Profits down sharply at Royal Mail

On a £10.44bn total revenue, Royal Mail reported an adjusted operating profit of £376 million, a fall of more than a quarter against last year, in its annual report for 2018-19.

Adjusted addressed mail volumes fell by 8%, but this was more than offset by growth in parcels both domestically at UKPIL and abroad in the GLS business. GLS saw revenues grow by 8%, even as overall growth was flat in terms of revenue on the part of UKPIL.

Profits fell in all parts of the business. Across Royal Mail Group this was a fall of 26%, with UKPIL seeing a 32% fall and GLS, nine percent. As indicated in other stories at Apex Insight the fall in profits comes from a major transformation programme across the company.

Rico Back, Group Chief Executive Officer, said: “Our ambition is to build a parcels-led, more balanced and more diversified international business, delivering adjusted Group operating profit margin of over four per cent in 2021-22, increasing to over five per cent in 2023-24.”

“At the heart of our refreshed strategy is a UK ‘turnaround and grow’ programme. In 2018-19, after a challenging year, we delivered productivity improvements and cost avoidance in line with our revised expectations. Over the next five years, through a focus on new ways of working and extending our network, we will ensure a contemporary UK Universal Service.

“The investment in the UK, and expected lower cash flow in the early years, means we are rebasing the dividend and changing our dividend policy. This is not a decision we have taken lightly as we know how important the dividend is to our shareholders. We have sought to find an appropriate balance between sustainable shareholder returns, and investing in the future.

“GLS is a key part of our strategic plan and will make a major contribution to our product and geographical diversification. By combining the best of Royal Mail and GLS, we will enhance our cross-border proposition in this large, growing and global market.”

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