Royal Mail interim results

Royal Mail plc (RMG.L) has announced its results for the half year ended 27 September 2015.

Moya Greene, Chief Executive Officer, commenting on the results, said:

“Royal Mail is the pre-eminent letters and parcels carrier in the UK. We have delivered a resilient performance in the first half, demonstrating our ability to respond to a competitive trading environment.

“We delivered parcel volume and revenue growth in the UK, which continues to be a challenging market. Addressed letter volume decline was at the better end of our forecast range. We are driving through a range of product innovations and service improvements at pace, as well as targeting new areas of growth and enhancing our offering.

“As a result of an acceleration of our UK cost savings programme and a better than expected performance in GLS, Group operating profit before transformation costs was flat in the first half. Given our strategic focus on costs, we now expect underlying UKPIL operating costs to be down by at least one per cent for the full year.

“As in previous years, the full year outcome will be dependent on our important Christmas period, for which we have extensive preparations in place.”

Here are some of the key highlights from the results: 

Group financial performance

  • Revenue was flat, with growth in UK and European parcels offsetting the decline in UK letter revenue.
  • Adjusted operating profit and margin before transformation costs were both broadly flat due to an acceleration of our cost savings programme.
  • Transformation costs increased, reflecting higher levels of voluntary redundancy costs. Nearly 3,000 (net) UKPIL employees left the business in the first half.
  • Operating profit margin after transformation costs declined by 110 basis points.
  • Free cash inflow of £49 million reflects higher levels of investment, in particular transformation operating expenditure, due to acceleration of the cost savings programme.
  • Net debt increased to £369 million from £275 million at 29 March 2015, mainly due to payment of dividends, as in the comparative period. 

Business performance

  • UKPIL revenue was down one per cent:
    • Parcel volumes were up four per cent, driven by new customer wins and initiatives in account parcels, continued growth in lower AUR import products, and strong volume growth in Parcelforce Worldwide. Parcel revenue increased by one per cent.
    • Addressed letter volumes declined by four per cent (excluding elections), at the better end of our forecast range of a 4-6 per cent decline per annum. Total letter revenue declined by three per cent.
  • Our strong focus on UKPIL costs resulted in a one per cent reduction in underlying operating costs before transformation costs:
    • UKPIL people costs decreased by one per cent and non-people costs declined by two per cent.
    • UKPIL collections, processing and delivery productivity improved by 2.9 per cent, at the top end of our target range of a 2.0-3.0 per cent improvement per annum.
  • GLS continued to perform well. Volumes were up nine per cent, benefitting from strong growth in international volumes. Revenue was up eight per cent. 


  • In line with our stated interim dividend policy, the Board has declared a dividend of 7.0 pence per share for the half year ended 27 September 2015, which will be paid on the 13 January 2016 to shareholders on the register on 4 December 2015. 


  • Outlook for UK letter and parcel trends over the medium and short term, respectively, remains unchanged.
  • We now expect underlying operating costs in UKPIL (excluding transformation costs) to be down by at least one per cent in 2015-16.
  • We have avoided around £200 million of costs over the last three years5 and have over 70 scoped and resourced projects across UKPIL targeted to avoid around £500 million of additional annualised costs by 2017-186.
  • Transformation costs for 2015-16 are now expected to be at least £180 million, due to the impact of the accelerated efficiency improvements in the first half, as well as higher project costs in relation to transformation in the second half.
  • This would lead to a total net cash investment in 2015-16 of around £620 million, similar to last year.
  • Given our performance in the first half, we now expect GLS operating profit margin decline to be at the better end of the 50-100 basis points range in 2015-16.
  • Our performance in the second half will be dependent on our important Christmas period.

 For more information, please visit the Royal Mail website here.