Royal Mail’s half-year results in line with expectations

Royal Mail has announced its results for the half year ended 25 September. The revenue of £4,583m was up 1% on the £4,395m achieved in the first half of 2015, while profit before tax was up from £240m to £252m.

Commenting on the results, Moya Greene, Chief Executive Officer, said: “Our performance was broadly in line with our expectations. Group revenue increased by one per cent on an underlying basis, driven by a good performance from GLS, our continental European parcels business. We delivered UK parcel volume and revenue growth including new contract wins. Addressed letter volume decline was within our forecast range. The recent acquisition of ASM in Spain and GSO in California supports GLS’ strategy of targeted and focused geographic expansion.

“We have increased our cost avoidance target from £500 million to £600 million of annualised costs cumulative over the three financial years ending 2017-18. We are targeting to reduce underlying UKPIL operating costs before transformation by up to one per cent in 2016-17, depending on the absorbable rate of change within our organisation. We are past the peak of investment. Net cash investment is expected to be no more than £500 million per annum, compared with an average of £615 million over the past three years.

“As always, our performance for the full year will be dependent on the important Christmas period. Extensive planning, which began in the spring, will help us to manage our busiest time. This includes the recruitment of over 19,000 temporary staff and opening nine temporary parcel sort centres.”

Analysts echoed Greene’s view that the results were on track.

David Cheetham, market analyst at XTB.com, told Post&Parcel: “The latest trading update for Royal Mail contains no great surprises and comes broadly inline with many analysts forecasts. Group revenue ticked higher by 1% compared to the same half-year period in 2015 in a positive development and whilst restructuring costs weighed on operation profits, if these expenses are excluded then the bottom line continues to grow with operating profits after transformation costs rising to £262m.

“he performance of the stock over the past year has been impressive with last night’s closing level representing a 12% gain and shareholders will likely find these latest results as pleasing and look forward optimistically to potential further gains. The increase in the earnings per share and dividend will only serve to increase the appeal of Royal Mail which overall seems to have posted another set of strong results and continues to deliver above average returns for investors.”