International Distributions Services (IDS) H1 24/25 earnings summary

Executive summary

• Group revenue increased 8.2% to £6.3 billion, with both Royal Mail and GLS contributing to growth despite a challenging macroeconomic and regulatory environment.

• Adjusted operating profit reached £61 million, reversing a £169 million loss last year, mainly due to reduced losses at Royal Mail.

• Royal Mail's transformation and modernization initiatives are progressing, with losses significantly reduced and on track to return to adjusted operating profit before year-end costs.

• GLS showed resilience and expanded its network, but operating profit declined 14.7% to £128 million due to margin pressure from wage inflation and regulatory headwinds, especially in Germany and Italy.

• A recommended cash offer by EP UK Bidco is expected to complete in Q1 2025, subject to conditions.

Financial highlights

• Group revenue rose 8.2% year-over-year to £6.3 billion; Royal Mail revenue up 10.7% to £3,921 million, GLS revenue up 4.4% to £2,432 million.

• Adjusted operating profit was £61 million, a significant improvement from a £169 million loss last year.

• Royal Mail adjusted operating loss reduced to £67 million from £319 million; GLS adjusted operating profit fell to £128 million from £150 million.

• Free cash outflow improved to £47 million from £72 million; net debt increased to £1.9 billion.

• Basic loss per share improved to 2.6p from 23.3p loss per share year-over-year.

Outlook and guidance

• Royal Mail is on track to return to adjusted operating profit (before voluntary redundancy costs) for the full year.

• Fiscal and regulatory headwinds, including a £120 million cost increase from changes to Employers' National Insurance, are expected next year.

• Universal Service reform is urgent due to worsening cost environment and need for further investment.

• The Board recommends shareholders accept the EP UK Bidco offer, with completion expected in Q1 2025.