- Not enough progress on costs
- Tailwinds fading, headwinds growing
- ‘Urgent’ need to make changes
An improvement in profitability for the year to the end of March wasn’t enough to lift investor spirits in Royal Mail (RMG), with shares sliding 12.5% to 299p putting them at the bottom of the FTSE 250 performance table.
While noting the positive progress made to date, chief executive Simon Thompson’s message to the market was blunt, saying there was ‘much more to do’.
COST SAVINGS UP
Group revenues for the 12 months to March were barely changed at £12.7 billion, but thanks to £59 million of cost cuts adjusted operating profits were up 8% to £758 million.
The savings were at the low end of the firm’s stated target range pf £55 million to £80 million, with Thompson flagging ‘insufficient progress’ in the Royal Mail Delivery business where ‘the change agenda is even more urgent and important’.
Due to the normalization of business post-lockdown, domestic parcel volumes were down 7% even though 7% of total parcels sent were Covid test kits.
Elsewhere, General Logistics Systems reported a 4.4% increase in revenues in sterling terms (9.6% in euros) thanks to a recovery in business services and freight, but operating profits were flat at €402 million.
GREATER CHANGE NEEDED
Non-executive chairman Keith Williams was downbeat about the outlook, warning the tailwinds from the pandemic were ‘dissipating’ while the firm faced ‘clear headwinds such as weakening GDP and growing inflationary pressures’.
‘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’, he added.
Chief executive Thompson was equally frank: ‘As we emerge from the pandemic, the need to accelerate the transformation of our business - particularly in delivery - has become more urgent. We have no time to waste.’
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