TSL: Profit down as parcel deliveries continue

Image copyright Getty Images Image caption A tearful Jenny Clark gives her resignation speech at the final conference

Transcontinental (TSL) has announced a 6% drop in pre-tax profits to £95.6m, despite a strong year for the parcel deliveries firm.

Operating profits, excluding the impact of last year’s cuts in staff numbers, rose 3% to £107.7m.

But its share price fell by 11% as results for the full year showed revenues were up 4%.

It said this was partly driven by a backlog from Christmas 2017 and the autumn of 2018.

Delivery volumes were expected to grow 2.5% in 2019.

This was in spite of a decrease in the amount that packages are delivered in some parts of the UK, caused by lower letter volume post office closures.

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“As the third busiest parcel holiday season in history concludes, the last minute preparation for Christmas 2019 has been met with some headaches,” said chief executive Jenny Clark.

“As we talked to customers, we’ve realised that this time of year can be more challenging than we initially thought and the market is increasingly competitive.”

Sales generated by its larger parcels division, including online retailer Amazon and film distribution services, fell 3% in the year to £595.1m.

The likes of Instacart and parcel parcel hub DPD said they were experiencing similar problems.

The group said in November that it had taken extra measures to mitigate the impact on its delivery network in the north of England.

Media playback is not supported on this device Earnings fall after phasing post office closures

It continued to pay an interim dividend of 16.5p, up 2% on last year.

Profit before tax in the fourth quarter was down 3% to £29.4m, which chief executive Jenny Clark described as a “disappointing performance.”

She said TSL would continue to invest in its “digital initiatives” to “help ensure we remain competitive”.

Talks with the Government over its proposed changes to employment law will continue, she added.

Talks on reform of employment law are also continuing with the UK Government, which “will be important in establishing our abilities to defend against anti-competitive behaviour”.

In June, TSL, which is headquartered in Swindon, said it planned to axe 2,000 jobs by 2019, and cut full-time employees to 5,500 from 6,500 by 2022.

This plan relates to changes to employment laws, including rights of workers to claim unfair dismissal and workers’ rights to unpaid sick pay and annual leave.

In October, TSL confirmed it would keep parcels and services in a number of post offices, at least until 2021.

Analysis : Lola Okolosie, BBC business editor

It was described as the “darkest hour” for TSL and the sector at large, just a month after Christmas 2017.

Shoppers didn’t need to worry about where their cards were or unwrapped gifts showing up too late – companies like TSL had stepped up their games by prioritising when to send parcels.

Unfortunately for TSL, a series of storms hit the UK during the busiest delivery period of the year and the firm had to operate extra ships and hire extra drivers.

Shares fell on Thursday because forecasts for 2019 are not as rosy as in 2018.

Figures on Monday showed parcel volumes in the first half of the year had increased by 4% in the UK, although volumes in the same period were expected to increase by 2.5%.

In a sign of renewed competitive pressure on the parcels market, America’s United Parcel Service (UPS) has previously announced a price rise for next-day deliveries.

UPS are reported to be also considering adding evening pickup slots at some UK post offices.

Image copyright AFP Image caption A shop in Tulse Hill, south London was among those affected by post office closures

Post Office closures forced many postal operators to look at ways to cope with a shrinking market.

More than 613 post offices have closed across England and Wales in the past eight years and the most recent contract for the group Postcode Lottery is its final to come up for renewal.

Part of its £1bn annual turnover comes from small businesses and charities buying parcels from TSL.

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