Annex E
UNIVERSAL POSTAL SERVICE AND FULL MARKET
OPENING
ROYAL MAIL'S
2004-05 REGULATORY ACCOUNTS[9]
Universal service performance
Profit from operations from universal service
obligation (USO) products increased by 32.6% to £427 million
compared to last year's figure of £322 million.
Price controlled performance
Profit from operations for the price controlled
operations of Royal Mail increased by 26.7% to £441 million,
based on revenues up by 3.1% and operating costs increasing by
1.6% year-on-year.
Royal Mail's benefit from current price control
Postcomm's analysis indicates that in the first
two years of the current price control, Royal Mail made circa
£268 million (in 2000-01 terms) more profit than forecast
by Postcomm at the time the current control was set. Postcomm
estimates that approximately 40% is attributable to higher volumes
with the remainder due to forecasting errors or efficiency improvements
by Royal Mail.
Mail volumes
In 2004-05, total mail volumes rose by 0.8%
to 22,239 million. First and Second class public tariff volumes
decreased by 0.1% and 2.7% respectively and Mailsort volumes increased
by 1.3%.
Stamped mail
The public tariff products (first class and
second class) are basically self-funding. It is only the business
payment channels within the public tariff (ie meter and pre-payment
customers) that subsidise stamped mail. There is no significant
cross-subsidy between the public tariff and bulk mail items.
Manually sorted stamped mail incurs much higher
costs than machinable stamped mail and represents roughly 10%
of total stamped volumes. Despite its relatively low share of
total mail volumes, manually sorted stamped mail is a key reason
for stamped mail's poor profitability.
Cost reflective pricing
The introduction of Pricing in Proportion will
mean that from August 2006 Royal Mail's prices will be 90% more
cost reflective than the present weight-based pricing structure.
9 Royal Mail published its regulatory accounts in
July 2005 for the year ending 27 March 2005. The regulatory accounts
are prepared by Royal Mail and audited by Ernst and Young. Back
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