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Postal service Royal Mail said on Wednesday that revenues had sunk 11.5% year-on-year during the first quarter of its trading year, reflecting weakening retail trends, lower test kit volumes, and a return to a structural decline in letters.
Royal Mail stated it had delivered an adjusted operating loss of £92.0m due to the “inflexibility” in its cost base to adjust to lower volumes and a “disappointing performance” in terms of delivering further efficiencies.
While the FTSE 250-listed group maintained its full-year 2022-23 outlook for year-on-year revenue growth at its GLS division of “high single-digit” percentage and operating profits of €370.0m to €410.0m, it highlighted that a weaker parcels market and lower than anticipated efficiency savings in-year meant that the group as a whole was now likely to be around breakeven at the adjusted operating profit level, provided progress can be made on the above actions and excluding any impact from industrial action taken by staff.
Royal Mail, which will be renamed International Distributions Services to reflect the group structure of Royal Mail and GLS, added that progress on its Pathway to Change programmed had stalled, creating a £100.0m risk to £350.0m of benefits identified for 2022-23. Other cost-saving programmes were said to be on track, albeit with headwinds from recent increases in absence due to Covid-19.
Chairman Keith Williams said: “Whilst GLS delivered a solid performance in the first quarter, the performance of Royal Mail was disappointing with an adjusted operating loss of £92.0m resulting from a decline in parcel volumes post the pandemic and a lack of progress in delivering efficiencies.”
“The pandemic boom in parcel volumes bolstered by the delivery of test kits and parcels is over. Royal Mail is currently losing one million pounds per day and the efficiency improvements which are needed for long-term success have stalled. We can however be a long-term success story. We have advantages in scale and reach and a strong balance sheet and asset base which are the foundations for a successful future. We need to act now in moving to that future in the interests of all stakeholders, employing those advantages to the maximum.”
Reporting by Iain Gilbert at Sharecast.com
