Royal Mail Half Year Results announcement

[Martin Walsh]

Half year results show we are loss making and need to act fast

Today we published our half year financial results to the market. As we initially reported in October, we lost £219 million in the first half of our financial year. By comparison, in the same period last year we made £235 million profit.

International Distributions Services – the holding company which includes Royal Mail and GLS – has also reported an operating loss of £163 million. GLS made a profit, but this was offset by the material operating loss in Royal Mail.

Our situation is serious and to turn things around financially, transforming the business is not optional; it is now urgent.

The losses we have suffered to date, made worse by industrial action, are not sustainable.

We have to take action, and quickly.

Click here to watch Simon Thompson's video update this morning.

Dividend and consideration of separation
We have taken the decision to not pay an interim dividend. We will look at the potential to pay a final dividend for the 2022/23 financial year from earnings in GLS.

As we have said previously, in the event that significant change in Royal Mail is not achieved, all options remain open to protect the value and prospects of the Group, including separation of Royal Mail and GLS.

A five point plan to stabilise the business
Today we have shared a five point plan to stabilise the business and get back on track:

1. Rightsizing our business:

• We’ve already announced we need to reduce our operational FTE workforce by c.10,000, with c.5,000-6,000 estimated redundancies.

• We have started redundancy consultation in many units and will launch a preferencing process, including voluntary redundancy (VR) today. Your manager will share more details later today.

• We are progressing revision activity to align resource to workload in delivery, processing and distribution. We are planning revisions in all our 1,200 delivery offices and are implementing dedicated parcel-only routes at the same time.

2. Creating the headroom to invest:

• We are focusing on cash management and controlling our costs, and reducing our capital expenditure from c.£350 million to c.£250 million.

3. New resourcing models:

• We have already removed the 25% cap on Owner Drivers in Parcelforce.

• After starting in November, we will continue to hire new starters on new contracts.

• We have developed a new attendance policy, which will go live in the new financial year to reduce our sick absence, which has remained elevated since the pandemic.

4. Efficient use of our network and assets:

• In October we rolled out ‘Scan in, Scan out’ technology in Delivery to replace handwritten sign in sheets.

• We are deploying dedicated parcel routes from around 350 hubs for larger and next day parcels. We are also looking at how we can improve efficiency by utilising a number of Parcelforce hubs for both Royal Mail and Parcelforce parcels.

• We will move parcel volume from mail centres to super hubs for more efficient processing.

5. Building management capability and effectiveness:

• Having completed the management restructure under Delivering for the Future, the biggest change to the delivery operational management structure in 30 years, we will now continue to embed this structure.

• Following the launch of the Royal Mail Academy in July, we will continue to invest in developing our managers, building on the ‘Beyond’ events being held throughout November.

More structural change required
Our five point plan has already started to reduce costs and improve performance, but this isn’t enough to secure the long-term sustainability of the business. So we are moving ahead with further structural efficiencies to better leverage our network, including:

• A review of our customer service points given footfall is down 50% compared with pre-pandemic so we are conducting a review to determine the optimum number of locations.

• A review of our mail centre footprint to take into account the reduced workload outlook. Based on early estimates, we expect the number of mail centres we will require in future will likely reduce.

• Currently there is duplication across the Royal Mail and Parcelforce Worldwide networks, with both companies carrying the same format of parcels and visiting the same customers on the same day. As part of our plans to look at how we can more efficiently utilise the Royal Mail and Parcelforce networks, we will implement a single large parcel network to optimise synergies across the two businesses. Most smaller parcels will continue to be delivered by Royal Mail, with more medium and larger parcels being delivered by Parcelforce.

• We will undertake new and faster trials and are starting small-scale trials on new indoor delivery office sorting methods to reduce the amount of time spent re-sorting mail.

• We will introduce alternative fleet financing and maintenance options in the current year to provide a lower cost of ownership option for new electric vehicles.

Regulatory reform
We are urging the Government to reform the Universal Service to protect the long-term sustainability of the one-price-goes-anywhere service.

It is clear that when letter volumes have declined by more than 60% since their peak, that in order to be financially sustainable the Universal Service requires major reform now. Ofcom’s own research shows that a five-day (Monday-Friday) letters service would meet the needs of 97% of consumers and SMEs.

We have approached Government to seek an early move to five-day letter delivery.

Significant change but huge potential for growth

Simon says: 'I know this is a huge amount of change. We are transforming across our entire business and it is a lot to take on board all at once.

'It will be worth it, and we should remain focused, as our long-term aim remains the same.'

To own trust at the doorstep by delivering what our customers want:

• A seven-day parcel, next-day delivery service with low CO2 delivered by a postie that consumers trust, at competitive prices

• A reliable, sustainable and nationwide one-price-goes-anywhere letters service

'But we need to be more efficient, reduce our costs and increase flexibility in order to be competitive,' adds Simon.

