Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- International Distribution Services PLC (ROYMF, Financial) reported an adjusted operating profit of GBP61 million, a significant improvement from a loss of GBP169 million in the previous year.
- The company achieved an 8.2% increase in revenue, reaching GBP6.3 billion, with growth in both Royal Mail and GLS segments.
- Parcel volume growth was strong, with a 7% increase, generating GBP4.4 billion in revenue, a 6.4% year-on-year increase.
- Royal Mail's transformation efforts are progressing well, with improved financial and operational performance, including a significant reduction in operating losses.
- GLS expanded its global service offering with new transatlantic routes and increased distribution capabilities in the Asia Pacific region.
Negative Points
- GLS experienced a year-on-year decline in operating profit margin due to economic and regulatory challenges, particularly in Germany and Italy.
- The UK and European markets remain challenging, with significant fiscal headwinds expected next year, impacting profitability.
- The recent changes to employer's national insurance will increase Royal Mail's costs by GBP120 million next year, affecting short-term profitability.
- Despite improvements, Royal Mail still faces cost of living pressures and weak consumer confidence, impacting overall performance.
- The need for universal service reform is urgent, as the current regulatory framework is outdated and poses challenges to the company's operations.
Q & A Highlights
Q: Can you explain the impact of the changes in national insurance and how you plan to mitigate it?
A: The changes in national insurance will increase our costs by approximately GBP120 million starting April 1. We plan to mitigate this through pricing and cost measures, but it will impact profitability in the short term, leading to a reduction in the carrying value of Royal Mail by GBP134 million. - Michael Snape, CFO
Q: Are customers shifting back from Track 48 to Track 24 services, and how are parcel volumes behaving in Europe and the UK?
A: The trend has stabilized or shifted back to Track 24 due to stable service quality. In the UK, parcel volumes show mixed trends with cautious consumer spending. In Europe, the situation varies by country, with some experiencing softer volumes due to economic conditions. - Martin Seidenberg, Group CEO
Q: How is the transformation of Royal Mail into a parcel-centric business affecting the workforce?
A: We currently have 54,000 daily walks, which will decrease by 7,000 to 9,000 with the proposed USO reform. This is due to the decline in letter volumes and an increase in addresses served. - Martin Seidenberg, Group CEO
Q: What is the current employee sentiment amid ongoing changes and potential ownership shifts?
A: Employee motivation is positive, supported by stable leadership and communication of our progress. The potential new ownership is seen as a long-term investor, which is encouraging for further investment in Royal Mail. - Martin Seidenberg, Group CEO
Q: What is the status of the Universal Service Obligation (USO) reform, and what challenges are you facing?
A: The USO reform is urgent as the current regime is outdated. We are urging the government to support and expedite the reform process to align with international peers and address increased costs. - Martin Seidenberg, Group CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
