The company posted a broadly weak set of full year figures.
On an adjusted basis, revenue ticked up by 3.8% to £10.84 billion, while operating profit slipped to £325 million, which was at the lower end of the £300-£400 million range that was announced three months ago. Parcel volumes increased by 2%, but that was below forecasts. GLS, the courier service, saw operating profit rise by 17.5% to £208 million – and that has traditionally been the bread winner for the group. James Rietkerk, the head of GLS has stepped down, and this is a blow to the division. The UK parcel, international and letters (UKPIL) operation is expected to be materially loss-making in 2020-21.
The business wasn’t in great shape before the pandemic so the health crisis has compounded its problems. In an effort to cut costs, the firm will lower the headcount. The restructuring of the management team will impact roughly 2,000 jobs. The cost savings from staff should be £130 million next year. In addition to that, capital expenditure will be reduced by around £300 million over the next two years. Shareholders should not expect a dividend in the next financial year, but the company hopes to start paying a dividend again in the following year. The Royal Mail (LON:RMG) share price has been pushing higher for the past three month but it is lower today as traders are not optimistic about the dividend being reinstated.
In late March the Royal Mail share price took a knock when the group issued a Covid-19 update. On account of the major uncertainty caused by the health crisis, Royal Mail said there would be no final dividend, in addition to that no guidance was issued - which wasn’t as surprise. The company cautioned that the restructuring plans that it has pencilled-in, will take even longer to achieve on account of the disruption caused by the health emergency. The Royal Mail share price sold-off sharply in November when the group warned it was behind schedule in terms of its restructuring scheme, so that is likely to be an issue that will hang over the company.
Last month it was announced that Rico Back, the CEO, stepped down with immediate effect. The group also issued an update in relation to its performance in April. The UKPIL division saw revenue fall by £22 million. In addition to that, costs soared by £40 million as health and safety expenses jumped, and so did overtime overheads. For many companies that continued to operate amid the lockdown, the health emergency has been a double edged sword, as business might be good, but Covid-19 related costs have jumped.
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