Annual Report and
Financial Statements 2023-24
International
Distribution
Services plc
Reported revenue
1
£ 12,679m
2022-23: £12,044m
Reported operating profit
1
£26m
2022-23: £(742)m loss
Adjusted operating loss
2
£(28)m
2022-23: £(71)m loss
Adjusted operating loss margin
2
(0.2)%
2022-23: (0.6)%
Reported basic earnings per share
1
5.6p
2022-23: (91.3)p loss per share
Adjusted basic loss per share
2
(14.6)p
2022-23: (20.5)p loss per share
FY 2023-24 dividend
2p
2022-23: Nil
Net debt
2
£ 1,716m
2022-23: £1,500m
2023-24 Group Financial Performance Contents
Strategic Report
01 Group at a glance
02 Chair’s statement
04 Chief Executive's review
11 Our marketplace
14 Our business model
16 Our strategy
20 Measuring our performance
22 Our stakeholders
24 Section 172 statement
27 ESG review
41 TCFD statement
49 Risk management and our
principal risks and uncertainties
59 Viability statement
62 Financial review
76 Non-financial and sustainability
information statement
Corporate Governance
80 Chair’s introduction
82 Board of Directors
84 Board at a glance
85 Governance framework
86 Division of responsibilities
87 Board activities
89 Culture
90 Shareholder and workforce engagement
91 Board evaluation
92 Nomination Committee Report
96 Audit and Risk Committee Report
104 Environmental, Social and Governance
Committee Report
106 Directors’ Remuneration Report
139 Directors’ Report
143 Statement of Directors’ Responsibilities
Financial Statements
145 Independent auditor’s report
164 Consolidated income statement
165 Consolidated statement of
comprehensive income
166 Consolidated balance sheet
168 Consolidated statement of changes in equity
169 Consolidated statement of cash flows
171 Notes to the consolidated financial statements
233 International Distribution Services plc
– Parent Company financial statements
Additional Information
237 Shareholder information
238 Glossary of alternative performance measures
244 Forward-looking statements
£(254)m
£280m
Group reported operating profit split
2023-24 2022-23
Royal Mail £(254)m £(1,039)m
GLS £280m £297m
Segmental revenue split
3
2023-24 2022-23
Royal Mail £7,834m £7,411m
GLS £4,865m £4,650m
1. Reported results are prepared in accordance with UK adopted International Financial Reporting Standards (IFRS).
2. The Group’s performance is explained through the use of alternative performance measures (APMs) that are not defined under IFRS.
A full list of the Group’s APMs are set out on pages 238 to 243 and reconciliations to the closest measure prescribed under IFRS.
3. Includes intragroup revenue of £20m split between Royal Mail (£1m), Parcelforce Worldwide (£16m) and GLS (£3m).
(2022-23: intragroup revenue was £17m split between Parcelforce Worldwide (£14m) and GLS (£3m)).
62%
38%
Group at a Glance
Our approach to sustainability
Demonstrating leadership across
the broad environmental, social and
governance (ESG) agenda is the right
thing to do. It is also essential if we are
to achieve competitive advantage and
create value for our stakeholders.
We aim to run our business in a
responsible and sustainable way
and be an integral, trusted and valued
part of the communities we operate in.
→ Read more on pages 27 to 40
Who we are
International Distribution Services plc (IDS
plc or IDS) is a holding company,
which includes our UK-based operation,
Royal Mail and Parcelforce Worldwide (Royal
Mail), and our international operation, GLS.
IDS aims to be a modern logistics company,
delivering sustainable growth and value for
shareholders.
What we do
Our businesses provide postal and delivery
services across their extensive networks.
Royal Mail delivers letters and parcels to
around 32 million addresses across the UK.
GLS is one of the largest parcel services
providers in Europe, with a growing presence
in North America.
Our strategic priorities
During the year we have focused on a number
of strategic initiatives to improve the customer
experience and drive growth including:
— Progressing the transformation of Royal
Mail and improving quality of service
and productivity.
— Growing our out-of-home networks
in both Royal Mail and GLS.
— Continuing to upgrade GLS’ network
and expand its customer offering.
→ Read more on pages 16 to 19
Our values
Our values, which shape our culture,
underpin everything we do. We focus on
our customers and on providing reliable
and convenient value-for-money
services. We want our people to be
proud to work for our businesses.
Royal Mail
— Be positive – about what we can achieve.
— Be brilliant – for our customers.
— Be part of it – each one of us is responsible.
GLS
— Reliability
— Security
— Transparency
— Flexibility
— Sustainability
Our ambition
To build a more
balanced and diverse
international business.
1
International Distribution Services plc Annual Report 2023-24
Additional Information Financial Statements Corporate Governance Strategic Report
Chair’s Statement
Keith Williams
Non-Executive Chair
The past year has been one of transition, but the Group has made
good progress. Following a long period of industrial action we have
stabilised Royal Mail. This has allowed us to improve the businesses’
operational performance and make good progress on its modernisation
agenda. At GLS, whilst both short-term macroeconomic headwinds
and strategic investments impacted profitability, the business
delivered good volume and revenue growth in almost all markets,
and continued delivery of its strategic agenda.
We are a people-driven business and our colleagues across the
Group have contributed to our performance and the progress we
have made. On behalf of the Board, I would like to thank them for
their continued hard work and dedication.
At the time of writing, the Board has received a revised possible
offer of 370 pence per IDS share from EP Group for the entire
issued share capital of IDS. The proposal follows significant
negotiation including a number of earlier proposals from EP
Group (the first of which was made on 9 April 2024 at a price
of 320 pence per share in cash).
Both Royal Mail and GLS perform critical functions in the markets
where they operate, and the Board is particularly mindful of Royal
Mail’s unique heritage and responsibilities as the designated
Universal Service Provider in the United Kingdom and a key part
of national infrastructure. In assessing the proposal, the Board has
also been very mindful of the impact on Royal Mail and GLS and their
respective stakeholders and employees, as well as broader public
interest factors. The Board has sought, and EP Group has agreed
to offer as part of the proposal, a set of contractual undertakings
to protect key public interest factors and recognise Royal Mail’s
status as a key part of national infrastructure.
The Board is minded to recommend the revised offer of 370 pence
to IDS shareholders, should an offer be made at that level, subject to
satisfactory resolution of the final terms and arrangements. However,
there can be no certainty that any offer will be made.
“ Despite a challenging
macroeconomic backdrop,
the Group delivered a good
performance.”
The plans now being executed under the leadership of Martin
Seidenberg since he became Chief Executive Officer of IDS in August
2023 are delivering clear operational and financial improvements.
Royal Mail has crossed an inflection point and GLS is continuing to
build on its proven track record of delivering top line growth, strong
margins and good cash flow generation, enabled by its flexible
operating model, broad customer base and geographic diversity.
Over the past eight months, Royal Mail’s trajectory has seen
a fundamental step change, with the operational turnaround
accelerating at pace. GLS has consistently been one of the most
profitable players within the parcel delivery segment with its asset
light business model, broad customer base and geographic diversity
enabling a resilient performance in a challenging market. It continues
to invest to support significant network expansion and to drive innovation,
launching new digital services and transforming the last mile.
Universal Service reform
Royal Mail continues to make progress on its transformation and the
business is now back to growth. However, urgent reform of the Universal
Service is essential to ensure longer-term financial sustainability.
Royal Mail has developed a clear and detailed proposal for reform
of the Universal Service based on extensive modelling and analysis
of customer needs. These changes should be enacted quickly by
Ofcom through changes to postal regulations and conditions and
do not require legislation change through Parliament. We urge
Ofcom to act without delay. Royal Mail’s proposal would deliver
a more efficient, more reliable and more financially sustainable
service. It would reduce the net cost of the Universal Service by
up to £300 million per year, whilst protecting what matters most
to customers resulting in a better, sustainable outcome for our
customers, our people, and our shareholders. Once reform is
agreed, deployment would take 18-24 months. However, at the
current time there is no clarity on the form or timing of any change
to the Universal Service. The longer the wait for change to be agreed
the smaller the reduction in costs will be, given continued falling
letter volumes, against an ongoing need for investment and
transformation in Royal Mail.
2
International Distribution Services plc Annual Report 2023-24
1. Reported results are prepared in accordance with UK adopted International Financial Reporting
Standards (IFRS).
2. The 52 week 2023-24 results are derived by removing the 53rd week revenue and incremental
costs in relation to Royal Mail, see the Group's APMs on page 238 to 243 for further details on this
adjustment. Percentage changes are on a 52 week basis. The GLS financial year is 12 months
to 31 March 2023 and 2024, so no adjustment is made for GLS’ results. The 52 week results are
in line with how the Chief Operating Decision Maker as defined by IFRS 8 reviews performance.
3. The Group’s performance is explained through the use of alternative performance measures
(APMs) that are not defined under IFRS. A full list of the Group’s APMs are set out on pages 238
to 243 and reconciliations to the closest measure prescribed under IFRS.
4. Based on internal analysis of publicly available competitor fleet data.
5. In the Group's full year results announcement published on 24 May 2024 this sentence incorrectly
read ‘In December 2023, GLS submitted its Net-Zero targets for SBTi validation’.
Royal Mail is also calling on Ofcom to modernise the Universal
Service, for example by adding tracking to Universal Service
parcels to reflect customer demand.
The proposal we submitted to Ofcom in April 2024 is available at
www.internationaldistributionservices.com/en/about-us/regulation/
the-future-of-letter-deliveries.
Financial performance
1,2,3
Despite a challenging macroeconomic backdrop, the Group
delivered a robust performance. Group revenue grew by
£635 million year-on-year to £12,679 million, with revenue
and parcel volume growth in both businesses. Group reported
operating profit was £26 million (2022-23: £742 million loss), due to a
significant reduction in the loss at Royal Mail as the prior year
included an impairment charge of £539 million on the carrying value
of Royal Mail. Adjusted operating loss was £28 million
(2022-23: £71 million loss), driven by revenue growth and reduced
losses in Royal Mail. Group adjusted basic loss per share was
14.6 pence (2022-23: 20.5 pence loss per share). On a reported
basis, Group earnings per share was 5.6 pence (2022-23: 91.3 pence
loss per share).
Sustainability
Our businesses made good progress in their respective
decarbonisation strategies, although emissions increased by
2% compared to the prior year, mainly due to volume growth in
GLS. On a per revenue basis, CO
2
e emissions fell by 5%. In July
2023, Royal Mail reached the milestone of 5,000 electric vans
across its delivery and collection fleet and operates the largest
electric vehicle (EV) delivery fleet in the country.
4
GLS is also
continuing to expand its low- and zero-emission fleet, which
grew by around 48% year-on-year, adding more e-vans, light
vehicles and alternative-fuel vehicles to its delivery network.
Both Royal Mail and GLS are deploying hydrotreated vegetable oil
(HVO) biofuel, which has the potential to reduce emissions by up
to 90% compared to diesel. In Germany, our first hydrogen truck
is now in operation.
In September 2023, we announced that Royal Mail’s Net-Zero
and near-term targets had been validated by the Science
Based Targets initiative (SBTi) and in December 2023,
GLS committed to set Net-Zero targets for SBTi validation.
5
We have also continued to implement the Task Force on
Climate-related Financial Disclosure recommendations.
Capital allocation and dividend
The maintenance of a conservative balance sheet has always been
at the heart of the Group’s capital allocation policy and the Board
considers the Group’s net debt position as robust (pre-IFRS 16) at
£328 million as at 31 March 2024 (£181 million at 26 March 2023,
£142 million at 24 September 2023).
As previously indicated at the Group’s half year results, the Board has
proposed a final dividend payment of 2 pence per share in respect
of 2023-24, funded by GLS. This final dividend payment is subject to
shareholders approval at the Annual General Meeting scheduled to
take place on 25 September 2024. The dividend will be paid on
30 September 2024 to shareholders on the register at 23 August
2024. The Board is also proposing a special dividend of 8 pence per
share, conditional upon completion of the transaction with EP Group.
The Group had available liquidity of around £2.1 billion at the end of
March 2024, including £927 million of cash and cash equivalents
(excluding £47 million GLS client cash), £216 million of current asset
investments, along with undrawn bank syndicate loan facility of
£925 million.
Board changes
During the year we introduced a new management structure and
on 20 July 2023 Martin Seidenberg was appointed to the newly
created role of Group Chief Executive Officer to lead the Group
and set its strategic direction. Martin joined GLS in 2015 as CEO
of GLS Germany and was subsequently appointed CEO of GLS
in June 2020. He joined the Board in April 2021. He has extensive
international logistics experience and proven track record of
delivering change and growth.
On 18 January 2024 Michael Snape joined the Board as Group Chief
Financial Officer (CFO) and Executive Director with immediate effect.
Michael was previously CFO of Boots, No7 Beauty Company and
International for Walgreens Boots Alliance. Prior to Boots Michael
was International CFO for Tesco, responsible for its operations
outside the UK and Ireland. Michael brings extensive turnaround
experience and excellent financial leadership.
Michael succeeded Mick Jeavons who stepped down as Group CFO
and Executive Director on 18 January 2024. During his 30-year career
with the Group Mick held various senior roles and his counsel, knowledge
and experience have been invaluable. On behalf of the Board, I would
like to thank him for his outstanding contribution through some turbulent
times and wish him every success for the future.
In June 2023 Ingrid Ebner joined the Board as a Non-Executive
Director and member of the Nomination Committee.
Summary
The Group has made good progress this year and delivered
operational and financial improvements, against a difficult
macroenvironment. Royal Mail has crossed an inflection point,
although headwinds remain. GLS delivered revenue growth and
adjusted operating profit at the upper end of guidance and made
further progress on delivering its strategic priorities. However,
there is more to do, with further investment required at GLS
and the ongoing transformation of Royal Mail.
