IDS – Royal Mail parent calls for urgent reform as first-half losses widen
- Revenue of £5.9bn flat as GLS growth offsets lower volumes at Royal Mail
- Underlying operating loss trebles to £169m driven by widening loss at Royal Mail
- Full year guidance downgraded with Group adjusted operating profit now expected to be around break even
- GLS Expected to fund modest dividend at full year but no contribution form Royal Mail for now
Derren Nathan, head of equity research at Hargreaves Lansdown:
“International Distribution Services’ new CEO, Martin Seidenberg, is finding it harder than first thought to turn round His Majesty’s mail service. And he’s escalated the agenda to Downing Street’s door calling for a relaxation of the Group’s statutory duties. That’s in the face of the steep declines in volume bought about by digitalisation and competition in the market. His comment that it’s simply not sustainable to maintain a network built for 20 billion letters when Royal Mail is only delivering 7 billion is one that resonates. But all in investor confidence, which has rebounded of late, is likely to take another hit as the profitability horizon is pushed out further. There’s a lot of work going on behind the scenes to restore the public’s faith in Royal Mail, and a faultless execution of Santa’s delivery list will be important to rebuilding trust. Whilst the international division GLS is generating a healthy profit the growing economic pressures have kept a lid on margins here too. The fact that this side of the business should be able to support a dividend this financial year will be music to some investors ears, but given that Royal Mail is far off from making a contribution, it’s likely to be more of a symbolic gesture than a meaningful payout.”
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