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Royal Mail impresses City with GLS trading update

Published: 13:05 30 Mar 2021 BST

Royal Mail PLC -

Royal Mail PLC (LON:RMG) gave the City another pleasant surprise today with a trading update from its international arm GLS.

Having issued two profits upgrades for its UK business driven by the eCommerce boom in parcels, the FTSE250 company said GLS was also on a strong growth path.

Up to the 2024-25 financial year, GLS is expected to grow revenue at around 12% annually from a base of €3.6bn in 2019-20, more than double operating profit to €500mln and generate €1bn of free cash flow, Royal Mail said.

For the year to March just ended, GLS' adjusted operating profit is expected to be around £350mln (€390mln). 

Analysts said the growth predicted over the next five years was much higher than expected.

“UBS said: GLS mid-term targets are higher vs. our expectations on sales and margins leading to a FY24/25 EBIT (underlying profit) circa 33% above our forecast.”

Peel Hunt added it was forecasting revenue growth of 7.1% a year from GLS and adjusted operating profit of €422m in 2024-25, while Nicholas Hyett at Hargreaves Lansdown said the GLS numbers were eye-catching.

“Very strong revenue growth, we suspect supported by continued growth in e-commerce and acquisitions, together with only modest capex requirements makes GLS the jewel in Royal Mail’s crown.

“If the UK business could emulate its international cousin the group would be home and dry.”

Royal Mail also surprised with the announcement of a 10p final dividend while it repeated its forecast of £700mln operating profits in the year to end March 2021.

Shares rose 1.9% to 518p compared to 128p a year ago.

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