Keith Williams
Non-Executive Chair
24 May 2024
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Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Martin Seidenberg
Group Chief Executive Officer
Chief Executive’s Review
“ Royal Mail’s operational
performance has improved and
its modernisation agenda has
progressed. GLS delivered a
good financial performance and
continued to deliver its strategy.”
Operational performance
Volume and revenue
1
Revenue (£m)
53 weeks
March 2024
52 weeks
March 2024
ex. 53rd
week in
Royal Mail
52 weeks
March 2023
Change
52 wks 2024
ex. 53rd wk
in Royal Mail
vs 52 wks
2023
1,2
Group
3
12,679 12,539 12,044 4.1%
Royal Mail 7,834 7,694 7,41 1 3.8%
Total Parcels 4,108 4,040 3,910 3.3%
Domestic Parcels
(excluding
international)
4
3,382 3,327 3,226 3.1%
International Parcels
5
726 713 684 4.2%
Letters 3,726 3,654 3,501 4.4%
GLS 4,865 4,865 4,650 4.6%
Volume (m units)
53 weeks
March 2024
52 weeks
March 2024
ex. 53rd
week in
Royal Mail
52 weeks
March 2023
Change
52 wks 2024
ex. 53rd wk
in Royal Mail
vs 52 wks
2023
1,2
Royal Mail
Total Parcels 1,295 1,273 1,205 6%
Domestic Parcels
(excluding
international)
4
1,120 1,101 1,064 3%
International Parcels
5
175 172 141 22%
Addressed letters
(excluding elections) 6,736 6,617 7,280 (9)%
GLS 905 905 862 5%
1. Reported results are prepared in accordance with UK adopted International Financial Reporting Standards (IFRS). The 52 week 2023-24 results are derived by removing the 53rd week revenue and
incremental costs in relation to Royal Mail, see the Group's APMs on page 238 to 243 for further details on this adjustment. Percentage changes are on a 52 week basis. The GLS financial year is
12 months to 31 March 2023 and 2024, so no adjustment is made for GLS’ results. The 52 week results are in line with how the Chief Operating Decision Maker as defined by IFRS 8 reviews performance.
2. All percentage changes reflect the movement between figures as presented, unless otherwise stated.
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. International includes import and export for Royal Mail and Parcelforce Worldwide.
→ Further detail on our strategic progress is included on pages 16 and 19.
4
International Distribution Services plc Annual Report 2023-24
Q
You have now been in your role for ten months –
have your thoughts about the business changed?
No – if anything the last ten months have reinforced my belief in
the strength of IDS. I firmly believe that by working together to meet
customers’ evolving demands, we will turn around Royal Mail and
continue to grow GLS. While there are challenges ahead and much
work to do, we have two companies with great potential and plenty
of opportunities to transform and grow. Royal Mail has unparalleled
scale and reach in the UK, a great brand and strong customer
relationships. GLS is a state-of-the art international parcel logistics
network. It also has a strong brand and a proven track record of
delivering growth and innovative customer services. Delivering
on our potential is an exciting challenge and, as evidenced by
our recent performance, we are heading in the right direction.
Q
Has anything in particular stood out in recent months?
I was particularly impressed by the level of energy and
engagement from our Royal Mail colleagues who worked
tirelessly to ensure that practically all items posted before
our last recommended posting dates were delivered in time
for Christmas. This has served as a launchpad for a marked
improvement in Royal Mail’s trading and operational performance
and I am very pleased that the momentum has been maintained.
The roll out of our new out-of-home growth plan is also noteworthy.
Focused on making our service more convenient, we have launched
two significant partnerships that give customers more options to
drop off and collect parcels.
Q
Transformation and growth are clearly key priorities –
are you focusing on anything else?
We must engage with our people more effectively. They underpin
our success and are key to the delivery of a higher-quality more
efficient customer service. Specifically in our Royal Mail business
we need to address the legacy impact of last year’s industrial
dispute on our workforce’s pride and find new ways to improve the
overall employee experience. And as customer demand for more
sustainable products and services continues to grow, we also
need to drive our environmental initiatives to further reduce the
impact of our operations and play our part in the transition to a
low-carbon future. This is the right thing to do. It will also enhance
our competitiveness and we have a strong platform to build on.
Royal Mail is already the UK’s greenest delivery operator.
1
1. Based on average gCO
2
e emissions per parcel delivered by UK parcel
operators, as published by Citizens Advice 2023 Parcels League Table.
CEO Q&A
5
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Royal Mail 2023-24
performance
Chief Executive’s Review continued
Revenue
1
£7,834m
2022-23: £7,411m
Reported operating loss
1
£(254)m
2022-23: £(1,039)m loss
Adjusted operating loss
2
£(348)m
2022-23: £(419)m loss
Royal Mail parcel/letter revenue split %
2023-24 2022-23
Parcels 52% 53%
Letters 48% 47%
52%
48%
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International Distribution Services plc Annual Report 2023-24
Royal Mail
In the following commentary all percentage changes are based on a
comparison
3
of 52 weeks March 2024, excluding the 53rd week in
Royal Mail, and 52 weeks March 2023. Revenue increased 3.8%,
reflecting growth in both parcel and letter revenue.
Domestic parcel volumes (ex. international) increased by 3%,
with domestic parcel revenue up 3.1% year-on-year. We made
good progress in winning back customers lost due to industrial
action last year. Price increases were partially offset by negative
mix. Growth was particularly strong in the second half, as we
lapped 15 days of industrial action.
International parcel volumes, including import and export parcels
for Royal Mail and Parcelforce Worldwide, showed strong growth
of 22%, driven by strong import volumes. International parcel
revenue grew by 4.2% year-on-year, reflecting higher import
volumes at a lower average unit revenue.
Total letter revenue grew by 4.4% year-on-year, benefitting
from price rises, necessary given the inflationary environment
and costs of delivering the USO against the backdrop of
declining letter volumes, and positive mix effects, partially offset by
volume decline. Addressed letter volumes (excluding elections) fell by
9% year-on-year, reflecting the trend of long-term structural decline.
Stamped letter revenue rose significantly, with a particularly strong
performance over the Christmas period, which was heavily impacted
by strike action in the prior year. Advertising mail volumes declined
by 11%, a result of the macroenvironment, whilst business mail
volumes remained relatively robust, with the decline in volume more
than offset by price increases, leading to revenue growth of 7.2%.
Whilst quality of service improved, there is more to do. Across the
year, the business delivered an average of 74.5% of First Class mail
within one working day (Ofcom target 93%) and 92.4% of Second
Class mail arrived within three working days (Ofcom target 98.5%).
Reported operating loss reduced to £254 million
(2022-23: £1,039 million loss) and adjusted operating loss reduced to
£348 million (2022-23: £419 million loss), broadly in line with
expectations. The business was close to breakeven in H2 at the
adjusted operating level, excluding voluntary redundancy charges.
In-year trading cash outflow was £246 million (2022-23: £306 million
outflow). Gross capital expenditure decreased by £79 million to
£176 million, due to a new cash management approach and prioritisation
of investment projects.
→ Further detail on performance is included in the Financial Review.
1. Reported results are prepared in accordance with UK adopted International Financial Reporting
Standards (IFRS).
2. The Group’s performance is explained through the use of alternative performance measures
(APMs) that are not defined under IFRS. A full list of the Group’s APMs are set out on pages 238
to 243 and reconciliations to the closest measure prescribed under IFRS.
3. The 52 week 2023-24 results are derived by removing the 53rd week revenue and incremental
costs in relation to Royal Mail, see the Group's APMs on page 238 to 243 for further details on this
adjustment. Percentage changes are on a 52 week basis. The GLS financial year is 12 months to
31 March 2023 and 2024, so no adjustment is made for GLS’ results. The 52 week results are in
line with how the Chief Operating Decision Maker as defined by IFRS 8 reviews performance.
7
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
GLS 2023-24
performance
Revenue
1
£4,865m
2022-23: £4,650m
Reported operating profit
1
£280m
2022-23: £297m
Adjusted operating profit
2
£320m
2022-23: £348m
58%
42%
GLS B2C/B2B volume split %
2023-24 2022-23
B2C 58% 55%
B2B 42% 45%
8
International Distribution Services plc Annual Report 2023-24
Chief Executive’s Review continued
In the US, revenue declined by 4.2% in USD terms driven by lower
freight revenues, not fully offset by strong parcel volume growth
of 12%, driven by B2C. Operating losses reduced by around one
third compared with the prior year, due to lower costs driven by
operational efficiencies. Measures focused on further improving
unit operational costs and the quality of revenue, including yield
management activities, are continuing.
GLS Canada organic revenues declined by 5.5% in CAD terms due
to lower freight revenue, a result of the weaker macro environment,
and lower fuel surcharges. The prior year also saw unusually strong
growth. This led to a decline in operating profit in CAD terms, which
was exacerbated in Euro terms due to the weakening of the CAD,
although Canada remains a higher margin business for GLS.
→ Further detail on performance is included in the Financial Review.
Calling for Universal Service reform
In their call for input Ofcom concluded that reform of the Universal
Service is necessary, given letter volumes have declined from
a peak of 20 billion a year in 2004-05 to 6.7 billion in 2023-24.
Ofcom calculates that providing the current Universal Service to
the UK has a net cost to Royal Mail of £325 million to £675 million
every year. If we want to save the Universal Service, we have to
change the Universal Service.
Our proposal, based on extensive consultation and detailed modelling,
would ensure a more efficient, reliable and financially sustainable
Universal Service, which is good for the business and its shareholders,
protecting tens of thousands of jobs and the best terms and conditions
in the industry, whilst safeguarding what matters most to customers,
a one-price-goes-anywhere Universal Service.
If fully and swiftly implemented by April 2025 at the latest, our
proposal would reduce the net cost of the Universal Service by
up to £300 million per year through a net reduction in daily delivery
routes of 7,000-9,000 over the course of around 18-24 months.
Royal Mail is confident it can manage this primarily through natural
turnover, and the implementation of these proposals is expected
to result in fewer than 1,000 voluntary redundancies.
Our proposal also closely aligns to changes successfully made in
comparable countries – in Europe and around the world – over recent
years. These changes should be enacted quickly by Ofcom through
changes to postal regulations and conditions and do not require
legislation change through Parliament. Royal Mail is urgently calling
for Ofcom to act faster on implementing change, with the introduction
of new regulations by April 2025 at the latest. However, at the current
time there is no clarity on the form or timing of any change to the
Universal Service and the longer the wait for change to be agreed,
the smaller the reduction in costs will be.
A summary of our response to Ofcom’s call for input and details of
our proposal are available at
www.internationaldistributionservices.com/en/about-us/regulation/
the-futureof- letter-deliveries.
GLS
GLS delivered a good financial performance, in line with the upper
end of guidance, against challenging macroeconomic conditions,
with above market revenue growth.
Revenue grew 4.6% to £4,865 million, 4.7% growth in Euro terms,
driven by good volume growth, partly mitigated by lower freight
revenues and mix. Excluding acquisitions, revenue was up 3.7% in
Sterling terms. Revenue growth was achieved in almost all markets,
with six markets delivering double digit growth. However, US and
Canada, which together accounted for 11.3% of total GLS revenue,
both saw revenue declines, due to the weaker macroenviroment and
lower freight revenue.
Parcel volumes increased by 5%, with B2C growth of 10%, with
11 markets delivering double digit growth. Cross-border grew by 8%.
B2C volume share was 58%, three percentage points above the prior
year.
Reported operating profit was £280 million (2022-23: £297 million)
and adjusted operating profit was £320 million (2022-23: £348 million)
or €371 million (2022-23: €403 million), reflecting inflationary pressures,
including a higher minimum wage in some markets and the impact of
strategic investments. Adjusted operating profit margin declined by
90 basis points to 6.6%.
Foreign exchange movements had a net nil impact on operating profit.
We continued to invest in growth and automation to generate
efficiency savings, with gross capital expenditure of £204 million
(2022-23: £152 million). In-year trading cash inflow pre-IFRS 16
remained robust, at £92 million, which compared with £197 million
inflow in the prior year. In-year trading cash inflow was £173 million
(2022-23: £272 million inflow).
Performance in selected markets is highlighted below, with revenue
growth and cost development detailed in Euro terms, unless stated
otherwise. Operating profit is before specific items. Further detail
is included in the Financial Review.
GLS Spain revenue grew by 18.4% driven by double-digit volume
growth and improved pricing. Overall operating profit increased
compared with the prior year.
GLS France revenue grew by 5.0%, driven by higher volumes and
slightly better pricing. Whilst there was a small operating loss due to
inflationary effects on the cost base which were not fully recovered
through better pricing, the business remains on a good trajectory
and the new Paris hub will become operational for peak,
demonstrating our confidence in the business.
In Germany, organic revenue growth was 4.4% driven by improved
pricing, with volumes flat. Overall operating profit was in line with
the prior year, excluding acquisitions, which represented a strong
performance compared with competitors.
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Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Chief Executive’s Review continued
Sustainability
Royal Mail’s Net-Zero and near-term targets have now been
validated by the Science Based Targets initiative (SBTi) as being in
line with the latest climate science to limit global warming to 1.5°C
above pre-industrial levels. The targets are part of Royal Mail’s Steps
to Zero strategy to achieve Net-Zero by 2040. During the year, flights
to Jersey and the Isle of Man were removed from Royal Mail’s delivery
network to streamline services and further reduce carbon emissions.
