Q3 Trading Update

International Distributions Svc PLC

18 January 2024

 

International Distributions Services plc

(Incorporated in England and Wales)

Company Number: 8680755

LSE Share Code: IDS

ISIN: GB00BDVZYZ77

LEI: 213800TCZZU84G8Z2M70

18 January 2024

TRADING UPDATE TO END OF DECEMBER 2023

Marked improvement in Royal Mail Christmas performance - on track to meet Full Year guidance

International Distributions Services plc (IDS.L) is today providing an update on trading for the nine months to the end of December 2023.

Christmas trading period

●     The Group saw a marked improvement in performance in the three months to 31 December 2023.

●     Royal Mail achieved its best Christmas operational performance for four years, and met our customer commitment to deliver items posted by the last recommended posting dates in time for Christmas¹

●     Group revenues were up by 9.8% on the previous year, with Royal Mail winning back customers following last year's industrial action.

●     Actions to transform ways of working and implement changes agreed with the Communication Workers Union (CWU) in July 2023 already helping to drive improvements in quality of service, although more remains to be done.

Nine months to 31 December 2023 and outlook

●     Group revenues have performed well in a difficult macroeconomic environment, increasing by 3.8% with greater volumes in both Royal Mail and GLS.

●     This has however been offset by increased costs, including pay increases and inflationary pressures.

●     We are expecting a second-half operating profit, on an adjusted basis, to broadly offset the £169 million operating loss in the first half, so our guidance for the full year remains at about breakeven excluding voluntary redundancy costs.

Martin Seidenberg, Chief Executive Officer of IDS plc, said:

"I would like to thank all my colleagues across Royal Mail and GLS for their extraordinary efforts delivering Christmas for our customers. This has led to a marked improvement in both trading and operational performance for Royal Mail over Christmas and we have continued to win-back customers. We need to build on this momentum.

"With Ofcom due to publish options for the future of the Universal Service imminently, now is the time for urgent action. We are doing all we can to transform, but it is simply not sustainable to maintain a delivery network built for 20 billion letters when we are now only delivering seven billion."

Royal Mail:

●     Total parcel volumes increased by 21% and revenues increased 14.4% in Q3 as we won back customers lost during industrial action, and reflecting the impact of 15 days of industrial action in the prior period.

●     Letter volume decline has returned to the long-established pattern of a 6-8% annually following the significant decrease during the pandemic (letter volumes down 31% compared to 2019-20 pre-pandemic levels).

●     Letter revenues increased by 11.8% as a result of price increases, but costs continue to rise as a result of inflation, pay awards and the high fixed costs of delivering the Universal Service

●     Our determination to transform ways of working, and implement the changes agreed with the Communication Workers Union in July 2023, are starting to show results in terms of quality of service underpinned by:

○     New policies reduced sick absence by c.25% by end of December 2023 compared to prior year.

○     Increased recruitment of permanent employees on new, more flexible contracts, reduced reliance on agency staff.

○     New Quality Control Centre drove proactive intervention - consequently by end of December only 0.2% of our daily 54,000 walks were not resourced on any given day

○     Looking ahead, implementation of new indoor methods in delivery and later start times are expected to further improve performance.

GLS:

·    Continued robust performance against a challenging macroeconomic backdrop. Revenue growth in almost all markets. Cost pressures driven by inflationary effects, including the impact from higher minimum wages in some markets, and investments in strategic initiatives.

·    Volumes grew 5% year on year in the nine-month period; revenue growth of 5.4% in Sterling, 4.3% in Euros (including acquisitions and working day effects²), driven by higher parcel volumes, partly mitigated by weaker freight revenues.

·    Strong Q3 volume growth in Spain, enabled by additional capacity coming from the new hub in Madrid. 

·    Continued to accelerate improvements in digital propositions, expanding the development of our out of home solutions in key markets and increasing the use of technology in distribution centres. 

As announced separately today, Michael Snape has been appointed Group Chief Financial Officer (CFO) of IDS plc, effective immediately.

THREE MONTHS ENDED DECEMBER 2023 (THIRD QUARTER)

	3 months ended December
Volume (m)	2023	2022	% change5
Royal Mail
Total Parcels	387	321	21%
Domestic Parcels (ex. international) 4	334	282	18%
International Parcels6	53	39	36%
Addressed Letters (ex. elections)	1,792	1,900	(6%)
GLS	245	232	6%

	3 months ended December
Revenue (£m)	2023	2022	% change5
Group3	3,589	3,268	9.8%
Royal Mail	2,281	2,016	13.1%
Total Parcels	1,211	1,059	14.4%
Domestic Parcels (ex. international) 4	998	855	16.7%
International Parcels6	213	204	4.4%
Letters	1,070	957	11.8%
GLS	1,310	1,255	4.4%

NINE MONTHS ENDED DECEMBER 2023

	9 months ended December
Volume (m)	2023	2022	% change5
Royal Mail
Total Parcels	965	934	3%
Domestic Parcels (ex. international) 4	841	821	2%
International Parcels6	123	113	9%
Addressed Letters (ex. elections)	5,052	5,498	(8%)
GLS	678	643	5%

	9 months ended December
Revenue (£m)	2023	2022	% change5
Group3	9,451	9,105	3.8%
Royal Mail	5,822	5,663	2.8%
Total Parcels	3,063	3,035	0.9%
Domestic Parcels (ex. international) 4	2,532	2,490	1.7%
International Parcels6	531	544	(2.4%)
Letters	2,759	2,629	4.9%
GLS	3,640	3,455	5.4%

1.        Over 99% of first and second class items posted by the last recommended posting dates were delivered in time for Christmas. As reported by Spectos, an independent specialist appointed to measure Royal Mail's Quality of Service performance.

2.        Revenue growth year on year in Euros was 5.0% after adjusting for the impact of acquisitions and fewer working days. 

3.        Royal Mail and GLS revenue does not equal Group revenue due to the elimination of intragroup trading.

4.        Domestic Parcels excludes import and export for both Royal Mail and Parcelforce Worldwide.

5.        % changes based on reported numbers.

6.        International includes import and export for Royal Mail and Parcelforce Worldwide.

Enquiries:

Investor Relations

John Crosse

Email: [e-mail]

 

Media Relations

Jenny Hall

Phone: [phone]

Email: [e-mail]

Greg Sage

Phone: [phone]

Email: [e-mail]

Royal Mail press office: [e-mail]

 

Company Secretary

Mark Amsden

Email: [e-mail]

The person responsible for arranging the release of this announcement on behalf of IDS plc is Mark Amsden, Company Secretary.

FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking statements concerning the Group's business, financial condition, results of operations and certain Group's plans, objectives, assumptions, projections, expectations or beliefs with respect to these items. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as 'anticipates', 'aims', 'due', 'could', 'may', 'will', 'would', 'should', 'expects', 'believes', 'intends', 'plans', 'potential', 'targets', 'goal', 'forecasts' or 'estimates' or similar expressions or negatives thereof.

Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the Group's actual financial condition, performance and results to differ materially from the plans, goals, objectives and expectations set out in the forward-looking statements included in this document.

All written or verbal forward-looking statements, made in this document or made subsequently, which are attributable to the Group or any persons acting on its behalf are expressly qualified in their entirety by the factors referred to above. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. No assurance can be given that the forward-looking statements in this document will be realised; actual events or results may differ materially as a result of risks and uncertainties facing the Group. Subject to compliance with applicable law and regulation, the Group does not intend to update the forward-looking statements in this document to reflect events or circumstances after the date of this document, and does not undertake any obligation to do so.

 

END