Business Post doubles its profits.

[NEWS]

Profits at the UK division of mail firm Business Post have doubled in the last year.
Preliminary results released by the group this week revealed profit at UK Mail, the UK operation of the company, was up 100 per cent, from £3.2 million in 2006 to £6.4 million last year. Revenues at the firm were also up 124 per cent compared with 2006, rising from £40.4 million in 2006 to £90.3 million this year.

The company said opening the market to competition had allowed the firm to secure a number of major contracts, including wins with the BBC and the Department of Work and Pensions (News, 18 January). It also won Royal Bank of Scotland's supplier of the year award.

But the group said its growth in the market was limited by a requirement to charge customers VAT on its services, something the Royal Mail is not required to do.

Total revenue at Business Post was up 17 per cent from £278 million in 2006, to £326 million this year.

[johno47]

So Fozzie answer this one, your always saying that competition dont make much profit from their mail revenue, then how do you account for this.?

[F0zziebear]

The returns on investment with Downstream Access are small per item. They are shifting over a billion items per year with revenues of £100M+ yet manage 5% returns if they are lucky. These margins will get further squeezed as TNT/UK Mail (Business Post) and DHL fight for these contracts, each trying to offer the service for less money. The stable in this is the cost of getting an item delivered through RM (13.5p).

You also need to consider the returns on investment eslewhere in the postal market. China, India for example might prove to be better investments.

The encouraging thing from RM's persepctive is that UK Mail have iondicated they are not interested in doing E2E, which means that large chunks of their revenues end up back in RM's pockets!

Hope that makes some sense? If not ask away

F0zz

p.s. The inside track on trap six

[johno47]

I take your point Fozzie but the investments in other postal markets in China and India have not changed over the last 12 months, our market has and it cant be down to pure coincidence that profits have doubled over the last financial year, during which time our postal market has opened up, and also every postal worker in the UK is aware that nobody wants end to end delivery, the cost to any company wishing to do that would be enormous and would bankrupt them because the outlay at first would take decades to get back, and also it would be a huge gamble to get the British public to accept them, so no postal workers arent afraid of that, the only E2E that competitors want is town business mail, ive said before that RM ought to get the VAT added to their costs and any competitor entering the mail market must provide an E2E delivery, that to me is competition.
The whole point of competition is to give the public a choice, now all the banter that the goverment and competition puts out misleads the public into thinking they have a choice when they dont the only choice is for big business which really is actualy affecting the general public because business mail subsidises the cost of normal mail so that then has to be increased for the public, and also these costs that are being saved by business does not get passed on to the public, so in reality the public lose out twice.
I know what your going to say, that personal mail is droping and that banks and other business mail is now the main mail volumes, but we still have to deliver it and like i say if competition ever does set up, then we will still have to deliver to the rural and scummy areas and anywhere else they dont want.

[F0zziebear]

You're right about winners and losers. Only big business and a few medium size businesses are either able or have taken advantage of changing supplier.

Many medium size companies don't know about the competitors, or cannot afford to make the change.

My question would be if a company has to offer an E2E proposition then to what extent do they have to provide it? In Germany they have far more regional mail so offer a full E2E service within a region. The UK doesn't have this kind of set-up so it wouldn't work. I've looked into all of these models and my business case was proposed based on this knowledge. Any further information on this would probably be classed as releasing commercial information. However, it is possible to make a return within 5-7 yrs if the right approach is taken.

UK Mail have doubled their profits because their revenues have more than doubed. To me that doesn't necessarily say great investment. It says to me lots of hassle, requirements for really high QofS. For Example you need to get 99% of mail into RM on time to meet many of the customer requirements. Providing a purely Downstream Access business is not viable in the longer term as the competitors will keep under-cutting each others price.

The real advantage to the UK of competiton in my mind is product innovation. However I've seen little of this. I would argue that liberlisation of the market has seen improved processing ability. I would also argue that liberalisation has seen a massive removal of bureaucratic management from RM (including me :-) and an improvement in the quality of service since 2004.

One final point on delivering residue mail. If a competitor gives RM an uneven distribution of mail they get charged more for the remaining residue. By this I mean if TNT gave RM only rural mail to deliver it will cost significantly more than 13.5p per item. So there are actually barriers to entry, which in actual fact is one of the most prohibitive factors when trying to design an alternative E2E business in the UK.

Hope that gives some insight on cherry-picking as I reckon most people including the unions think its a completely level playing field. Ask about this at your WTLL. Your DOM won't have a clue, but ask the Wholesale team to come and speak.

F0zz

[johno47]

Im not on about business mail, im on about the general publics mail, yours, mine and everybody elses, its not fair and the way the goverment and competitors talk about it only misleads the general public, you ask the general public or anybody who isnt in the industry, they all think it means a better deal for them, the point im making is that competition is only for business, and one final point ive worked in RM for a long time and i can tell you that before commercial freedom ive seen competitors accept an item from a customer for them to deliver and because its in the middle of nowhere bring it to RM pay for delivery and then given it to us for delivery, because it cost them less than trying to deliver it themselves and ive seen that many times, so it seems theres a way around it doesnt it.

[F0zziebear]

I am interested to know how many people on this website regularly send mail. I didn't understand your last point. Maybe you can make it again as you may have a point. There are issues about competitor delivery and quality of service. My company found a rival was door dropping and were blaming us and RM.

F0zz

[johno47]

Fozzie it doesnt matter how many people send personal mail on this website, if banks, goverment, busness, or whoever we still have to deliver it, competitors might get the profit from it but we deliver it.
The point i was making is that in the past before the postal markets were opened up, i have seen companies who are now our competitors, collect an item from one of their customers, and because the item was small or it was going to a delivery point that was out of the way for them, and because they could not deliver that item for a cheaper cost than us, they brought that item to a PO stuck stamps on it and sent it by Royal Mail, i have lost count of how many items i have seen being sent that way.
At the end of the day, people still send mail whether its from the public or from business, it still has to be physicly pushed through a letter box, im pretty sure that they havnt got a machine to do that yet, your answers are business orientated which i understand is your area, im on about general public customers, who dont see any benefit from mail competition,the postal market is not fair, no matter what you say it isnt, its business orientated..

[POSTMAN]

When all this stuff started the idea was to buck us up and for the public to have a better service.
IN NO WAY HAS THE GENERAL PUBLIC A BETTER SERVICE!!
Like Johno has said the only thing to happen in all this is the other mail/parcel companys or who ever,is that these guys have made more money out of it END OFF!

There's nothing else,nothing at all!!!

Competition has bought nothing but heartache for many and loads of profits for a few.

Welcome to the EU!

[Big Daz]

I hardly send any mail, mail service these days is much more about post going to the man in the street rather than the man in the street sending post. That is the future rightly or wrongly!