In the coming year increased flexibility of delivery window times will
enable the removal of a further 18 flight routes, which when fully
realised, will equate to a saving of c.30,000 tCO
2
e per year or over
50% of Royal Mail’s base year domestic air emissions.
In July 2023, Royal Mail reached the milestone of 5,000 electric
vans across its delivery and collection fleet. The business operates
the largest EV delivery fleet in the country, and has started to deploy
HVO biofuel at six refuelling sites for heavy good vehicles. The use of
HVO has the potential to reduce emissions by up to 90% compared to
diesel. Overall, during the year Royal Mail reduced its emissions by 8%.
GLS is continuing to expand its low- and zero-emission fleet by adding
more e-vans, light vehicles and alternative-fuel vehicles to its delivery
network. The low and zero-emissions fleet grew by around 48%
year-on-year, to more than 4,900 and now makes up around 11%
of the total fleet. Across the GLS network there are now more than
3,600 charging points, with 1,400 points installed during the year,
an increase of more than 63%.
Various electric truck trials are ongoing in Belgium, France, Spain,
Germany, Poland, Denmark, the Netherlands and the Czech Republic.
In Germany, the first hydrogen truck is being used for linehaul operations
and for pick-up and delivery in the Cologne-Bonn area.
In Italy, a Volvo FH electric truck now connects the Riano Hub with
the San Lorenzo facility, which has a zero-emission only fleet of
vehicles. In addition, the Liquefied Natural Gas (LNG) truck fleet
in Italy is ramping-up the use of biogas. In Canada, a first class
8 electric truck is now being used for pick-up and delivery in
Montreal and is intended to be used in the future for line hauls
between Quebec City and Montreal.
In several countries GLS is investigating using HVO as
an alternative fuel for line haul transportation.
GLS is also in the process of applying for SBTi validation of
its near-term and longer-term emissions reduction targets.
Martin Seidenberg
Group Chief Executive Officer
24 May 2024
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International Distribution Services plc Annual Report 2023-24
A number of trends are driving structural change in our letter
and parcel market and are shaping the way we run our business.
Our Marketplace
TREND
Structural growth in
parcels and decline
in letter volumes.
How we are responding
— Focusing on parcels, whilst also
delivering letters.
— Increasing prices to help
mitigate mail volume decline.
— Campaigning for Universal Service
reform (see page 24).
40%
Of UK retail sales via e-commerce
in 2023 (18% in 2014)
1
56%
Letter volume decline since 2011-12
2
TREND
Growing demand for
sustainable products
and services driven
by environmentally
conscious customers
and increasing regulation.
How we are responding
— Reducing our environmental footprint and
supporting the transition to a low-carbon
future (see pages 28 to 31).
— Royal Mail has the lowest reported CO
2
e
per parcel in the UK
3
and the largest
electric van (EV) delivery fleet.
4
It is also
decarbonising its line haul fleet of large
trucks through the deployment of HVO.
— GLS is committed to science-based
greenhouse gas reduction targets
in line with the SBTi.
— 80% of GLS’ operated sites use renewable
electricity and the business has >3,600
EV charging points at its depots.
49%
Of UK consumers prefer
a carbon-free delivery
5
49%
Of Europeans prepared to
have longer delivery times if
delivery is more sustainable
6
1. Office for National Statistics, January 2024.
2. Addressed letters (excl. elections), internal analysis.
3. Based on average gCO
2
e emissions per parcel delivered by
UK parcel operators, as published by Citizens Advice 2023
Parcels League Table.
4. Based on internal analysis of publicly available
competitor fleet data.
5. IMRG Consumer Home Delivery Review 2023.
6. DHL eCommerce: European Online Shopper Survey 2023.
Parcel and letter volumes (m units)
Year
1,200
2011-12
2017-18
2014-15
2020-21
2012-13
2018-19
2015-16
2021-22
2013-14
2019-20
2016-17
2023-24
2022-23
6,00
0
2,800
2,600
2,400
2,200
2,000
1,800
1,600
1,400
7,00
0
8,00
0
9,00
0
10,00
0
11,00
0
12,00
0
13,00
0
14,00
0
15,00
0
16,00
0
Addressed letters (excl. elections)
Parcels
COVID-19
Royal Mail Industrial
Relations dispute
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International Distribution Services plc Annual Report 2023-24
TREND
Challenging
macro environment.
How we are responding
— Becoming more agile and mitigating
escalating operational costs where
possible through efficiency, increased
automation and final mile optimisation.
— Modernising Royal Mail through
implementation of the Business
Recovery, Transformation and
Growth Agreement with the CWU.
— Upgrading our networks and increasing
automation to drive productivity and
growth. The second Royal Mail hub
opened in June 2023. GLS’ Madrid hub
commenced full scale operation in March
2023 and new hubs are scheduled to open
in Paris and Berlin in the coming year.
— Improving GLS’ final mile efficiency
through out-of-home (OOH) solutions.
— Adapting our pricing and surcharges
to partly mitigate mail volume decline.
2023 UK
1
GDP growth
0.1%
2023 EU
7
GDP growth
0.4%
2023 average UK inflation
1
7.3%
2023 average EU
7
inflation
6.4%
Royal Mail’s Midlands
Parcel Hub in Daventry
which opened in June 2023.
Our Marketplace continued
7. Eurostat, March 24
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International Distribution Services plc Annual Report 2023-24
TREND
Knowledgeable customers
who want to choose how
and when their parcel will be
delivered and buy services
based on speed, reliability,
price and convenience.
How we are responding
— Improving Royal Mail’s quality of
service is our top priority.
— Expanding our offering to make sending
and receiving parcels as convenient as
possible including increasing the scale
of our OOH network across locker and
parcel shops. During the year Royal Mail
launched a partnership with PayPoint that
allows customers to drop off parcels at
Collect+ locations across the UK. The
business also announced plans to install
3,000 lockers across the UK in
partnership with Quadient. GLS has also
increased its OOH locations by c.7,500 to
c.55,000 (+16%), including c.7,400
lockers.
— Continuing to invest in the latest
technology to meet customers’ evolving
needs and developing our digital footprint
across the entire customer journey.
— Leveraging GLS’ innovation expertise
and strong investment in digital to
enhance the customer experience.
72%
Of online shoppers want to be
able to make in-flight redirections
6
39%
Of European e-shoppers receive
deliveries outside their homes
6
65,000
Competitor lockers already
installed in Europe (including UK)
8
c.50%
Of Royal Mail’s consumer
sales are now online
9
Royal Mail partnership with
PayPoint allows customers
to drop off parcels at 5,000
Collect+ locations across the UK.
TREND
Evolving regulation including
countries across Europe
reforming their Universal
Service obligations, changes
to labour standards and
the use and tax treatment
of subcontractors across
Europe.
How we are responding
— Campaigning for Universal Service reform.
A summary of Royal Mail’s response to
Ofcom’s call for input is available at
www.internationaldistributionservices.
com/en/about-us/regulation/the-future-
of-letter-deliveries.
— Monitoring government policy and
developments in our markets and
adapting to local market circumstances.
92%
Of consumers’ needs likely to be met
by a reformed Universal Service
10
c.24%
Average increase in minimum
wage in selected EU countries
over the last two years
7
8. Kardinal “OOH parcel delivery: a comparative look at market
leaders’ strategies”, January 2024. Companies benchmarked:
DHL, Geopost, InPost, GLS.
9. Based on Royal Mail's analysis of postage labelled mail
excluding postage stamped mail.
10. Based on customer research undertaken by Royal Mail
(and included in the business’ submission to Ofcom on
2 April 2024) which found that provided the First Class
service was retained at six days a week, delivery of
non-priority letters two days a week would meet the
needs of the vast majority of consumers.
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Our Business Model
We use our strengths and resources
An extensive network
UK network includes c.1,200 delivery offices,
37 mail centres and 2 parcel super
hubs. Across Europe, Canada and the
US’ West Coast over 1,600 depots,
c.120 hubs and c.55,000 OOH locations.
Brands
Strong and renowned brands.
People
We are a people-driven business and
our colleagues across the Group play
a key role. We aim to foster a trusting
and inclusive culture that is aligned
with our purpose and strategy.
Increasing levels of automation
81% parcel automation across Royal Mail
as at March 2024 (76% March 2023).
Embedded sustainability strategy
Operating in a sustainable and responsible way.
→See pages 27 to 40
Effective governance
and risk management
→See pages 79 to 142 and 49 to 58
14
International Distribution Services plc Annual Report 2023-24
to create value
for our stakeholders
Customer
Meeting customers’ evolving needs.
Quality of Service
Improving service levels
and rebuilding customer trust.
Modernisation
Transforming Royal Mail.
Efficiency
Increasing productivity and competitiveness.
Collaboration
Leveraging innovation and expertise
across Royal Mail and GLS.
Our customers
c.32m
UK addresses
c.250,000
GLS customers
Our people
Provide 1 in
200 jobs
in the UK economy as a whole
1
Our suppliers and business partners
62,600 jobs
indirectly supported by Royal Mail
in the wider economy
1
Our communities and society
£10.9bn
gross value added by Royal Mail
(direct and indirect contribution)
1
Our shareholders
£937m
cash to shareholders via dividend payments
and share buybacks over last five years
1. The Centre for Economics and Business Research (Cebr) research, conducted
for Royal Mail in May 2024, comprising direct and indirect contributions.
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During the year we have focused on a number of strategic
initiatives to improve the customer experience and drive growth.
Our Strategy
16
International Distribution Services plc Annual Report 2023-24
Strategic update
Royal Mail
Royal Mail is now back on the right trajectory. The business has been
stabilised and we have delivered improvements in quality,
productivity and automation. Royal Mail returned to growth, with a
close to breakeven performance at the adjusted operating profit
level, excluding voluntary redundancy charges, in the second half of
the year.
Longer-term strategic plans are being developed, including a network
strategy to define our future footprint, leveraging both Royal Mail and
Parcelforce’s networks, and we have also made progress on our
channel strategy and new growth initiatives, where we have already
begun implementing a more diversified out-of-home offering.
On 2 April 2024 we announced the appointment of Emma Gilthorpe
as CEO of the Royal Mail business. Emma, who was previously Chief
Operating Officer at Heathrow airport, has a customer and employee-
centric approach and an impressive track record of delivering major
strategic change programmes whilst driving performance improvements.
Emma joined the business on 1 May 2024 and is currently working closely
with me as part of an intensive induction process before taking over
responsibility for the business in the summer.
Stabilisation and quality of service
When I began as Group CEO, my immediate priority was to take
short-term actions to stabilise the business as it came out of the
longest industrial action in our history. I am pleased to report that
we have achieved that, by refocusing our investment approach,
instilling a new rigorous approach to cash management and cost
control including capex reductions, whilst protecting investment
in our key transformation projects. We also implemented targeted
price increases. The business is now on a sounder footing, which
has enabled us to move forward with the transformation agenda.
I also committed to improve quality, to deliver the service our
customers rightly expect and help win back business lost during
the industrial action last year. To achieve that, I implemented the
following initiatives:
— Reinforced operational management at both regional and local levels.
— Established a quality control centre to drive real time operational
performance analysis and enable proactive intervention as required.
— Maximised the use of our Parcel Hubs, where we can process
parcels much faster and ensure higher quality of service in the
middle mile. Our Midlands Super Hub near Daventry increased its
throughput to a record total of 950,000 parcels in a 21-hour shift.
— Reduced our reliance on agency, recruiting more people on new
terms and conditions and reducing sick absence.
— Launched a quality incentive for our people over Christmas, based
on local and national quality targets, providing additional support
for the units where quality was most impacted.
As a result, quality of service has improved across both commercial
and USO products, with a 3.9% increase in First Class mail arriving
within one working day between Q2 and Q4. Across the year, the
business delivered an average of 74.5% of First Class mail within one
working day, with more than 91% delivered within two working days (in
Q4, this was more than 93%). 92.4% of Second Class mail arrived
within three working days. We reported our best Christmas
performance in four years with more than 99% of items posted
before the last recommended posting dates arriving by Christmas
Eve. We have also put in place a solution for NHS mail which has
improved service levels. Our approach is working. We are on the right
trajectory, but there is more to do.
Delivering our transformation
We have continued to drive our modernisation agenda forward
and have a clear plan for improvement. The Business Recovery
Transformation and Growth Agreement with CWU provides a solid
foundation for future growth and we have made good progress on
implementation during the year. Changes introduced include:
— Seasonal hours, requiring employees to work a longer week
during peak and a shorter working week in the summer of 2024,
were introduced for the first time during December 2023.
— New attendance and sick pay arrangements, with frontline
absence rates declining steadily since their introduction in
Autumn 2023.
— To support performance and efficiency we are regularly communicating
key performance metrics to our posties using our
‘MyPerformance’ app which was launched in October 2023.
Feedback is currently provided on 3 KPIs, with 5 more on trial,
which is already delivering improved first-time delivery rates and
safety metrics.
— Reducing reliance on agency staff, recruiting more than 9,000
full-time employees (FTEs) on new terms and conditions with
greater flexibility e.g. weekend working and supporting quality
improvement.
— Enabling later start times to ensure more next day delivery, improve
reliability, reduce cost and lessen impact on the environment, with
the removal of around 50% of domestic flights from Royal Mail’s
transport network.
As the agreement has been implemented, we have adapted some of
the programmes to deliver the associated benefits through a slightly
different route – for example, on indoor methods we have switched
to an alternative approach focused on improving upstream sortation.
The transformation will take time and there's still hard work ahead, but
Royal Mail is making good progress and heading in the right direction.