'Royal Mail is a fundamentally strong business, with the brand, scale and trusted relationships at the doorstep that means we can have a bright future.

'We are taking the actions to turn Royal Mail around and will do whatever it takes.'


https://www.internationaldistributionss ... cement.pdf

ids-plc-hy-2022-23-results-announcement.pdf

https://www.internationaldistributionss ... -final.pdf

ids-plc-hy-2022-23-results-presentation-final.pdf

[hazzeem025]

So basically everything is just getting brought in regardless of the strike action. f***ing amazing. How the f**k does the CWU combat something that it's fundamentally against, that is already happening?

[FilthyBloke]

Pretty bleak.
Along with the budget being announced today it doesn’t paint a pretty picture.

I wonder how much of the losses are because of the electric vehicles and power points and other investments though.

[49erman]

So basically everything is just getting brought in regardless of the strike action. f***ing amazing. How the f**k does the CWU combat something that it's fundamentally against, that is already happening?

CWU need to talk to us…..now…..what is their plan now? We need more strike dates and quickly!

[FilthyBloke]

Strike days will do nothing.
Not now.
This guy knows that.

He’s not cracking.

Even the talk of strike days is damaging to the business and he’s still not giving an inch.

[49erman]

Strike days will do nothing.
Not now.
This guy knows that.

He’s not cracking.

Even the talk of strike days is damaging to the business and he’s still not giving an inch.

Do it anyway, at least we can screw up their dividends……

[1560loopsayear]

'We are taking the actions to turn Royal Mail around and will do whatever it takes.'

He had to finish with a sinister threat didn't he.

[FilthyBloke]

Dividends have already been slashed ?

We should have had a week long strike a month ago and not the odd strike day here and odd strike day there.

Thompson has been playing hardball since day one and all the CWU have responded with is charging around waving a feather duster.

Time is running out. But remember the deal we have now is dependent on us not going on strike.

[poolcued]

In for a penny, in for a pound

[Zicomurphy]

Makes you wonder if they has been any point in the last 10 days of talks and if there is any point in them continuing.

Looks nailed on the USO will be reduced to 5 days very soon. How many more job losses will that lead to on top of the 10,000 already announced.

More medium and large parcels going from Royal Mail to parcelforce to be delivered by owner drivers. Depending on the sort of volumes they are talking about again that reduction in work could lead to further job losses.

With the reduction in EVR terms and the number of job losses we could be looking at could well be looking at quite substantial compulsory redundancies.

[rambo1]

Strike days will do nothing.
Not now.
This guy knows that.

He’s not cracking.

Even the talk of strike days is damaging to the business and he’s still not giving an inch.

Do it anyway, at least we can screw up their dividends……

Really? Grow up. It's YOUR job and that of your friends and you just want to 'screw up their dividends' ? And also the dividends of your colleagues who have shares.

[rambo1]

Makes you wonder if they has been any point in the last 10 days of talks and if there is any point in them continuing.

Looks nailed on the USO will be reduced to 5 days very soon. How many more job losses will that lead to on top of the 10,000 already announced.

More medium and large parcels going from Royal Mail to parcelforce to be delivered by owner drivers. Depending on the sort of volumes they are talking about again that reduction in work could lead to further job losses.

With the reduction in EVR terms and the number of job losses we could be looking at could well be looking at quite substantial compulsory redundancies.

I honestly don't think it will come to compulsory redundancy. There's enough that want to go now .

[Ferrari5825]

Makes you wonder if they has been any point in the last 10 days of talks and if there is any point in them continuing.

Looks nailed on the USO will be reduced to 5 days very soon. How many more job losses will that lead to on top of the 10,000 already announced.

More medium and large parcels going from Royal Mail to parcelforce to be delivered by owner drivers. Depending on the sort of volumes they are talking about again that reduction in work could lead to further job losses.

With the reduction in EVR terms and the number of job losses we could be looking at could well be looking at quite substantial compulsory redundancies.

Honestly, as someone who isn't that high on seniority and after seeing how the company has shown what it thinks of its staff in the last few months, i'd take the compulsory redundancy. The soul has been sucked from the place and it just won't be worth working for, as no matter how hard you work, it will never be enough.

[Zicomurphy]

I hope you are both right about there being enough volunteers for EVR (and I certainly didn’t wish to scaremonger anyone wishing to stay who fears being made redundant) but there does seem to be a massive difference between the EVR terms in the MTSF agreement and what they are proposing to pay now. I would have snatched their hand off if they were offering the old terms, if they are now only paying 9 months I would need to consider a lot more carefully and I think a lot of other people will be in the same boat.

[datasaint]

The managers will be going along with the OPGs if they move ahead with redundancies then.

The managers are so short sighted, agreeing their pay rise with Unite, the company is talking about mail centre closures now, say goodbye to your jobs managers.