EP UK Bidco’s £3.6bn offer for International Distribution Services (IDS) has now gained merger control clearance from the European Commission and from the USA Committee on Foreign Investment.
In a Q3 trading update for the period to 31 December issued today (15 January) IDS said that both operational and financial performance at Royal Mail were showing ongoing improvement.
“Operational improvements enabled us to deliver millions of parcels to customers up to 9pm for the first time, between Black Friday and the end of December, ensuring we met customer needs for next day deliveries over peak,” the group stated, and said that more than 99% of items posted on or before the last recommended posting date pre-Christmas had arrived in time for the festivities.
The volume of tracked parcels jumped by 19% to 188m parcels.
Sales at Royal Mail were up 2.4% at £2.3bn, while sales at overseas parcel wing GLS were down 2% at £1.28bn.
Group sales slipped by 0.8% to just under £3.62bn.
For the nine months ending 31 December group sales were up 5.5% at £9.97bn, and Royal Mail revenues rose by 7.5% to £6.25bn.
CEO Martin Seidenberg said he was proud of colleagues across the group, who went “above and beyond for our customers this Christmas”.
“At Royal Mail, we have made more progress to adapt to customer demand,” he said.
“Successful execution of our union agreements is bringing increased operational flexibility, which together with increased automation, and thousands of new vehicles, is leading to improved reliability.
“In particular I'm pleased with the strong growth in tracked volumes, and the progress we are making expanding our out of home network, giving customers more convenient options to send and receive parcels.”
He said the business planned to grow its network to over 21,000 drop off locations by the end of March, including around 1,500 lockers.
Royal Mail is also piloting a new delivery model in some areas from next month, whereby Second Class post will not be delivered on Saturdays in line with the firm’s hopes for reform of its Universal Service obligations.
Seidenberg noted: “Our investment and efforts to drive improvements must be backed by urgent reform of the Universal Service.
“After five years of discussion, we look forward to seeing Ofcom's proposals as part of its forthcoming consultation. After speaking to thousands of customers, we submitted our proposal to Ofcom for a modern and sustainable postal service, and will shortly begin to pilot a new delivery model in a limited number of locations.”
A spokesperson told Printweek: “Working with our unions, CWU and Unite CMA, we plan to pilot a new delivery model in 37 of our c.1,200 delivery offices this year. The first pilot is due to start in February 2025 with a staggered roll out over the following months.
“The pilots are designed to ensure everything runs smoothly and we can deliver a better customer experience if we deploy any Universal Service changes. We will only look to implement our new operating model if Ofcom’s new regulations come into force. Until then, the current regulatory framework remains in place and any proposals are subject to change.”
Ofcom commented: “We’re speaking to postal users to understand how the universal service could evolve while continuing to meet their needs.
“We’ll consult publicly on proposals early this year, and we understand Royal Mail plans to carry out pilots in light of any proposals we make.”
Shares in IDS nudged up 0.26p to 364.46p on the update (52-week high: 368.00p, low: 209.82p).
EP UK Bidco is offering 370p per share, made up of 360p in cash and 10p in dividends. Czech billionaire Daniel Křetínský is behind the bid.
Its takeover offer for IDS is expected to be declared unconditional in Q1, subject to the required conditions being satisfied or waived.