Efficiency and productivity
Automation levels hit 81% in March 2024, up from 76% in March
2023. This will enable us to push higher volumes of larger parcels
more efficiently through the Royal Mail network and as a result,
reduce costs and improve quality. We are also moving to a closer
integration of the Royal Mail and Parcelforce networks to optimise
parcel delivery through the most efficient route.
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Our Strategy
Productivity, across both processing and delivery, has improved.
In Q4, productivity was 4.3% higher year-on-year, enabled by
increased automation and improved ways of working. This is
particularly pleasing given workload has increased, with bigger
parcels now being transported through the network. We maintained
the reduction of 10,000 FTEs, the position we entered the year, and
were able to make further reductions with March 2024 frontline FTEs
over 1,000 lower vs. March 2023.
We are currently mapping out our future network, and developing
a plan to address our core challenge to move to a network setup
that can efficiently deliver parcels of all shapes and sizes, whilst
also delivering letters in the most efficient and cost effective way.
Expanding customer choice and convenience
Our modernisation agenda is wider than just the CWU agreement.
We have developed a new out-of-home growth plan, focused on
making our service more convenient for our customers, and have
already launched two significant partnerships to broaden our
final mile offering and give customers more options to drop off
and collect parcels. We have plans to increase the number of
parcel drop off locations by more than 50% to 21,000 through:
— 5,000 new Collect+ locations for customers to drop off parcels
rolling out in 2024-25.
— Launch of Royal Mail locker network in partnership with Quadient,
with 200+ rolled out, ramping up to 1,500 by end of 24/25 and an
initial target of 3,000 locations.
— Launching pilot Royal Mail Parcel Shop, with the potential to
expand further.
Summary
Royal Mail is now back to growth and the business has delivered
improvements in quality, productivity, and automation. We have also
made good progress on implementing the CWU agreement.
We continue to push for USO reform, submitting our proposal to
Ofcom which would ensure a more efficient, reliable and financially
sustainable Universal Service. These changes should be enacted
quickly by Ofcom through changes to postal regulations and
conditions and do not require legislation change through Parliament.
We have also set in motion a broader strategic programme including
our growth, network and channel strategy, where we have already
begun implementing a more diversified out-of-home offering. We are
on the right track, having made a significant step in the right direction
in 2023-24 and I look forward to building on our progress with Emma,
the new Royal Mail CEO. However, headwinds remain with a tough
macro and competitive environment, no change to the Universal
Service as yet agreed, continued declines in letter volume and
further investment required to deliver our multi-year transformation.
GLS
GLS has a distinctive and proven business model and made good
progress executing on its strategy, which is focused on:
— Strengthening its top position in the cross border deferred
parcel segment.
— Strongly positioning business in the 2C parcel market, whilst
securing its leading position in the 2B segment.
— Inspiring the market through innovative digital and sustainable
customer-focused solutions.
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International Distribution Services plc Annual Report 2023-24
During the year GLS continued to upgrade its network to support
growth and to transform the last mile, reinforcing its position in the
2C parcel market. It has also deployed a number of new innovative
digital solutions and expanded its international business and network
to support cross-border volumes.
Upgrading the network
We have continued to invest in GLS to drive productivity and growth.
The new Madrid hub commenced full scale operation in March 2023
and has already contributed to double digit volume and revenue
growth in Spain. During peak, on its busiest day GLS Spain handled
over 900,000 parcels. Across the whole GLS group, the business
processed 6.2 million parcels on the Monday after Black Friday .
New depots were also established in Rome and Nancy, and after the
successful launch of the new Madrid hub last year, this year, new
automated hubs will open in Paris and Berlin in time for the peak
season. In Germany, the new Berlin hub will be GLS’ largest depot
and regional hub, with a network capacity of up to 200,000 parcels
per day. It will play a key role in serving the greater Berlin area and
serve as a international gateway to Eastern Europe. The new Paris
hub will have the capacity to handle around 200,000 parcels per day.
GLS is also deploying new technologies in robotics.
Following successful testing of automated guided vehicles in
Germany, there are now plans to expand into five additional depots
across the country, with the potential to expand into France, Spain and
Italy. The business is also increasing automation, and deploying
artificial intelligence (AI) across its network, developing package
detection technology to reduce damage caused during sortation,
and technology to improve the efficiency of feeding parcels into
sorters.
Altogether, our investments in hubs, automation and robotics will
increase GLS' per day capacity by around 750,000.
Transforming the last mile
During the year GLS expanded its locker network by 53%.
Parcel locker expansion in Eastern Europe is progressing well, where
lockers grew almost 90%, and as part of the rollout smart lockers are
being deployed, which have lower capex requirements, higher
partner uptake and faster utilisation, allowing for rapid scalability.
In the Netherlands, GLS’ partnership with PostNL has gone live
giving immediate access to 1,000 lockers, which will grow to 1,400
lockers, adding to the more than 700 existing parcel shops.
GLS France has also partnered with Quadient to gain access to its
open locker network and through its partnership with Matkahuolto,
GLS Finland expanded its pick-up and drop-off points to 1,300.
As previously announced, we also acquired the leading parcel shop
chain ProntoPacco in Italy during the year. GLS Spain launched an
automated kiosk returns pilot, that allows customers to quickly and
easily return their packages without queuing.
Introducing innovative digital solutions
During the year GLS launched a number of new innovative digital
solutions across the entire customer journey. In Eastern Europe, the
utilisation of digital messaging solutions that offer cost efficiency and
enhanced features such as pictures and QR codes is being expanded
to enrich customer experiences and meet growing demand.
GLS continued to roll out its driver optimisation software to enhance
delivery productivity. As part of our mission to provide more
customer centric tracking solutions, we expanded our real time
tracking solution, Bettermile, to nine countries.
GLS is also working to cater to the rapidly expanding C2C (Consumer
to Consumer) market by offering convenient self-service solutions.
These solutions empower senders with insights into volumes, returns,
label generation, and more. Additionally, consignees have access
to redirection options and out-of-home services, facilitating parcel
returns, collection, and sending through self-service channels.
Building a global service offering
Growth in cross-border volumes outpaced domestic during the year,
demonstrating the strength of our international network. GLS increased
key customer volumes, growing its Asia-Europe cross-border segment
by introducing local sales teams in Asia and switching to a global
management model for international key accounts.
In January 2024 the business introduced a new transatlantic service in
Europe, leveraging its growing North American presence, which is
already ramping rapidly and is expected to be a key pillar of our
cross-border growth. The cross-border market between North
America and Europe remains a significant potential growth area for
GLS, with higher-than-average margins per parcel.
Additionally, GLS successfully entered the Serbian market, and after
its first full operational year, it is ahead of plan.
Summary
Global economic conditions continue to remain fragile with a slower
macro recovery now expected, compared to previous forecasts.
However, GLS will continue to invest in its strategic priorities,
upgrading the network, transforming the last mile and building a
global service offering, whilst advancing to a sustainable future.
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The KPIs we use to assess the Group’s performance are set
out below. They demonstrate the deliverability of each business’
strategy and, in particular, our progress against our efficiency
and profitable growth objectives.
Measuring Our Performance
1. Reported results are prepared in accordance with UK adopted International Financial Reporting
Standards (IFRS).
2. The Group’s performance is explained through the use of alternative performance measures (APMs)
that are not defined under IFRS. A full list of the Group’s APMs are set out on pages 238 to 243 and
reconciliations to the closest measure prescribed under IFRS.
3. The 52 week 2023-24 results are derived by removing the 53rd week revenue and incremental
costs in relation to Royal Mail, see the Group's APMs on page 238 to 243 for further details on this
adjustment. Percentage changes are on a 52 week basis. The GLS financial year is 12 months to
31 March 2023 and 2024, so no adjustment is made for GLS’ results. The 52 week results are in line
with how the Chief Operating Decision Maker as defined by IFRS 8 reviews performance.
Reported
revenue
1
£ 12,679m
Group adjusted
operating loss
2
£(28)m
Royal Mail adjusted
operating loss margin
2
(4.4)%
Relevance
Demonstrates revenue growth
across Royal Mail and GLS.
How we calculate
Total reported Group revenue.
Performance in 2023-24
— Group revenue was £12,679 million,
representing growth of £635 million,
including the impact of the 53rd week in
Royal Mail of £140 million.
— Both Royal Mail and GLS grew revenue
year on year, against a challenging
macroeconomic backdrop.
— Royal Mail revenue grew by 3.8%, on an
underlying basis,
3
driven by strong letter
revenue growth and a recovery in parcel
revenue in H2.
— GLS revenue grew 4.6%, or 4.7% in Euro
terms, driven by good volume growth,
partly offset by lower freight revenue and
mix.
Relevance
Our primary measure of
business performance.
How we calculate
Reported operating profit/(loss)
excluding adjustments and specific
items (see page 240).
Performance in 2023-24
— Group adjusted operating loss reduced
year on year, due to the improved
performance in Royal Mail.
— Royal Mail recorded an adjusted operating
loss of £348 million, driven by increased
revenue, compared to a loss of £419m in
2022-23.
— GLS adjusted operating profit was down
year on year, as expected, to £320 million,
due to wage and other inflationary
pressures and the impact of strategic
investments.
Relevance
Demonstrates efficiency and our
focus on driving profitable growth.
How we calculate
Adjusted operating profit/(loss) as a
proportion of revenue in percentage terms.
Performance in 2023-24
— Royal Mail adjusted operating loss margin
improved to (4.4)%.
— This was driven by an increase in revenue
with both parcel and letter revenue
growing year on year, which more than
offset the increase in costs.
2023-24
2022-23
2021-22
£(28)m
£(71)m
£758m
2023-24
2022-23
2021-22
£12,679m
£12,044m
£12,712m
2023-24
2022-23
2021-22
(4.4)%
(5.7)%
4.9%
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International Distribution Services plc Annual Report 2023-24
4. Refers to direct employees only. 2023-24 covers 53 weeks and the two prior years cover 52 weeks.
2022-23 LTAFR has been restated from 0.73 to 0.79 due to an error in prior year reporting.
5. GLS in-year trading cashflow is now the metric used for this KPI, as it is the measure used in
management reporting and more closely resembles the cashflow performance of the business as
it includes operating lease payments.
6. Foreign exchange rate used 1.158
Royal Mail lost time accident frequency
rate (LTAFR) per 100,000 hours worked
4
0.78
GLS adjusted operating
profit in Euros
2
€371m
GLS in-year trading cash flow, pre-IFRS 16
5
€106m
Relevance
Targets a continually improving safety
culture for employees, customers
and communities.
How we calculate
Total number of accidents resulting
in an absence on the next day or shift,
per 100,000 hours worked.
Performance in 2023-24
— Royal Mail LTAFR of 0.78.
Relevance
Demonstrates efficiency and profitable growth.
How we calculate
Adjusted operating profit before
specific items, in Euros.
Performance in 2023-24
— GLS adjusted operating profit was
£320 million. The impact of inflation
and wage increases, plus strategic
investments, more than offset the
growth in revenue year on year of
£215 million, as expected.
— In Euro terms, adjusted operating
profit was 371 million.
Relevance
Demonstrates cash generation, important to
support investment and future growth.
How we calculate
Pre-IFRS 16 in-year trading cash flow of
£92 million converted into Euros.
6
Performance in 2023-24
— Although EBITDA was broadly flat year on
year, in-year trading cash flow pre-IFRS 16
reduced due to an increase in capital
expenditure and an outlfow in trading
working capital.
— Capital expenditure increased due to
investment in the GLS network and to
support the expansion of lockers.
2023-24
2022-23
2021-22
0.78
0.79
0.54
2023-24
2022-23
2021-22
€371m
€403m
€402m
2023-24
2022-23
2021-22
€106m
€228m
€207m
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Our Stakeholders
Engagement with our stakeholders helps us understand what matters to them.
It also builds trust and fosters stronger relationships.
Colleagues
Our workforce who underpin
the delivery of our strategy.
Customers
People who rely on and buy
the services we provide.
Shareholders
Investors, including our
employees, who provide
capital to run our business.
Unions
Organisations that
represent the interests
of our workforce.
Their key issues
Health, safety and wellbeing.
Fair, diverse and inclusive
working environment.
Attractive pay and conditions.
Development opportunities.
High-quality, value-for-money,
reliable, convenient and
sustainable service.
Strong ESG performance.
Long-term sustainable value.
Strategy and execution.
Strong ESG performance.
Protection of
worker interests.
Pay and conditions.
How we engage across the Group
Two-way and peer-to-peer
dialogue channels, including
the Workplace platform.
Internal communication channels
including Courier magazine and
Royal Mail TV.
Annual Big Trust Survey, Employee
Voice Forums and People Panels.
Face-to-face programmes
to enhance colleagues’
understanding of our strategy.
Direct customer engagement.
Regular customer surveys.
Net promoter score monitoring.
Trustpilot reviews.
Complaint management
and resolution.
Active investor relations (IR)
programme (see page 90).
Quarterly results
announcements.
Regular meetings with
union representatives.
Elected union
representatives work with
Royal Mail management.
Engagement with GLS’
local works councils.
How we engage at Board level
Designated Non-Executive Director
for engagement with the workforce
leads Employee Voice Forums and
provides regular updates to the
Board on valuable feedback from our
colleagues (see page 90).
Site visits (see page 88).
Reviews feedback from employee
surveys and actions taken to address
any issues arising.
Regular Board updates on quality
of service.
Environmental, Social and
Governance Committee (ESG
Committee) considers services
to support vulnerable customers.
Monthly IR reports submitted
to the Board.
Participation in IR programme,
including shareholder meetings
(see page 90).
Engagement with shareholders
at the Annual General Meeting.
