25th Jun 2020 09:55
(Alliance News) - Royal Mail PLC on Thursday reported a slump in full-year profit, announced plans to cut 2,000 management jobs and said it is targeting the restart of dividends in the 2022 financial year.
The FTSE 250 stock was 6.6% lower in London in morning trading at 168.02 pence a share.
Revenue for the financial year that ended in March was GBP10.84 billion, up 2.5% from GBP10.58 billion the year before, which comprised 53 weeks.
UKPIL parcel volumes were up 2%, lower than expected, due to threat of industrial action in the third quarter and impact of Covid-19 on international import volumes in the final quarter. Parcel revenue was up 4.6% for the year, due to targeted pricing actions.
Addressed letter volumes - excluding election mailings - were down 8%. Total letter revenue was down 0.9% in the period, benefitting from two elections in the period and targeted price increases.
In GLS, volumes were up 4 % excluding acquisitions, or 5% including acquisitions. Revenue grew 6.3% excluding acquisitions, or 9.5% including acquisitions.
However, group pretax profit dropped to GBP180 million from GBP241 million as operating costs rose 3.7% to GBP10.62 billion.
Profit was also hit by a GBP51 million regulatory fine and a GBP91 million impairment charge, which was up from GBP68 million the year before.
"In recent years, our UK business has not adapted quickly enough to the changes in our marketplace of more parcels and fewer letters. Covid-19 has accelerated those trends, presenting additional challenges," said Interim Executive Chair Keith Williams.
Royal Mail reported the abrupt departure of Chief Executive Officer Rico Back in mid-May and appointed Non-Executive Chair Williams as interim executive chair. Back, who had been criticised for managing the UK business from his home in Switzerland during the virus crisis, started his career with Royal Mail in 1989 and assumed the CEO role in June 2018.
To save costs, Royal Mail is to cut around 2,000 UK management roles, which is expected to deliver an annual operating profit benefit in the 2022 financial year of GBP330 million.
This will be implemented through a three-step plan. Firstly, the postal operator said it intends to take immediate action on costs, which will result in a GBP130 million saving in people costs next year and flat non-people costs.
"Secondly, we're accelerating the pace of operational change in the UK to address long-standing challenges and be sustainable for the long term. Thirdly, we're working with all stakeholders to underpin the USO to ensure it reflects user needs and is modern, contemporary and sustainable," added Williams.
Looking out, the postal operator continues to expect UKPIL to be "materially" loss-making in the financial year ahead, while GLS profitability may potentially be reduced.
At GLS, Royal Mail said it is capitalising on growth opportunities in parcels, protecting margin in the short term, with opportunities for margin expansion in the future.
The year's dividend per share of 7.5 pence reflects the board's decision not to recommend a final dividend, against a total payout of 25p the year before. Royal Mail does not expect to pay a dividend in the financial year ahead, but it is targeting the restart of payouts in the 2022 financial year.
By Evelina Grecenko; [email protected]
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