Royal Mail is to build three automated parcel hubs as part of a plan to introduce a second delivery for parcels.
The move is part of a £1.8 billion investment in network enhancements, digital initiatives and new ways of working.
The second delivery, which will be fully operational by 2023, will consist of Next Day parcels, typically purchased online from retailers the evening before, and larger items more appropriate for van delivery. Royal Mail said that in many cases, the delivery would be less than 24 hours after the order is made.
Customers will continue to receive a delivery of letters and all other parcels earlier in the day via Royal Mail’s network of postmen and women.
The company expects Next Day parcels to outpace growth in other delivery time categories. This initiative will help facilitate that growth.
And it said that the separate processing and delivery of Next Day and larger items would generate a reduction for Royal Mail in the cost of handling parcels, including small items. It would also make it easier for postmen and women to deliver their usual round as heavy, bulky items will no longer be in their mailbag.
Royal Mail has also set out plans to collect returns from customers at their home, and offer a range of in-flight redirection options where consumers are not going to be at
* Revenue at Royal Mail’s main UK operating company, UKPIL, was flat at £7.6 billion last year reflecting the fact that growth in the parcels operations was offset by a decline in letters. Adjusted operating profit was down 32 per cent at £332 million.
Total parcel volume was up eight per cent last year, while parcel revenue was up seven per cent. Addressed letter volume was down eight per cent.
GLS, Royal Mail’s international parcels business, increased revenue by eight per cent to £2.9bn, but adjusted operating profit was down nine per cent at £177m.
Chief executive Rico Back said: “Our ambition is to build a parcels-led, more balanced and more diversified international business, delivering adjusted group operating profit margin of over four per cent in 2021-22, increasing to over five per cent in 2023-24.”
“At the heart of our refreshed strategy is a UK ‘turnaround and grow’ programme. In 2018-19, after a challenging year, we delivered productivity improvements and cost avoidance in line with our revised expectations. Over the next five years, through a focus on new ways of working and extending our network, we will ensure a contemporary UK Universal Service.”
“The investment in the UK, and expected lower cash flow in the early years, means we are rebasing the dividend and changing our dividend policy. This is not a decision we have taken lightly as we know how important the dividend is to our shareholders. We have sought to find an appropriate balance between sustainable shareholder returns, and investing in the future.
“GLS is a key part of our strategic plan and will make a major contribution to our product and geographical diversification. By combining the best of Royal Mail and GLS, we will enhance our cross-border proposition in this large, growing and global market.”