Remuneration Committee Chair
engages with shareholders on
remuneration matters as
required (see page 109).
Royal Mail senior
management meets
regularly with senior
union leaders and provide
updates to the Board.
Outcomes
Big Trust Survey feedback.
See page 34.
Change for Good campaign.
See page 39.
Actions to address issues raised
during Royal Mail and GLS Employee
Voice Forums (see page 89).
Services that meet customers’
needs. See pages 18 and 19.
Actions to address quality issues.
See page 17.
Updated the Group’s ESG
Principles and established Group
ESG ambitions. See page 27.
Further enhanced climate-
related disclosures.
See pages 41 to 48.
Resumed dividend payments.
Business Recovery,
Transformation and Growth
Agreement and
its implementation.
See page 17.
Principal risks (→ See pages 52 to 58)
3
7
11
12 3
4
5
6
8
9
10
11
12
1
2
3
4
5
6
7
8
9
10
11
12
2
3
6
7
11
12
22
International Distribution Services plc Annual Report 2023-24
Regulator
Ofcom, the body that oversees our
provision of the Universal Service.
Governments
Administrations that levy taxes
and determine legislation that
affects our business.
Suppliers
Our commercial partners
who support our business.
Local communities
The people who our
activities may impact.
Their key issues
Effective delivery of our
Universal Service Obligations.
Meeting our annual regulatory USO
Quality of Service (QoS) targets.
Effective delivery of our
Universal Service Obligations.
Provision of employment.
Tax income.
Transitioning to a
low-carbon future.
Fair commercial terms.
On-time payment.
Long-term relationships.
Positive social and
economic impact.
Sustainable business
operations.
How we engage across the Group
Royal Mail management meets
regularly with Ofcom.
Dedicated regulation team
engages with Ofcom and
participates in regular meetings.
Royal Mail management
meets with government
ministers, key politicians
and civil servants, including
the Postal Affairs Minister.
Public affairs engagement
programme.
Regular updates and briefings.
Regular commercial dialogue. Execute UK
community strategy.
GLS supports numerous
regional and national
charitable initiatives.
See pages 36 and 37.
How we engage at Board level
Chair and CEO engage regularly
with Ofcom and provide updates
to the Board.
Dedicated regulation team
provides regular Board updates on
engagement with Ofcom, particularly
in relation to Universal Service reform.
Regular Board updates on
relevant matters including
updates on relevant legislation.
ESG Committee receives
updates on ESG-related
consultations and policies.
Chair and Group CEO engage
with government ministers.
Contracts considered critical
in terms of risk profile approved
by Board prior to award.
Audit and Risk Committee
considers reports on payment
practices for relevant businesses.
Site visits.
ESG Committee discussion
on the Group’s societal and
community investment.
Outcomes
Participation in Ofcom’s call
for input in relation to Universal
Service reform. See page 24.
Annual regulatory USO QoS targets.
£10.9 billion of gross value
added by Royal Mail (direct
and indirect contribution).
1
62,600 jobs indirectly supported
by Royal Mail in the wider
economy.
1
Promote responsible business
practices through supply chain
compliance. See page 39.
Publish information on payment
practices in line with the Duty
to Report on Payment Practices
and Performance.
1 in every 199 jobs in the
UK economy as a whole
is provided by Royal Mail.
1
Community investment.
See pages 36 and 37.
Principal risks (→ See pages 52 to 58)
2
3
6
9
10
12
1
3
4
6
8
10
12
1
3
4
5
8
10
12
3
6
10
11
12
1. Cebr research conducted for Royal Mail in May 2024, comprising direct and indirect contributions.
23
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International Distribution Services plc Annual Report 2023-24
Universal
Service
reform
In January 2024, Ofcom announced
that it was reviewing options for the
future of the Universal Service, and
called for input on potential reform
to better accommodate changing
customer needs as letter volumes
continue to fall.
Royal Mail submitted its proposal to Ofcom on 2 April 2024.
This proposal was developed after extensive engagement listening
to feedback from customers, businesses, employees, trade union
representatives and other stakeholders and is designed to meet
customers’ changing needs and protect what matters most to them.
The key elements of Royal Mail’s proposal are detailed below and a
summary is available at www.internationaldistributionservices.com/
en/about-us/regulation/the-future-of-letter-deliveries.
Meeting customers’ needs
— A one-price-goes-anywhere service to all parts of the UK
maintained.
— First Class letters still delivered daily, six days a week (Monday to
Saturday) to recognise the importance of next day and Saturday
deliveries, especially for the NHS, publishers and senders of
greeting cards.
— The option of First Class and non-First Class letters retained,
giving people a choice of price and speed.
— Parcels still delivered up to seven days a week.
Modernising the Universal Service for our customers
— New, additional reliability targets for Universal Service First Class
and Second Class services, alongside revised, realistic speed
targets, to give customers further confidence. Non-First Class
letters to be delivered every other day, Monday to Friday.
— Delivery speed of access standard business to move to
within three working days, instead of two.
— Tracking added to Universal Service parcels to reflect
customer demand.
Benefiting our people
— Opportunities for more Saturdays off: As all non-First Class letters
would only be delivered every other weekday (Monday to Friday),
there would be fewer routes overall on a Saturday.
— Smaller walking routes, with more addresses visited: Walking
routes would reduce, whilst our posties would be delivering
letters to around seven out of ten addresses compared to
around four out of ten today.
— More choice of duties: The number of walking routes would reduce,
while the number of van-based parcel roles would increase.
— Greater job security: The proposals are designed to make
our business more financially sustainable, protecting tens
of thousands of jobs and the best terms and conditions in
the industry.
Creating a stable and financially sustainable future for the benefit
of all of our stakeholders that will:
— Deliver a more efficient and more financially sustainable
Universal Service which could save Royal Mail up to £300 million
a year. These savings would enable continued investment in the
modernisation and transformation of the business to provide
products and services that customers want and reduce its
environmental impact.
— Once agreed, implementation would take around 18 to 24 months.
— Make our network more efficient, improve how we deliver the mail and
set ourselves up to manage future letter decline and parcel growth.
24
International Distribution Services plc Annual Report 2023-24
Section 172 Statement
On occasions, the Board has to make difficult choices and prioritise
the interests of different stakeholders. In such circumstances, what
matters to each stakeholder is carefully considered and, after taking
account of all relevant factors, a decision is made based on the
long-term interests of the Group. Outcomes of decisions are not
always positive for all stakeholders.
In relation to the decisions taken during the financial year ended
31 March 2024, and up until 24 May 2024, the Directors of
International Distribution Services plc consider, both individually and
together, that they have acted in the way they consider, in good faith,
would be most likely to promote the success of the Company for the
benefit of its members as a whole, having regard to the stakeholders
and matters set out in section 172 of the Companies Act 2006.
Examples of principal decisions made by the Board during the
53 weeks ended 31 March 2024, and up until 24 May 2024, and
the stakeholder issues and section 172 matters considered as part
of the decision-making process, are set out on this page and on the
following page. We define ‘principal decisions’ as decisions which
are material or strategic to the Group and/or significant to any of our
stakeholders. In each case, given the materiality and importance of
these matters, the relevant management team made recommendations
to the Board and, where relevant, its Committees for consideration.
Likely consequences of any decision in the long term.
The interests of employees.
The need to foster business relationships
with suppliers, customers and others.
The impact of operations on the community
and the environment.
The desirability of maintaining a reputation
for high standards of business conduct.
The need to act fairly as between members.
Universal Service reform
In March 2024 the Board reviewed Royal Mail’s response to
Ofcom’s call for input on the future of the universal postal service.
The business’ response (see adjacent page) is focused on meeting
the needs of customers today and into the future. It creates a
platform for growth, benefits the Royal Mail workforce and addresses
the sustainability of the Universal Service.
Having considered the response, the Board concurred with
Royal Mail’s assessment and the need for change based on
the following matters:
— Customers: In 2004-05 the business delivered 20 billion letters
per year compared to 6.7 billion in 2023-24. At this rate of decline,
letter volumes in the next five years will be closer to 4 billion. As
letter volumes have declined, the number of delivery addresses
has increased (by 15% since 2004-05). To secure Royal Mail’s
long-term future, it must operate a sustainable business model
based on customer demand, which means delivering more
parcels and fewer letters. In relation to those customers who
could be affected by the change, for example a small number
of magazine publishers, it was noted that Royal Mail was working
to manage the change and mitigate the impact.
— Employees: Management believes that reform would bring
significant benefits, including benefits for employees. In particular
a reformed Universal Service would enable Royal Mail to grow
in a financially sustainable way, which would support job security
in the long term. Also opportunities to offer employees different
working patterns would be created.
— The long-term interests of the Group and all its stakeholders:
In developing its response, Royal Mail engaged with its stakeholders
to canvas their views, which were reflected in the business’
response. The Board also noted that according to Ofcom, a
financially sustainable Universal Service should be able to achieve
an EBIT margin of 5-10%. However, since privatisation in 2013,
this has only been achieved twice. Ofcom has recognised that
the USO is a net cost to Royal Mail of c.£325 million to £675 million.
Reforming the Universal Service is essential if Royal Mail is to
have a sustainable future.
Our stakeholders are integral to our success and we must
take account of their issues and concerns if we are to create
sustainable long-term value.
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International Distribution Services plc Annual Report 2023-24
Industrial relations
In April 2023, following an extensive period of industrial action,
the Board approved the final terms of the Business Recovery,
Transformation and Growth Agreement (the Agreement). The
Agreement sets out how Royal Mail and the CWU will work together
to move to a more modern industrial relations framework. In coming
to this decision, the Board considered the following matters:
— The long-term interests of the Group and all its stakeholders:
The Agreement was an important step forward in the turnaround
of Royal Mail. To enable the business to survive long term and
succeed in a highly competitive market, it must adopt a more
modern industrial relations framework to enable the business
to become more agile and compete more effectively.
— Customers: Royal Mail needs to adapt much faster to changing
customer demands in a highly competitive market. The new
ways of working will enable the business to respond to customers’
demands and changing needs. In particular, the operational
changes in the Agreement are designed to improve quality of
service for customers and, the later start times that came into
effect from April 2024, will help Royal Mail respond to the market
demand for more next day parcel deliveries.
— Employees: The three-year pay deal included in the Agreement
provides certainty for employees and will ensure that Royal Mail
remains the industry leader on pay, terms and conditions.
— Environmental impact: Increased flexibility of delivery window
times will enable the removal of 18 flight routes in the coming year.
Bond issue
In September 2023 the Group issued two new bonds; one
for €500 million (repayable in 2028) and one for £250 million
(repayable in 2030) net of a partial repayment of €135.5 million
of the Group’s existing €500 million bond maturing in July 2024.
Some of the monies raised will be applied to cover the remaining
€364.5 million that is outstanding on the 2024 bond. The balance
will enhance the Group’s overall liquidity. In its consideration of this
financing, the Board took account of the following matters:
— The long-term interests of the Group and all its stakeholders
including customers, employees and suppliers: Raising funds
to refinance the Group’s existing liabilities under the 2024 bond
in an orderly manner and raising additional monies would increase
liquidity and improve the Group’s financial stability, which would
benefit all stakeholders. In particular it would support value-add
growth initiatives in GLS and increase third parties’ confidence in
Royal Mail.
— The need to act fairly as between members: The financing
arrangement avoided any dilution of shareholders’ interests.
Section 172 Statement continued
New purpose-built
GLS depot in Denmark
In September 2023 GLS submitted a proposal to the Board
requesting investment to build a new depot in Ringsted,
Denmark. In approving the proposal, the Board considered
the following matters:
— The long-term interests of the Group and all its stakeholders:
The investment supports GLS’ strategy. In particular the new
facility, housing a fully-automated conveyor, would resolve
capacity issues in the region, facilitate long-term volume
growth and, as a result of increased automation, realise
financial returns via productivity savings.
— Customers: GLS’ service offering in the city of Copenhagen
and surrounding areas would be enhanced.
— Environmental impact: The depot’s construction in accordance
with high sustainability standards would minimise the impact
of the business’ operation on the environment. In particular,
the facility’s energy-efficient heating, ventilation and LED
lighting, and 1,100 solar panels and 32 vehicle charging
points at 16 charging stations were noted.
26
International Distribution Services plc Annual Report 2023-24
ESG Review
Demonstrating leadership across the broad ESG agenda is the right thing to
do. It is also essential if we are to achieve competitive advantage and create
value for our stakeholders. We aim to run our businesses in a responsible and
sustainable way and be an integral, trusted and valued part of the communities
we operate in.
Our ESG approach
In recognition of the impact our operations have on society and the
continuing growth in demand for sustainable products and services,
our approach to ESG is built around the ambitions and principles set
out below. They focus on the topics identified by our stakeholders
as being material and support a number of the United Nations
Sustainable Development Goals (SDGs). They also underpin Royal
Mail’s and GLS’ strategies, which aim to create stakeholder value
and achieve sustainable growth.
Royal Mail and GLS undertake regular materiality assessments
to ensure that their respective ESG programmes continue to
take account of the areas stakeholders consider most important.
Information about Royal Mail’s and GLS’ most recent materiality
assessments and further detail about each business’ ESG
programme are included in their respective ESG Reports, which
are available at www.internationaldistributionservices.com/en/
sustainability/reporting-and-performance.
