Royal Mail reports “resilient performance”
Royal Mail has today (19 May) announced that its revenues for the year ended 27 March were up 1%, with a 1% drop in its UK underlying costs. Moya Greene, Royal Mail’s Chief Executive Officer, said that the company had “delivered a resilient performance in challenging markets”.
Greene added: “Our UK parcel revenue and volumes grew by 1% and 3%, respectively. Our addressed letter volumes declined by 3%; total letter revenue by 2%. GLS, our European parcel business, continued to perform strongly, supporting the overall Group revenue performance.
“We are introducing new and improved products and services and responding quickly to changing customer needs. These measures, alongside our emphasis on customer focus and delivering a value for money service, have helped us to maintain our preeminent position in UK letters and parcels and driven growth in GLS.”
Roger Morris, Head of Royal Mail Parcels, spoke about the company’s new products ad technology investments at this morning opening session of the Mail & Express Delivery Show (MEDS), which is taking place in London today.
Royal Mail’s adjusted operating profit before transformation costs was £742m, up 5% on the previous year. However, adjusted operating profit margin after transformation costs declined by 10 basis points which Royal Mail said was “a result of increased transformation costs due to our cost avoidance and efficiency programme”.
To view the full Financial Report for the full year ended 27 March 2016 please click here.
Reaction to the Royal Mail results was mixed.
David Cheetham, Market Analyst at XTB.com, said: “Royal Mail have posted a resilient set of results for the 12 months ended March 27th 2016 that have come in slightly above analysts’ estimates.
“Whilst the earnings per share showed a slight decline to 41.3p from 42.8p previously, this is still above a consensus call of 38.7p. In addition to this beat on expected earnings, the announcement of an increase in dividends to 22.1p will please shareholders after a challenging year performance wise as the 500-year old institution has had to adapt to rivals pushing investment in technology as well as companies like Amazon expanding their UK operations.
“A rise in UK parcel revenue and volume has offset the drop in numbers for addressed letters and with planned transformation costs of £160 million for 2016-17 as well as the share price closing yesterday near the upper-end of its recent range the company seems well placed to deliver an impressive performance going forward.”
However, David Kerstens, an Equity Analyst with Jefferies, pointed out that Royal Mail’s outlook for the coming year depends on the outcome of labour negotiations over a new pay deal and pension reforms. He also cautioned that the delayed Ofcom consultation document on the UK mail industry could have an impact. The publication date for the Ofcom document has already been postponed a few times – but delegates at the MEDS event in London today were told by informed sources that it is now set to be published next Tuesday (24 May).
