International Distributions Services plc

Group revenue increased 16.6% to £12.6 billion. Adjusted operating profit more than doubled to £702 million, with margin up 260 basis points to 5.6%; EPS rose to 52.1p. In-year trading cash flow was £606 million pre-IFRS 16, net debt fell to £457 million, and excluding operating lease creditors the group had £622 million of net cash. Royal Mail UK revenue rose to over £8.6 billion, adjusted operating profit was £344 million and margins grew 4%; parcels revenue was up 38.7% on 32% volume growth and letter revenue declined 12.5%. GLS revenue increased almost 28% to over £4 billion, operating profit rose 72% to £358 million and margin was 8.9%. Looking ahead, management did not give specific UK revenue guidance, citing volatility, but said costs could see around £133 million of tailwind from actions already taken, offset by transformation, service and bonus-related items; it also said GLS expects margins to reduce slightly to around 8% while still growing top line marginally, and reaffirmed FY2024-2025 GLS targets of €500 million operating profit, 8% margin, 3%-4% capex, and €1 billion cumulative free cash flow.

Keith Williams emphasized that the business had shown adaptability in an unprecedented year and praised management, colleagues and the board for keeping the group on track. He highlighted the shift in mix, saying almost three quarters of the business now relates to parcels versus 63% the prior year, and said the group has made good early progress under the new management team. He also said the board would take a cautious stance on dividends but move to a sustainable progressive dividend policy, starting with a proposed 20p per share FY2021-2022 full-year dividend.

Mick Jeavons walked through the headline financials, pointing to 16.6% revenue growth to £12.6 billion, adjusted operating profit of £702 million, 5.6% margin, and EPS of 52.1p. He noted in-year trading cash flow of £606 million pre-IFRS 16, net debt of £457 million, and a net cash position of £622 million excluding operating lease creditors, while saying CapEx was broadly flat at £346 million. On capital allocation, he said both businesses should be self-sufficient for organic investment, the group will prioritize investment-grade credit metrics and low leverage, and the board expects to maintain a net cash position given the risk backdrop.

Questions centered on whether Royal Mail could sustain momentum after the pandemic, what the service and automation plan looked like, and how management would restore trust and productivity. Simon Thompson said 5% operating margin by 2024 is now the low end of his expectation and suggested the company could get there sooner, while also saying the business needs to reach 90% parcel automation by end-2024 and exit the year above 50%, ideally 70%. Management also used customer examples to show the rollout of Sunday deliveries, parcel collection, same-day/next-day prescription delivery with Pharmacy2U, and a cultural reset with CWU backing; the union representative said there is now a more tangible joint vision and that automation is acceptable if handled without threatening job security.