2023-24 Group performance highlights
Metric 2023-24 2022-23 Page
Tonnes CO
2
e per £1m revenue
1
46.4 48.8 30
Health and safety
— Fatalities (employees)
2
— Fatalities
(third parties)
3
— Lost time accident frequency rate (LTAFR) (per 100,000 hours worked)
4
— Sickness absence (%)
4
1
17
0.93
6.45
0
23
0.95
7.15
33
33
33
33
Gender diversity (%)
1. Male
2. Female
79
21
78
22
36
36
Completion of compliance training (%)
5
99 99 39
1. The tonnes of CO
2
e per £1m revenue ratio comprises Scope 1 and Scope 2 (location-based)
emissions only. This ratio provides an overview of our carbon efficiency as we continue to grow.
2. The total number of fatalities due to accidents that have occurred as a result of our activities.
3. Third parties include contractors, third-party drivers and members of the public.
4. Refers to direct employees only.
5. Includes all Royal Mail managers assigned annual compliance refresher training and all GLS
employees with computer access.
Environment
Net-Zero by 2040 (Royal Mail) and zero
emissions by 2045
1
(GLS).
We aim to operate in an environmentally
responsible way, focused on reducing the
impacts associated with our operations,
and playing our part in the transition to
a low-carbon future.
Social
To be an employer of choice and an
integral and valued part of the places
where we operate.
We aim to deliver economic and
social benefits for our people, our
customers and the communities
we serve, in the UK as the Universal
Service provider.
Governance
To maintain stakeholders’
trust at all times.
We endeavour to act with integrity
and transparency in the interests of
our stakeholders, ensuring we have
effective mechanisms in place to
deliver our business operations in
a responsible manner.
Our principles and ambitions
1. GLS' zero emissions by 2045 ambition is to reduce 90% of its Scope 1, 2 and 3 CO
2
e emissions by 2045, while offsetting the remaining 10% residual emissions through investment in certified climate
protection projects. A pathway to deliver this reduction will be developed (including the setting of interim carbon reduction targets) and, to base this pathway on climate science, in December 2023
GLS committed to set targets in line with the SBTi. GLS is expecting to complete the SBTi submission and approval process during the financial year 2024-25.
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Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
SDG
Decarbonising our business
We recognise the need to take decisive steps to help tackle the
global climate emergency and prepare our business for a low-carbon
future. We aim to take a leadership role in our industry’s transition
and to support the implementation of the Paris Agreement.
Royal Mail
Royal Mail is the UK’s greenest delivery option for letters and
parcels.
1
‘Steps to Zero’, its environmental strategy, is aimed
at achieving Net-Zero by 2040, which consists of reducing:
— Scope 1 and 2 emissions 50% by 2030.
— Scope 3 emissions 25% by 2030.
— Scopes 1, 2 and 3 emissions 90% by 2040.
In September 2023 we announced that the above targets had been
validated by the SBTi. The validation provides further confidence
to our customers that the business’ targets are aligned to the latest
climate science and to a 1.5°C decarbonisation pathway across all
scopes of greenhouse gas (GHG) emissions.
As part of ‘Steps to Zero’, Royal Mail is:
— Optimising its distribution network and modernising its vehicles
to reduce transport fuel emissions.
— Improving the energy efficiency of its buildings, making space
for more parcel automation and technology.
— Transforming its operations and behaviours to embrace circularity
by enabling re-use models and reducing single-use items.
— Decarbonising its supply chain, by engaging with key suppliers
on carbon performance and reducing domestic air freight.
— Using its size, scale and reputation to play a positive role in
championing sustainability in its industry, for its workforce
and customers.
Royal Mail also tracks and reports its average CO
2
e per parcel and letter,
which helps customers make informed decisions about their carbon
footprint. Largely due to its final-mile ‘feet on the street’ delivery model,
Royal Mail UK’s CO
2
e per parcel is currently 200g CO
2
e, compared to
the business’ main peers which reported emissions of between c.350g
and 600g CO
2
e per parcel during 2023-24. The ‘feet on the street’
model sees many of our final-mile deliveries completed largely or partly
on foot, with our posties taking up to a billion steps a day.
Supporting the transition
to a low-carbon future
Royal Mail’s and GLS’ environmental strategies include pathways,
targets and mitigating actions that help us reduce our environmental
footprint and play our part in the transition to a low-carbon future, while
offering greener solutions to our customers. The metrics and targets
associated with their implementation are set out below.
Key material issues
— Climate change and emissions reduction: Achieving
our Net-Zero ambitions by decarbonising our businesses
and managing our climate risks and opportunities.
2023-24 highlights
— Royal Mail's Net-Zero and near-term targets were
validated by the SBTi.
— GLS committed to set Net-Zero targets for SBTi validation.
Environment
1. Based on average gCO
2
e emissions per parcel delivered by UK parcel operators, as published by
Citizens Advice 2023 Parcels League Table.
28
International Distribution Services plc Annual Report 2023-24
Carbon ambitions and targets
Royal Mail
Net-Zero by 2040 across Scopes 1, 2 and 3
1
aligned to 1.5°C,
the latest climate science and science-based target standards.
Net-Zero and interim targets :
GHG emissions 90% reduction in Scope 1, 2 and 3
emissions by 2040
50% reduction in Scope 1 and 2
emissions by 2030
25% reduction in Scope 3
emissions by 2030
Renewable electricity 100% from 2022 (achieved)
Zero-emission
final mile
100% by 2035
Company cars 100% zero-emission by 2030
GLS
Zero emissions from Scopes 1, 2 and 3 by 2045
2
for worldwide operations.
3
Interim targets:
Renewable
electricity
80% by 2022 (European locations
operated by GLS) – Achieved
Fleet 50% zero/low emission by 2030
100% of new vehicles will be low
or zero emission by 2035
Company cars 100% zero emission by 2030
GLS
As part of its Climate Protect environmental strategy, GLS has set
an ambition to reduce its worldwide Scope 1, 2 and 3 emissions
to zero by 2045.
2
In December 2023, GLS committed to set
Net-Zero targets for SBTi validation.
To achieve these targets, GLS is:
— Working with its transport partners to transform their parcel and
freight delivery fleet towards low- and zero-emission vehicles.
— Implementing distribution network and final-mile efficiency,
including extending its parcel shop and locker network.
— Reducing and avoiding emissions by ensuring new buildings
conform with low- and zero-emission operations.
— Improving the energy efficiency of its existing buildings by
introducing own-green electricity production and renewable
heating systems.
In 2023, GLS worked with ClimatePartner GmbH (Munich, Germany) on
a number of projects to offset emissions by the transportation of parcels
and freight shipments, as well as buildings and business travel by
companies operating under the GLS trademark in the EU
4
.
The companies in the following countries, operating under the GLS
trademark, will continue in the carbon compensation programme in the
coming financial year: Austria, Belgium, Denmark, Finland, France,
Germany, Ireland, Italy, Netherlands, Portugal, Slovenia and Spain.
Further information about GLS’ compensation of carbon emissions is
available at www.gls-group.eu/GROUP/en/carbon-offsetting.
Our environmental performance
In 2023-24, our total emissions increased by 2%, compared to the
prior year. Information about ongoing initiatives to reduce energy
across the Group are detailed on pages 30 and 31.
Royal Mail’s total (market-based) emissions were 1,171 KtCO
2
e
in the year, representing an overall decrease of 8% on the base
year in 2020-21 and a 2% decrease since last year. This emission
reduction was primarily due to Scope 1 and Scope 2 (market-based)
emissions decreasing 18% on the base year and 6% on the prior
year. Royal Mail achieved these reductions despite opening the
Midlands Parcel Hub and returning to normal levels of activity
following industrial action in the prior year. This was primarily due
to the deployment of 10 million litres of hydrotreated vegetable
oil (HVO), a fossil-free biofuel, saving c.30,000tCO
2
e in direct
emissions compared to diesel.
On a like-for-like basis GLS’ 2023 total (market-based) emissions
decreased by 0.5%, notwithstanding business growth and revenue
growth of 4.7%.
5
The decrease was driven by a reduction in emissions
from subcontracted transport services, who are working with GLS to
increase their share of low- and zero-emissions vehicles in Europe.
This like-for-like comparison excludes:
— Increased investment in tangible assets compared to the previous
year, which led to an 32% increase of emissions from capital goods.
— A 22% year-on-year increase in emissions (Scope 1 and Scope 3)
from transport services in North America
6
mainly driven by
methodology adjustments to ensure more accurate data collection
for owned vehicles. In addition, for GLS US, the prior year third-
party fleet inventory data was adjusted, which impacted the
year-on-year comparison.
— The launch of parcel business within GLS Serbia.
Including the above, GLS' 2023 total (market-based) emissions were
1303.2 KtCO
2
e, representing an increase of 5.5%.
As outlined in our 2022-23 Annual Report, energy efficiency
is aligned with our ambition to decarbonise, focusing on
optimisation and the deployment of more efficient technology.
1. Royal Mail reports its carbon emissions in line with the GHG Protocol Corporate Standard.
The standard classifies a company’s GHG emissions into three scopes. Scope 1 emissions
are direct emissions from sources that are owned or controlled, including combustion of fuel
and operation of facilities. Scope 2 emissions are indirect emissions from the purchase of
electricity for own use. Scope 3 emissions are all indirect emissions (not included in Scope 2)
that occur in the value chain of the reporting company, including both upstream and downstream
emissions. Royal Mail also reports 'Outside of Scopes' emissions in its ESG data pack to account
for the biogenic emissions associated with the combustion of biogas and biofuel which sit outside
of Scopes 1 to 3. For information about our conversion factors, please refer to our reporting criteria
(https://www.internationaldistributionservices.com/en/sustainability/reporting-and-
performance/).
2. GLS' zero emissions by 2045 ambition is to reduce 90% of its Scope 1, 2 and 3 CO
2
e emissions by
2045, while offsetting the remaining 10% residual emissions through investment in certified climate
protection projects. A pathway to deliver this reduction will be developed (including the setting of
interim carbon reduction targets) and, to base this pathway on climate science, in December 2023
GLS committed to set targets in line with the SBTi. GLS is expecting to complete the SBTi
submission and approval process during the financial year 2024-25.
3. We report our carbon emissions according to the GHG Protocol Standard. The standard classifies
a company’s GHG emissions into three scopes. Scope 1 emissions are direct emissions from
sources that are owned or controlled, including combustion of fuel and operation of facilities.
Scope 2 emissions are indirect emissions from the purchase of electricity, heat, steam and
cooling purchased for own use. Scope 3 emissions are all indirect emissions (not included in
Scope 2) that occur in the value chain of the reporting company, including both upstream and
downstream emissions. Further details about the basis of reporting are available at
www.internationaldistributionservices.com/en/sustainability/reporting-and-performance.
4. Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Portugal,
Slovenia, Spain, Poland, Czech Republic, Hungary, Romania, Slovakia, Croatia.
5. GLS emissions data reflects the calendar year, while the revenue growth reflects the financial year.
6. North America includes GLS US, GLS Canada and Rosenau.
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Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Carbon emissions performance CO
2
e (’000 tonnes)
1
FY 2023-24 FY2022-23
Total Royal Mail GLS Total Royal Mail
2
GLS
3
Scope 1 504.4 394.6 109.8 510.8 417.4 93.4
Scope 2 (location-based) 83.6 59.1 24.5 76.9 55.4 21.5
Scope 3 1,968.3 775.8 1,192.5 1,919.0 778.5 1,140.5
Total 2,556.2 1,229.5 1,326.7 2,506.8 1,251.4 1,255.4
Tonnes CO
2
e per £1m revenue
4
46.4 57.9 27.6 48.8 63.8 24.7
Scope 2 (market-based) 5.6 0.3 5.3 6.3 0.8 5.5
Energy consumption kWh (’000)
5
2,718,537 2,153,157 565,380 2,607,957 2,104,861 503,096
1. We report our carbon emissions to the GHG Protocol Corporate Standard, which classifies a company’s emissions into three ‘scopes’. Scope 1 emissions are direct emissions from sources that are owned
or controlled by Royal Mail or GLS, including the combustion of fuel and operation of facilities. Scope 2 emissions are indirect emissions from Royal Mail or GLS’ purchase of electricity, heat, steam and
cooling for own use. Scope 3 emissions are all other indirect emissions that occur in each business’ value chain and are voluntary to report. For the avoidance of doubt GLS reports emissions related to its
subcontracted transport fleet (Europe and part of North America) within Scope 3 and its own transport fleet (most of North America) within Scope 1. Royal Mail also reports 'Outside of Scopes' emissions in
its ESG data pack to account for the biogenic emissions associated with the combustion of biogas and biofuel which sit outside of Scopes 1 to 3. Further details about the basis of reporting are available at
www.internationaldistributionservices.com/en/sustainability/reporting-and-performance.
2. 2022-23 Scope 1 and 2 emissions data for Royal Mail has been restated following the provision of data which was previously estimated. Scope 3 emissions have also been restated for data which was
previously estimated for all categories and additionally to correct a data calculation error for Scope 3 categories 1 and 2. This has increased prior year reported Scope 3 emissions by 96.6KtCO
2
e, from
681.9KtCO2
e to 778.5KtCO
2
e. This increase is entirely due to this improvement in data accuracy and is not reflective of operational changes. Royal Mail 2023-24 data uses estimates rather than actuals for
Period 12 where required due to data latency.
3. GLS' emission data reflects the calendar year rather than the financial year. A detailed description of the Scope 1, 2 and 3 calculation methodology is available at www.internationaldistributionservices.com/
en/sustainability/reporting-and-performance. Not included are, CO
2
e emissions from recent M&A activities, the purchase of Versandmanufaktur GmbH (Germany) and Altimax (Canada). These will be
included in the reporting of 2024 CO2
e emissions.
4. The tonnes of CO2
e per £1m revenue ratio comprises Scope 1 and Scope 2 (location-based) emissions only. This ratio provides an overview of our carbon efficiency as we continue to grow.
