Royal Mail up despite profit drop

Royal Mail Group (LON:RMG) saw its share price increase by 3.53% to 296.10p (as of 15:55 GMT) after revenues for the half year ended 27th September climbed by 9.8%. Profits before tax were down by 90.2%, largely due to costs associated with COVID, voluntary redundancies, and product mix changes.

Interim CEO Keith Williams said: “The growth in online shopping and parcels during the pandemic, combined with our increased focus on delivering more of what customers want, has led to revenue growth of nearly 10% for the Group in the first half, with Royal Mail revenue up nearly 5%. For the first time, parcels revenue at Royal Mail is now larger than letters revenue, representing 60% of total revenue, compared with 47% in the prior period. GLS delivered strong revenue growth of 21.7%, with adjusted operating margin up by 300 basis points. B2C accounted for 56% of GLS volume in the first half. Across the Group, our people have worked incredibly hard to keep delivering for our customers during these unprecedented times, and I want to thank them for their dedication and commitment.

“We have been pushing forward with our transformation in Royal Mail and delivering more new innovations, products and services for our customers. Whilst we have done exceptionally well in terms of revenue and have seen real growth for the first time since privatisation, we have recorded a first half adjusted operating loss of £129 million after restructuring charges of £147 million, and a reported operating loss of £176 million. As anticipated the reduction in letter volumes has had a significant impact on the regulated business which lost £180 million in the first half, and demonstrates the need for change in the Universal Service.

“The level of revenue growth in the first half shows we have the right strategy and that Royal Mail can be cash generative and a sustainable, profitable business in the future. But we need to speed up the pace of change in order to create a profitable business in the UK. We are making good progress on the initiatives we set out in June. We are reducing management layers to increase our speed of decision making, directing the business towards those activities which generate quicker payback and focusing our capital expenditure on projects which will improve our customer proposition and increase our efficiency. These initiatives should add to top line growth and generate a saving of around £330 million in operational costs.“