Despite difficult market environment, Group delivered revenue growth of 8.2% in the first half and returned to adjusted operating profit.

Royal Mail transformation delivering an improved financial and operational performance – on track to deliver full year guidance3; GLS margin lower compared to H1 2023-24 against a challenging economic and regulatory backdrop; taking action through cost and efficiency measures.

Group overview:

  • Revenue £6,343 million, up £481 million year-on-year.
  • Adjusted operating profit1 of £61 million (H1 2023-24: loss of £169 million), mainly due to significantly reduced loss in Royal Mail.
  • Reported operating loss of £26 million (H1 2023-24: loss of £243 million), including an impairment of the carrying value of Royal Mail of £134 million (H1 2023-24: £nil):
  • Impairment charge largely due to expected additional tax burden reflected in a c. £120 million annual increase in employers National Insurance from FY 2025-26 – a result of Royal Mail’s role as a major UK employer with c. 130,000 people – which is expected to only be partially mitigated in the short term through pricing and costs actions; additional initiatives being developed to fully offset the impact over the long term.
    • Net debt increased to £1,894 million (£1,532 million September 2023); strong balance sheet maintained, ample liquidity.

Royal Mail overview:

  • Revenue growth of 10.7%:
  • Good parcel revenue growth of 8.9%, despite weaker market than anticipated in H1;
  • Addressed letter volumes (ex. elections) down 5% year-on-year. Letter revenue growth of 12.7%, with volume decline more than offset by price, and positive impact from General Election.
    • Further progress on modernisation and transformation in H1, leading to an improving trajectory for quality of service over the last 12 months:
  • Deployed the biggest operational change for over 20 years, changing frontline start times to enable the removal of half of domestic flights, improve reliability, increase network capacity and reduce emissions;
  • Permanent employees on new contracts grew to over 19,000 at the end of September (from c. 5,500 a year ago);
  • Increased parcel automation: 84% end of September, continuing to invest, c. 90% expected by March 2025;
  • Innovation: digitally tagging parcel containers in the network to improve visibility and efficiency;
  • Expansion of out of home: planned increase in drop off locations to over 21,000 by end of March 2025, including c. 7,500 parcel shops (with Collect+) and c. 1,500 lockers through partnerships and Royal Mail’s own network.
    • Considerable change and investment still required to transform Royal Mail and be financially sustainable for the future, including real and urgent need to reform Universal Service, which currently is hindering our competitiveness.

GLS overview:

  • Revenue growth of 4.4% year-on-year, driven by B2C and cross-border.
  • Adjusted operating profit lower year-on-year due to macroeconomic and regulatory pressures, particularly in Germany and Italy. In response, implementing further pricing and efficiency measures.
  • Other developed European markets and Canada performing well.
  • Continuing to invest to support strategic delivery:
  • Expanding out of home network, with growth of 11% vs. March 2024, to c. 61,000 points;
  • Improving digital propositions – new consignee app in Eastern Europe;
  • Upgrading the network to drive productivity and growth, with two new hubs open for peak;
  • Growing our international business.

Outlook:

  • Royal Mail on track to return to adjusted operating profit, before voluntary redundancy costs, for FY 2024-253. However, fiscal and regulatory backdrop is adding cost and inflexibility to the business, making USO reform even more urgent.
  • In GLS, the macro environment across Europe remains challenging, with regulatory pressures in certain markets; continued investment is required to deliver strategic ambitions and support growth.
  • Offer by EP UK Bidco Limited4: as set out in the Offer document published 26 June 2024, expected that Recommended Offer will become or be declared unconditional in Q1 of calendar year 2025, subject to required conditions being satisfied or waived.

Martin Seidenberg, Group Chief Executive Officer of IDS commented:

“The modernisation of the Royal Mail network continues at pace, with innovation to improve our services to customers, including the rapid expansion of our out of home footprint. As we enter our busiest period, we are well prepared to deliver Christmas, with around 4,000 new vehicles being delivered before peak, 16,000 extra people, extended delivery hours until 8pm and our growing network of parcel lockers and parcel shops.

“We are delivering on the changes we can control, but the cost environment is worsening just at the time when we need to invest. As a major employer with around 130,000 permanent employees, the changes to National Insurance will disproportionately impact our business relative to competitors. This makes Universal Service reform even more urgent.

“GLS’ flexible business model, diverse geographic footprint and commitment to high quality has enabled it to navigate a challenging environment. We are taking action to drive efficiencies and control costs while continuing with our strategy to invest to expand our out of home network, develop new digital solutions for customers and upgrade the network to drive productivity and growth. We are also expanding our global service offering across the US and Asia-Pacific.

“I would like to thank all our colleagues across the Group for their continued hard work, dedication to serving our customers every day and the role they have played in the progress we have made.”

Source: Royal Mail Group

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