5. The data presented contains disclosures in relation to the Streamlined Energy and Carbon Reporting (SECR) requirements. Carbon (Scope 1 and 2) and energy data for Royal Mail is UK. All carbon and
energy data reported for GLS is considered offshore. In accordance with SECR, details of energy efficiency actions taken in the year are listed throughout this Environment section and relate directly to
findings within our Phase 2 Energy Savings Opportunity Scheme report.
Environment continued
Buildings
During the year estate emissions accounted for 8% of Royal Mail’s
total annual emission profile (2022-23: 8%). The partial electrification
of its final-mile fleet and increased automation to grow parcel
capabilities and improve efficiency are adding considerable
electricity needs to the built estate.
To reduce energy consumption across Royal Mail’s operations,
the business continues to focus on energy efficiency measures,
including optimising time and temperature controls throughout
the coldest months. Royal Mail purchased and generated 100%
renewable electricity, the majority being achieved through a 100%
renewable electricity tariff backed by Renewable Energy Guarantees
of Origin certificates, which has been in place since April 2022. The
business is now looking to purchase renewable electricity via power
purchase agreements, ensuring a sustainably priced renewable
electricity supply and renewable generation in the future.
Currently, solar panels are installed at ten Royal Mail sites to help
to reduce renewable energy costs and provide greater resilience.
Discussions are ongoing with several landlords regarding new
photovoltaic (PV) installations and several schemes are expected
to be progressed in 2024.
Year on year, GLS' total electricity consumption from buildings
operated by GLS increased by 7% compared to the last reporting
period. Total purchased green electricity increased by 15% and
self-generated renewable electricity increased by 81%. GLS’
Scope 2 (market-based) emissions, which are predominantly
electricity, decreased by 4% in the last reporting period.
Since 2022 renewable electricity makes up 80% of the electricity
consumed by GLS’ European operated sites, with five countries
exclusively using renewable electricity.
The increase of GLS’ total electricity consumption was driven
by business and volume growth and other factors including:
— Increasing final-mile electrification which resulting in higher
electricity consumption from charging electric vans. Despite
GLS’ predominantly subcontracted fleet, electric vans are mostly
charged at GLS’ sites.
— The change from fossil gas and oil heating to electric heat pumps.
— The increasing automatisation of the business' buildings.
GLS considers sustainability requirements for all new construction.
GLS Spain’s new Madrid-based future-oriented hub, which
commenced full scale operation in March 2023, is rated ‘Very Good’
for sustainable construction by BREEAM, a globally recognised
standard. Charging infrastructure has been installed for transport
vehicles and company cars, as well as energy-efficient lighting and
controls to reduce electricity and water consumption. Part of the
electricity required by the building and the charging infrastructure
will be generated by a 1195 kW PV system and energy audits will be
undertaken annually to detect excessive consumption or system
malfunctions. The business’ recently opened depot in Potsdam,
Germany, collects rainwater which is used on site for non-potable
purposes and its entire roof is equipped with a photovoltaic system,
which supplies electricity to 70 charging points.
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International Distribution Services plc Annual Report 2023-24
GLS is also trialling and installing new sustainability measures in
existing offices, hubs and depots to decrease the environmental
impact of its buildings. To future-proof its depot buildings, GLS is
increasingly using regenerative heating systems and solar panels
to reduce carbon emissions from purchased heating or electricity.
LED lighting is also being installed to reduce overall electricity
consumption together with charging infrastructure and energy
management solutions.
Transport
Royal Mail operates one of the largest commercial fleets in the UK,
which alongside air and rail emissions accounts for around 70% of
the business’ total emissions profile. Around 23% of the business’
delivery routes are zero-emission, undertaken by a dedicated or
shared electric van or by walking and c.5,000 electric vans are
now in operation at 164 units of which 18 are fully electrified.
A financial review of 15% of these locations undertaken last year
showed that, on average, vehicle maintenance costs had fallen
55% and fuel costs 80%. Factoring in the additional investment
required for an electric van and associated charging infrastructure,
Royal Mail’s electrification scheme is anticipated to break even at
around three and a half years, making savings over the vehicle
lifecycle of seven years. Royal Mail also made significant progress
on decarbonising its line haul fleet of large trucks, through the
deployment of HVO, a biofuel that reduces direct carbon
emissions by up to 90% compared to diesel. The business
works with suppliers to ensure the HVO procured is derived
from sustainable feedstocks and purchases only International
Sustainability & Carbon Certification (ISCC) certified HVO.
Air accounts for 4% of Royal Mail’s domestic mail volume and
the business is committed to reducing its use of domestic flights
where possible. In the year, flights to Jersey and the Isle of Man
were removed from the delivery network to streamline services
and mail is now conveyed via existing road and ferry services,
which have a reduced environmental footprint. In the coming year,
increased flexibility of delivery window times, will enable the removal
of a further 18 flight routes, which when fully realised, will equate to
a saving of c.30,000 tCO
2
e per year or over 50% of Royal Mail's base
year domestic air freight emissions.
As 81% of GLS’ emissions derive from parcel, freight and transport
services, the reduction of vehicle emissions is a key factor in achieving
the business’ decarbonisation goals.
GLS is continuing to expand its low- and zero-emission fleet by
adding more e-vans, light vehicles and alternative-fuel vehicles
to its delivery network. In total, more than 4,900 low- and zero-
emission vehicles are now in operation, representing a 48%
increase in low- and zero-emission vehicles since 2023.
Reflecting the good progress made decarbonising GLS' parcel
transport fleet, CO
2
e emission per parcel decreased in Europe
by 7% and worldwide by 4% compared to the prior year.
Around 1,400 charging points have been installed during the year,
bringing the total number of charging points across GLS’ network
to more than 3,600. The business is also implementing a range of
initiatives to reduce final-mile emissions including the installation
of parcel lockers and other OOH delivery options.
Responsible consumption
In 2023-24 Royal Mail generated 29,500 tonnes of waste
(2022-23: 35,700 tonnes). This represents a total reduction of
27% against the base year (2020-21) and early achievement of
the business' target of 25% reduction in waste volumes by 2030.
Royal Mail will endeavour to maintain this reduction going forward.
In addition to reducing waste overall, Royal Mail recycled, re-used,
or diverted 98% of its waste, a similar performance to the prior
year (99%).
Royal Mail continues to develop its circular plan to minimise the
use of materials, especially virgin and raw resources, and reduce
the waste generated by its operations. In 2023-24 a number of
initiatives were introduced to enhance sustainability across the
business, including a re-use programme for pallets, measures
to reduce our reliance on single-use plastic cable ties and the
deployment of re-usable trolley sleeves.
Further information about Royal Mail’s waste and water consumption
is included in the Royal Mail ESG Report, which is available at
www.internationaldistributionservices.com/en/sustainability/
reporting-and-performance.
Alternative-fuel vehicles testing and introduction across
GLS’ network
— Germany: The first hydrogen truck is now being used for
line haul operations and for pick-up and delivery in the
Cologne-Bonn area.
— Italy: A Volvo FH electric truck now connects the Riano
Hub with the San Lorenzo facility.
— Canada: A First Class 8 electric truck is now being used
for pick-up and delivery in Montreal and will be used in the
future for line hauls between Quebec City and Montreal.
— Germany and Spain: Vehicles using HVO are being tested
and operated.
— Belgium, France, Spain, Germany, Poland, Denmark, the
Netherlands and the Czech Republic: Various electric truck
trials are ongoing.
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Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Creating a safe and healthy work environment
We want to create a safe and healthy working environment for
our people. Our priority is to ensure a workplace where everyone
is free from injury and enjoys good physical and mental health.
Royal Mail
Royal Mail’s Health and Safety policy, which is available at
www.internationaldistributionservices.com/en/sustainability/
governance/policies, is implemented through the business’
integrated Safety, Health and Environment (SHE) management
system. This provides the framework for managing risk, improving
performance and maintaining a safe, healthy and environmentally
responsible workplace.
Following increased investments in health and safety in the prior
year, during 2023-24 Royal Mail carried out over 1,400 health and
safety audits focused on risk management, compliance standards
and performance. Additionally, we provide health and safety
information and training to all employees, so that they understand
their responsibilities and can implement standards relevant to
their role. In 2023-24, we gave particular focus to the completion
of six managerial training products and, overall, there was a 90%
completion rate across the target group.
With the rise in dog ownership, animal attacks in the UK continued
to increase (2022-23: 1,964 versus 2023-24: 2,271 animal attacks).
In response, Royal Mail has intensified its focus on preventive
measures. The business ran an extensive communications
campaign to reduce the risk of dog attacks and encourage
responsible dog ownership. The campaign included updates to
online advice for dog owners and the production of an educational
film in partnership with Merseyside Police. Royal Mail continues to
work closely with the police to raise the profile of attacks and ensure
proportionate action is taken when they occur.
We aim to be an integral, valued and trusted part of every community
that our service reaches and an employer of choice.
Delivering economic
and social benefits
Social
SDG
Key material issues
— Health and safety: Ensuring a safe and healthy work
environment for our people, while considering the safety
of our customers and other members of the public.
— Customer service: How we deliver fast, convenient and
environmentally sustainable services, with great quality
of service for our customers and communities.
— Employees: Offering attractive employment opportunities
and promoting an inclusive working environment.
2023-24 highlights
— Expanded wellbeing programme for Royal Mail employees.
— New initiatives to improve gender diversity rolled out
across GLS’ business.
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International Distribution Services plc Annual Report 2023-24
GLS
GLS’ aims to ensure the health and safety of its employees,
transport partners and their drivers through implementation of its
Occupational Health and Safety (OHS) Policy via its extensive OHS
Programme. The programme covers management training, regular
staff briefings that raise awareness of particular workplace hazards
and specially developed transport and driver training courses that
focus on road traffic risks.
The business also operates a number of country-specific
preventative health programmes that are intended to prevent
work-related health hazards and ensure early detection of
occupational illnesses. Risk awareness is increasingly being
raised with the help of virtual reality applications. These
applications simulate hazardous situations that employees
have to successfully overcome and are being developed in
several countries including Spain and Slovenia.
Health and safety performance
We strive to continuously improve our health and safety performance
and monitor and report key safety metrics regularly to the Board and
the ESG Committee.
Our 2023-24 safety performance is set out in the table below.
Royal Mail’s lost time accident frequency rate (LTAFR) decreased
by 1% and the total accident frequency rate increased, by 6%.
GLS’ employee LTAFR decreased to 1.98%.
Royal Mail monitors and reports its road traffic collisions frequency
rate (RTCFR). In 2023-24, RTCFR increased by 21% compared with
the previous year. The business has continued to invest in larger
vans and line haulage to transport a growing volume and size of
parcels, which in some cases, due to the increases in vehicle
manoeuvres, has added to the likelihood of collisions. The fleet’s
transformation is being supported by the business’ safety team,
which assesses risks and creates action plans. At the same time,
the business is looking to improve driver behaviour by delivering
in-cab training alongside regular road safety communications
campaigns and via the use of telemetry. In 2023-24, Royal Mail
updated its van driver induction training to increase the focus
on key causes of collisions. Royal Mail is a partner of road safety
charity Brake, and benefits from access to the charity’s latest
research, experience and expertise, which helps inform our
communications campaigns throughout the year.
However, despite efforts to reduce all risks, we regret to report that
one employee and five members of the public sadly lost their lives in
accidents that involved Royal Mail vehicles in 2023-24. All serious
and fatal accidents are investigated by a safety professional to
identify causes, which are shared with relevant Board members,
and the implementation of all follow-up actions are tracked.
During 2023-24, GLS’ total number of fatal accidents fell from 17 to
12. No GLS employee had a fatal accident and all fatalities related
to road traffic accidents involving GLS' transport partner companies.
Drivers directly employed by GLS receive road safety training as
part of their standard training programme. To also reach drivers
employed by GLS transport partners, GLS has developed specific
initiatives within its OHS Programme, including providing training
material for transport partners and their drivers in line with local
legal requirements. Furthermore, GLS encourages and supports
transport partner companies to make practical road safety training
available to their drivers.
Employee wellbeing
We have a responsibility to not only keep our people safe and
healthy, but to also support their overall wellbeing. We make
available an extensive range of wellbeing programmes and
tools, a number of which were expanded during the year.
Royal Mail launched an enhanced wellbeing programme which
covers Mind, Health, Money and Life matters. Royal Mail employees
and their immediate families can access an online wellbeing hub,
as well as 24/7 access to a number of services including online GP
services and up to eight physiotherapy sessions a year and unlimited
mental health consultations. Further information about the business’
wellbeing programmes is included in the Royal Mail ESG Report,
which is available at www.internationaldistributionservices.com/en/
sustainability/reporting-and-performance.
The level of sickness absence in Royal Mail during the year was
6.75% (2022-23: 7.50%). GLS’ sickness absence level decreased
to 4.73%. Sickness rate improvement is mainly driven by positive
developments in Denmark, France, Spain and Italy.
Group health and safety performance
2023-24 2022-23 2021-22
Royal
Mail GLS
Royal
Mail GLS
Royal
Mail GLS
Fatalities
1
Employees 1 0 0 0 1 1
Third parties
2
5 12 6 17 2 18
LTAFR (per 100,000 hours worked)
3
0.78 1.98 0.79 2.08 0.54 2.28
Sickness absence (%)
3
6.75 4.73 7.50 4.96 7.98 4.88
1. The total number of fatalities due to accidents that have occurred as a result of our activities.
2. Third parties include contractors, third-party drivers and members of the public.
3. Refers to direct employees only. Royal Mail's 2022-23 LTAFR has been restated from 0.73 to 0.79 due to an error in prior year reporting.
