Royal Mail’s European parcels business GLS improved profits by 11% with single-digit revenue andvolume growth in the half-year ending September 2013 thanks to moderate growth in Germany, a strong
performance in Italy and reduced losses in France.The company’s revenue grew by 6% to €940 million with volumes up by 6% to 193 million items.Despite a 6% rise in costs, operating profits rose by 11% to €62 million. The profit margin roseslightly to 6.6% from 6.3% in the same period last year.
The figures, announced as part of Royal Mail Group’s half-year results, were an improvement onthe company’s 2012-13 results when operating profits fell by 17% to €123 million and the operatingmargin dropped to 6.7% from 8.2% the previous year. GLS grew only slightly in the year ending March2013, with a 2% revenue rise to €1.84 billion and 1% volume growth to 380 million parcels.
Royal Mail CEO Moya Greene said GLS, which generates about 70% of its revenues in Germany,France and Italy, “delivered an improved performance after a challenging 2012-13” and praised thecompany for “always delivering better margins than its peer group”.
GLS increased revenues in all major markets and its growth was “well ahead” of eurozone GDPgrowth over the six months, Royal Mail commented. The higher costs reflected higher volumes andincreased sub-contractor costs in Germany as well as turnaround-related costs in France.
Greene said: “While revenue has grown in Germany, conditions continue to be challenging due tothe highly competitive marketplace, and low levels of unemployment leading to increasedsubcontractor costs.” Improved delivery options to increase the rate of first time delivery arebeing put in place with the aim of reducing costs and increasing convenience.
In France, where GLS is in the early stages of a turnaround plan, revenue increased marginallybut costs were reduced, resulting in lower operating losses. Greene described the France results as“better than expected” and said the country should be profitable in two years’ time.
In Italy, GLS delivered a strong financial performance, growing organically and throughacquisitions, Royal Mail said. Greene said Italy revenue “grew strongly, in part benefitting fromcompetitor disruption” and the country was now a substantial contributor to overall GLS profits.GLS bought one Italian franchisee during the half-year to extend its network.
Elsewhere, GLS is continuing to monitor emerging European markets for new opportunities. GLSCroatia, a new company, has made “an encouraging start” after it began operations in August 2013,following the admission of Croatia to the European Union in July 2013.
