Highlights

• Group revenue performance driven by GLS; reported operating profit down 5.6% year-on-year; adjusted operating profit up 8.0% due to improved profitability in Royal Mail:
• Royal Mail revenue down 1.6% year-on-year reflecting changing consumer behaviour following removal of lockdown restrictions and lower international volumes, partially offset by growth in test kits; adjusted operating profit of £416 million, up 20.9%; adjusted operating margin up 90 basis points to 4.9%, due to benefits of restructuring and non-people cost saving programmes.
• GLS revenue up 4.4% year-on-year in Sterling (9.6% in Euros), driven by recovery in B2B volumes and freight, adjusted operating profit of €402 million, flat year-on-year (although down 4.5% in Sterling), with 8.1% adjusted operating margin (down 80 basis points), in line with expectations.
• Volume trends:
• Royal Mail: Domestic parcel volume (ex. international) up 31% vs. pre-pandemic period (2019-20); and down 7% year-on-year due to normalisation post lockdown restrictions. Test kits accounted for c.7% of total parcel volume in 2021-22. Addressed letters (ex. elections) volume grew 3% year-on-year following sharp declines last year; down 18% vs. pre-pandemic.
• GLS: Continued parcel volume growth of 4% year-on-year, driven by domestic and international, with a recovery in B2B volume.
• Royal Mail Transformation programme:
• £59 million benefits delivered from Pathway to Change agreement, low end of revised £55 – 80 million range; good performance in Processing; insufficient progress in Delivery.
• Achieved 50% parcel automation – North West hub on track to open in June 2022.
• Change agenda even more urgent and important: need to accelerate delivery and broaden scope.
• GLS: good progress in France and Canada, margin pressure in US. Addressing short term challenges to maintain trajectory: price & yield management, digitalisation and automation to drive efficiency. Generated c.€500 million free cash flow in first two years of Accelerate strategy vs. €1 billion target⁵ by 2024-25.
  • Strong cash generation: £353 million in-year trading cash flow⁴ pre-IFRS 16 (2020-21: £614 million), including increase in capex of £257 million, mainly due to investment in vehicles, hubs and automation in Royal Mail:
• Royal Mail £178 million in-year trading cash flow pre-IFRS 16 (2020-21: £342 million).
• GLS £175 million in-year trading cash flow pre-IFRS 16 (2020-21: £272 million).
• New Group-wide ESG Principles aligned with UNSDGs; the Group has set out to reduce its GHG emissions to zero by 2045.
• Final dividend: Board proposing 13.3 pence per share; full year ordinary dividend of 20 pence per share, in line with policy.
• £400 million return to shareholders via share buyback and special dividend completed.
• Outlook:
• Royal Mail 2022-23: assuming pay deal can be agreed broadly in line with current offer, and without material industrial disruption, current adjusted operating profit consensus of £303 million (as at 18 May 2022)⁶ sits within range of potential outcomes, with downside risk. Cost savings in excess of £350 million identified to mitigate macro-economic pressures.
• GLS 2022-23: high single digit revenue growth and operating profit €370 – 410 million.
• GLS Accelerate: Assuming rebound in GDP growth in 2023-24, target of €500 million operating profit in 2024-25 and €1 billion accumulated free cash flow by 2024-25 can still be achieved. 

Summary segmental results^1,2 

Keith Williams, Non-Executive Chair, commented:

“Whilst a difficult environment persisted over the last year, with operational challenges caused by Omicron and tight labour markets, we continued to see financial tailwinds from the pandemic, which are now dissipating. We also have clear headwinds as we enter 2022-23, such as weakening GDP and growing inflationary pressures. Whilst both GLS and Royal Mail face short term challenges, they also have longer term opportunities.

We are at a crossroads with the transformation of Royal Mail. We need to adapt our business to a post pandemic world and whilst we are making progress in some areas, more needs to be done in others. We need to accelerate and broaden the scope of change to meet the demands of our customers, deliver real efficiency savings with a financial benefit this year and beyond, and remain competitive to support sustainable growth and secure jobs for the future.

In GLS, we made good progress on our Accelerate strategy and we need to continue to harness growth opportunities in a profitable way. We are making good progress in France and Canada, but seeing margin pressure in the US. We are taking actions to address short term challenges, including price increases and accelerating efficiency opportunities, while still investing for the future. GLS can leverage its business model to become more global, digital and diverse.”

Simon Thompson, Chief Executive, Royal Mail said:

“It has been a year of progress, but there is much more to do. Over 50% of parcels are now processed automatically, the delivery of two new parcel hubs are on track, and we are reinventing our services and digital experiences to make sending and receiving even easier in an online age.

“But as we emerge from the pandemic, the need to accelerate the transformation of our business – particularly in delivery – has become more urgent. Our future is as a parcels business, so we need to adapt old ways of working designed for letters and do it much more quickly to a world increasingly dominated by parcels.

“The last two years has shown us all how quickly customer needs can change. Our focus now is to work at pace with our people and our trade unions to reinvent this British icon for the next generations, so that we can give our customers what they want, grow our business sustainably and deliver long-term job security for our great team. We have no time to waste.” 

Martin Seidenberg, Chief Executive, GLS added:

“We delivered a good set of financial results and have made good progress executing our strategy over the past 12 months, despite the challenging market conditions. We further strengthened our international capabilities and invested in our networks and services to unlock further growth and maintain our high quality levels.

Whilst the war in Ukraine has brought about some short term uncertainty, we will continue to leverage our business model and logistics know-how to become more global, digital and diversified.”