009/10.

Operating profit fell to £39m, from £180m.

Moya Greene, chief executive of the Royal Mail, says: “We have to develop new products and services to meet the needs of our customers and generate additional revenues to offset the decline in earnings from our letters business.”

The postal operator will look at expanding its range of advertising solutions, such as the recently launched Advertising Mail, designed at increasing the use of direct mail.

It will also look at developing new data services such as the NCOA Alert, launched last year to tackle data fraud.

It will also continue to develop DM product innovations, such digitally enhanced direct mail introduced in May.

News of losses comes days after MPs passed a bill that aims to make Royal Mail more attractive to potential private sector bidders. The Postal Services Bill includes a Government commitment to take on the firm’s pension deficit from March 2012.

Plans are also in place to restructure Royal Mail’s balance sheet in a bid to reduce its levels of debt.

Greene says that the passing of the act “provides an enabling framework within which key issues for Royal Mail can be addressed”.

There is concern in the direct marketing industry, however, that the need to boost revenues ahead and after privatisation could lead to further price increases for commercial customers using direct mail, stunting growth for a channel already under pressure from digital media.

Alex Walsh, head of postal affairs for the DMA, says of the Bill: “There’s no incentive for Royal Mail to improve efficiencies or cut costs. So, it’s highly likely that commercial mailers will be saddled with price increases along the line.”

In response, a spokesman for Royal Mail, says: “”Our objective is to ensure the Universal Service is put on a sound, secure and sustainable basis.”

In May, prices for higher volume business packet and mail services increased by an average of 10%.

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