CFO Financial Review
Operating profit
Segment
2016 £m Operating profit
2016 % Operating margin
2015 £m Operating profit
2015 % Operating margin
Change
Variance
Operating profit
Operating margin
Downstream Access Mail and Parcels Doordrop Media Underlying Operating Profit
8.7 0.9 9.6
1.6% 1.4% 1.6%
4.1 0.3 4.4
0.7% 0.5% 0.7%
112.2% 200.0% 118.2%
0.9% 0.9% 0.9%
Downstream Access Mail and Parcels Operating profits from Downstream Access Mail grew by 112.2% to £8.7m predominantly due to improvements in operational efficiency and a strong focus on administrative costs. We have reduced operational costs while, at the same time, boosting quality by optimising the way we work through efficiency reviews and our procurement led supplier management programme. We will continue to make key investments in IT, depots and vehicles to ensure that we remain the lowest cost, highest quality operator in the market. The 2015 closure of our final mile delivery activities required Whistl to streamline administrative and central costs through a combination of head count reduction and procurement led initiatives in operations, facilities and IT. Downstream Access administration expenses before exceptional items reduced by 12.4% compared to 2015. Whistl manages delivery costs by the selection of suppliers and channels as well as the optimisation of mail piece weights, sortation and formats including our market leading early adoption of Royal Mail’s Mailmark solution. Doordrop Media Doordrop Media operating profit grew by 200.0% to £0.9m due mainly to revenue growth. Operating margin increased to 1.4% (2015: 0.5%) and also benefited from strong cost control within administrative expenses.
Mail revenues generated by Whistl’s Downstream Access Mail and Parcels and International services reduced by 4.4% in 2016 to £528.4m (2015: £552.7m). This reduction included the impact of the closure of Whistl’s final mile delivery activities in 2015 with the consequent loss of some mail volumes associated with the service, together with a change in the price and mix of processed volume. Revenue was also lowered by an increase in customers choosing to appoint Whistl as agent, rather than principal, which reduces revenue but has no impact on volume or profitability. Revenues in the growth areas of Parcels and International services increased by 6.3% and 10.3% respectively, due to Whistl’s investment in product development, including our tracked domestic and international broker solutions. Volumes for those services grew by 8.6% and 30.2% respectively. Doordrop Media revenues grew by 19.7% to £63.3m (2015: £52.9m) due to the success of Whistl’s idoordrop service. The revenue and volume has grown by offering customers and media agencies a 360° service from brief to evaluation that applies insight and data analytics to target households that fit specific geo-demographic profiles. Doordrop Media makes use of multiple delivery channels including Royal Mail and our own network of delivery agents to best match customers’ needs at competitive prices. Group operating profit before exceptional items increased by 118.2% to £9.6m and Group operating margin increased to 1.6% from 0.7%. Whistl effectively and continuously manages its operating margins, which is essential as we manage third party delivery suppliers on behalf of our customers and pass through the delivery costs, which comprise a large part of the cost base. This is also a strength in our operating model as high, third party fixed costs, are variablised for Whistl.
Strategic Report | Whistl Annual Report 2016
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