European parcels carrier GLS performed ahead of expectations in the six months ending September 30,2014, with a 7 per cent increase in volumes and revenues and an 11 per cent rise in operating
profits, figures released today by parent company Royal Mail Group showed.The Royal Mail European parcels subsidiary increased half-year revenues by 7 per cent to€1,008 million (£813 million), with revenue growth in all major countries. Volumes grew in linewith revenues to 208 million parcels, representing stable average prices on an overall basisdespite the flat European economy.
GLS increased half-year operating profits by 11 per cent to €69 million (£56 million) from€62 million (£53 million) last year despite a 7 per cent increase in operating costs due to highervolumes and delivery costs. The company improved its operating profit margin to 6.9 per cent from6.6 per cent last year, and made a half-year net profit of £20 million, according to Royal Mail’shalf-year report.
Royal Mail CEO Moya Greene highlighted the company’s results, saying: “GLS, our Europeanparcels business, demonstrated a strong performance with better than expected volumes in domesticand export parcels.”
In Germany, its largest market, GLS increased revenues and volumes but had lower margins,Royal Mail said. Market growth was driven by B2C shipments and “domestic competitors were chasingvolume to fill networks”, the company commented. Price increases were thus “challenging” in thecurrent market environment. On the cost side, GLS Germany stabilised its sub-contractor costs butthe new minimum wage is expected to impact from January 2015 onwards, increasing cost pressuresonce again.
In France, GLS increased revenues and volumes, and the half-year operating loss was reducedto €9 million from €13 million in the first half of last year. “Our turnaround plan in France is ontrack,” Greene commented in her half-year review. “We are focusing on top line growth and rollingout our FlexDeliveryService.” With the difficult economic and political environment, the French B2Bparcels market is stagnating due to flat GDP but the B2C market offers opportunities, according tothe company.
Royal Mail last month announced a settlement agreement with the French competition authorityover alleged breaches of antitrust laws by GLS France before the end of 2010, and made a provisionof £18 million (€23 million) over the issue.
Italy again generated strong revenue growth during the six months with the market growthdriven by B2C. “GLS Italy continued to deliver a good performance, partly due to our selectiveacquisition strategy and the successful integration of new franchisees. The business is aiming tomaintain its competitive position by focusing on SMEs and increasing exports,” Greene stated.
Greene stressed that GLS remained a core part of the wider Royal Mail Group, perhaps in anattempt to pre-empt questions about whether the group will eventually sell its European parcelbusiness. “This performance of GLS in the current weak economic environment in Europe is the kindof performance that we will always want to have in our business.”
