Royal Mail reports adjusted operating profit down 13.6% year-on-year during FY2019/2020

The trial of the zero-emission van has formed part of the company’s efforts to continue to reduce emissions associated with its operations.

Royal Mail Group has reported its financial result for the financial year 2019, ending March 31, 2020. Group revenues increased by 2.4% year-on-year to £10,840m (2018: 10,581m); however, adjusted operating profit were down 13.6% year-on-year, totalled £325m (2018: £411m), and were also driven down by lower UKPIL profitability; excluding the impact of IFRS 16, the total figure came up at £312m. Adjusted profit before tax during the financial year 2019/2020 were down 30.9% year-on-year and totalled £275m (2018/2019: £398m).

The Group’s Royal Mail (UKPIL) business division’s total revenues were up 1.6% year-on-year to £7,720m (2018: £7,595m); the group reported total parcel volumes up 2.0% year-on-year, lower than expected, due to threat of industrial action (Q3 2019) and impact of COVID-19 on international import volumes (Q4 2019). Parcel revenues were up 4.6% year-on-year, due to targeted pricing actions.

Addressed letter volumes (excluding election mailings) were also down 8.0% year-on-year. Total letter revenue was down 0.9% year-on-year. Productivity improvement of 1.0% year-on-year was below the Group’s original target of over 2.0% year-on-year. This was due to necessary additional investment to protect quality in Q3 2019 and COVID-19.

Adjusted operating costs were up 2.8% year-on-year, driven by increased distribution and conveyance and people costs, including service quality measures. Adjusted operating profit margin of 1.5% year-on-year was down 110 basis points and reflected lower UKPIL profitability.

In the GLS business division, total revenues increased by 9.5% year-on-year to £3,161m (2018: £2,888m); volumes were up 4.0% year-on-year excluding acquisitions.

Adjusted operating profit, including acquisitions of £208m, were up 17.5% year-on-year. Adjusted operating profit margin of 6.6% was up 50 basis points compared with prior period, and in line with the Group’s annual target range.

Keith Williams, interim Executive Chair, Royal Mail Group, commented: “In recent years, our UK business has not adapted quickly enough to the changes in our marketplace of more parcels and fewer letters. COVID-19 has accelerated those trends.

To respond to present challenges, we are planning on cutting costs, including managerial roles, to result in a £130m savings to address the immediate impact of COVID-19. We are also accelerating the pace of operational change in the UK to address long-standing challenges. Finally, we are reviewing the Universal Service Obligation, the six-day a week flat tariff service for shipping to 30m UK address.

At Royal Mail, our focus is on transformation; at GLS we aim to continue to grow. Particularly, we are capitalising on growth opportunities in parcels, protecting margin in the short term with opportunities for margin expansion in the future. At the same time, we are seeking to improve performance in key markets. Our new structure brings more focus and accountability and whilst there are few synergies today between Royal Mail and GLS, in the medium term an international presence is important.”

Source: Royal Mail Group

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