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Employee engagement
Ongoing dialogue with colleagues across the Royal Mail business is
essential and we have a number of employee listening programmes in
place, including quarterly People Panels and a Non-Executive Director
sponsored Employee Voice Forum, which provide valuable feedback
on a range of issues.
In September 2023 we launched our annual employee survey,
The Big Trust Survey, inviting all employees to share their views
on what it is like to work at Royal Mail. This year 53% of employees
participated in the survey, compared to 69% last year. The survey
results produced a Trust Index score of 59 and an Engagement
Index score of 47, a decline of 9 points and 16 points respectively,
compared to the prior year. This was largely due to the legacy of
our industrial dispute and quality of service challenges.
To address the survey’s key findings, Royal Mail’s Chief Operating
Officer led a roadshow outlining the business’ operational priorities
for the year ahead. Local managers are also implementing plans to
address issues in their area and check-in pulse surveys are being
introduced to measure the effectiveness of new initiatives. To restore
company pride, one of the survey’s key findings, the business has
launched its Change for Good campaign (see page 39) and The
Heart of Royal Mail Awards, an employee recognition programme
that will be introduced in the coming year.
GLS regularly conducts employee surveys across its business
which focus on topics that are most relevant to its employees in
each country. Recently surveys have been conducted in Austria,
Croatia, Denmark, Germany, Finland, Hungary, Ireland and Spain.
Feedback was considered by local country management and,
where necessary, actions to address key issues were implemented.
For example, in relation to GLS Hungary while feedback indicated
continued high levels of commitment, there was a demand for
more career progression opportunities. In response, training and
development programmes have been expanded. In addition, GLS
Croatia has introduced a number of initiatives to address feedback
including measures to improve collaboration between functions and
facilitate knowledge sharing. As part of a workplace health promotion
project, GLS Austria conducted an employee survey and in response
has established a steering group to plan and implement a number
of wellbeing initiatives, including programmes focused on exercise
and mental health.
Further detail about feedback arising from employee surveys and
how the Board uses the information to monitor culture across Royal
Mail and GLS is set out on page 89.
Rewarding people fairly
Royal Mail provides highly competitive employment terms and
conditions in our industry in the UK. Fair employment conditions are
the foundation of how Royal Mail does business. It offers permanent
employees a competitive salary, paid holiday and a good pension.
In 2023-24 a UK postie’s basic pay was 18-28% higher than the
UK National Living Wage (NLW) for the same period. All temporary
workers receive pay in line with the NLW, with the majority receiving
hourly pay above the voluntary Real Living Wage set by the Living
Wage Foundation at national level.
We believe all our people should be rewarded fairly for their work,
regardless of gender. In 2023 the total average pay for male and
female Royal Mail employees continued to be broadly the same
as the prior year, with the mean pay gap now at 1.5% and 2.6%
in favour of male employees when measured on a median basis.
Information on the Royal Mail 2023 Gender Pay Gap Report
is included on pages 122 and 123 and the full report is available at
www.internationaldistributionservices.com/en/sustainability/
reporting-and-performance.
Providing learning and development opportunities
We aim to provide the tools, knowledge and resources for our
people to have fulfilling careers and develop the next generation
of talent. In 2023-24 Royal Mail invested £5.3 million in learning
and development, equivalent to 57,435 days, compared with
£8.4 million and 30,000 days in 2022-23, due to the targeting of
a bigger audience. The Royal Mail Academy, which has a flagship
training centre in Daventry and sites in Edinburgh, Warrington,
Bristol, Gatwick, Oxford and Glasgow, is focused on leadership
and management, supporting transformation, and wider learning
and development.
In response to the challenges the business continues to face in
relation to leadership capability, talent attrition and recruitment,
The Academy team has introduced new initiatives focused on
developing managers, including a new Future Manager Development
Programme and a new Leadership Development Framework.
The business has also renewed its focus on talent management,
and as part of a wider development programme, introduced a
regular performance and development management process for
our frontline delivery employees. The programme was launched
in October 2023 across 330 delivery offices and now for the first
time in Royal Mail history, all posties have their own KPI performance
data at their fingertips via a new app.
GLS provides a range of targeted training and professional
development programmes to enhance employees’ abilities and
enable them to reach their full potential. The business’ ‘New Level
Work’ coaching programme aims to support the development of
managers and help them become modern leaders, and is offered
across all GLS countries. In addition, the business runs interactive
leadership development sessions to support leadership in a number
of areas including transformation, recruitment and onboarding,
development and succession planning.
Each of GLS’ subsidiaries implements bespoke employee training
programmes including talent programmes to support employees’
development in operational and other functional leadership roles.
Further information on Royal Mail’s and GLS’ training and
development initiatives are included in their respective ESG Reports,
which are available at www.internationaldistributionservices.com/en/
sustainability/reporting-and-performance.
Diversity, equity and inclusion (DEI)
We strive to create an inclusive, fair, respectful and accessible
working environment across the Group. To achieve this, Royal Mail
and GLS have developed DEI strategies relevant to their respective
markets and businesses.
Royal Mail’s DEI strategy underpins the business’ ambition
to develop a workforce that reflects the broad diversity of the
communities it serves. Diversity includes, but is not limited
to, age, disability, marital or civil partnership status, pregnancy
or maternity status, race, ethnicity and national origin, religion/
faith or belief, sex or gender identity, and sexual orientation.
Social continued
34
International Distribution Services plc Annual Report 2023-24
The business’ DEI strategic priorities are to:
— Increase diversity across Royal Mail to create a workforce
that reflects the society in which it operates.
— Transform its generational profile.
— Be a force for good by partnering with others to lead the way.
— Build an environment of inclusion, fairness and accessibility for all.
— Focus on creating vibrant and inclusive employee resource groups
open to everyone.
Royal Mail 2025 diversity targets
1
Position at 31
March 2024
(%)
Target
position
March 2025
(%)
Female representation (all levels) 20% 25%
Female representation (levels 1-6) 26% 33%
Ethnic minority (all levels) 13% 15%
Ethnic minority representation (levels 1-6) 7% 11%
Youth representation (frontline below level 6) 8% 18%
1. In total, 250 employees do not have an assigned ethnicity in our reporting and are not included
in this table.
To support the implementation of its DEI strategy, Royal Mail has set
diversity targets as detailed above. Some progress has been made
during the year and we are proud that Royal Mail regained its place
in The Times 2023 Top 50 Employers for Gender Equality, which
recognises the business commitment to address gender inequalities
in the workplace. However the business has not made the level of
progress it had hoped to achieve against its diversity targets, largely
due to attrition. Measures are now being implemented to increase
diversity in hiring practices and leadership accountability, and
initiatives are underway to improve culture and retention.
To ensure a strong and effective pipeline of future leadership
talent, the business ensures that participants in its development
and leadership programmes (see page 34) are as diverse as
possible. In addition given the limited progress that has been made
in achieving the diversity targets detailed above, DEI leads have
now been appointed within the Commercial, Operations, HR, Legal,
ParcelForce and Finance functions to improve DEI in their areas.
Specific initiatives to promote diverse talent include blind shortlisting.
In September 2023, Royal Mail launched Future Delivered to
tackle youth unemployment and socio-economic inequity across
the UK. In partnership with This is Purpose, a purpose and social
impact consultancy, the business is developing a social mobility
plan aimed at supporting talent from lower socio-economic
groups. The ambition is to more than double the number of
employees aged under 30 in frontline.
Around 13% of Royal Mail employees are from underrepresented
ethnic groups. Royal Mail is a signatory to Business in the Community’s
(BITC) Race at Work Charter, and actively participates in BITC’s
Mentoring Circles programme. This programme offers colleagues
from underrepresented ethnic groups an opportunity to maximise
their full potential through mentorships by senior colleagues within
the organisation and across multiple industries.
Royal Mail remains committed to supporting disabled applicants
and colleagues at all stages of the employee cycle. The business
provides training, career development and promotion opportunities,
and operations managers complete Disability and Reasonable
Adjustments training to ensure that they are confident and effective
in supporting colleagues with disabilities. Support and training
are provided for colleagues with existing disabilities and for those
who have become disabled during their employment. Royal Mail
is proud to be part of the UK’s Disability Confident scheme and
to have achieved Disability Confident Employer Status. This year,
we launched a new Neurodiversity Support Programme which will
enable us to provide faster, more direct and tailored support to our
neurodiverse colleagues.
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Further information on Royal Mail’s DEI strategy and progress made
during the year is included in the Royal Mail ESG Report, which is
available at www.internationaldistributionservices.com/en/
sustainability/reporting-and-performance.
Group gender diversity profile as at 31 March 2024
Male Female Total
Board 6 4 10
Senior leaders
1
263 73 336
Other employees
2
120,369 32,606 152,975
1. Per the Companies Act 2006 definition (those employees who are responsible for planning,
directing or controlling the activities of the Company or a strategically significant part of it).
In Royal Mail this includes employees graded levels 1 to 6 and in GLS this includes employees
graded level A. It also includes directors of subsidiary undertakings included in the consolidation
but does not include Board members who would otherwise classify as senior leaders.
2. In the case of Royal Mail, Pension Trustees who are not employees are excluded and gender
data is not collected for Intersoft and eCourier.
GLS
More than 100 different nationalities are represented across
GLS’ business. Diversity and inclusion are key principles
that underpin its operations. GLS’ Diversity Statement, which
is available at www.gls-group.eu/GROUP/en/our-responsibility,
sets out its commitment to fully support a diverse and inclusive
working environment.
GLS promotes gender equality and works to ensure an inclusive
and welcoming working environment with equal treatment and
development opportunities for all employees. In the logistics
sector, female representation generally tends to be lower than
in other sectors and GLS’ DEI strategy is aimed at improving
gender diversity across all levels of the business. The business
has recently launched recruiting activities to encourage more
women to join GLS and has strengthened its career development
planning processes. In addition, active internal recommendations
are used to highlight the pool of GLS female talent to both the
business’ HR function and GLS management, and form part
of the business’ succession planning process.
GLS predominantly operates in the EU and therefore does not collect
ethnicity data of employees in line with EU Data Protection Law.
Supporting our communities
Royal Mail seeks to be an integral, valued and trusted part of
every community in which it operates. In 2023-24, the business
contributed £2.9 million to good causes and charitable schemes.
This included match giving for colleague fundraising and the cost
of its Articles for the Blind service. In addition to the total contributed,
Royal Mail colleagues raised £2.13 million for charitable causes.
Royal Mail’s community investment strategy is structured into three
key areas:
— Leveraging its national scale: In February 2023, British Heart
Foundation (BHF) became Royal Mail’s national charity partner.
The four-year partnership aims to raise £2 million and train
100,000 of our employees in CPR. In addition, employee
fundraising will be used to fund the new Community Hearts
Programme, which aims to deliver CPR training for one million
young people, fund community defibrillators across the UK
and develop accessible heart health information for the nation.
As at March 2024, the partnership has raised £463,300, trained
7,251 employees in CPR and installed 141 defibrillators in local
communities. As a result of the funds the partnership has raised,
in August 2023, BHF’s vital patient helpline was made free to
call and, in September 2023, a free CPR teaching tool for 11- to
16-year-old pupils was launched in educational settings across
the country. The latest partnership impact report is available at
www.royalmail.com/bhf.
— Using its local presence: Many of Royal Mail’s employees volunteer
and build relationships with charities in their local communities
and the business offers grants of up to £400 to help meet the
costs of volunteering. As Royal Mail employees are present in
every community across the UK, the business is uniquely placed
to support the search for missing people. Since 2014, Royal Mail
has posted alerts from the charity Missing People to its posties
via their handheld devices.
— Unlocking potential through education: We are committed
to developing the skills of young people in communities across
the UK. Royal Mail continued to support the virtual delivery
of The Postal Museum’s ‘Jolly Postman – Once Upon A Bicycle’
programme for a third year. The sessions inspire a love of reading
and connect the fictional story with the factual experience of
writing, sending and delivering letters for primary school children.
Royal Mail continues to support the Disasters Emergency Committee
(DEC) by providing a dedicated PO Box which enables the UK public to
respond to national appeals for overseas disasters. Throughout year,
the business’ employees have continued to support the DEC’s
Turkey-Syria earthquake appeal. In total, including match funding from
Royal Mail, just over £13,000 has been raised. In 2023-24, the DEC
directly raised a combined total of £20.3 million, with 7% (equivalent to
c.£1.4 million) being received via the PO Box. In October 2023 Royal
Mail announced a new partnership with National Emergencies Trust
(NET), a UK charity which raises and distributes funds to support those
affected by UK disasters.
Social continued
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International Distribution Services plc Annual Report 2023-24
Our social and economic
impacts on UK communities
8th
largest contributor to the UK
economy out of all UK corporations
1
1 in 200
people employed in the UK by Royal Mail
1
£10.9bn
of gross value added by Royal Mail
(direct and indirect contributions)
1
£2.9bn
contributed through procurement of goods and services
1
62,600
jobs indirectly supported by Royal Mail in the wider economy
1
£2.9m
contributed to good causes and charitable schemes
GLS empowers each of its national subsidiaries to lead their own
social initiatives. This decentralised strategy ensures that efforts
address the most pressing local challenges and opportunities
that are likely to have a lasting impact. This tailored approach also
strengthens community ties, making GLS a trusted and integral
part of the communities it serves. Activities range from employee
volunteering to donations or free parcel delivery, linking social
activities to GLS' core business.
Recent community activities have included:
— Reinforcing GLS's commitment to community safety and
inclusive education, GLS Italy supported Gimondi Camp 2023,
an educational play project focused on cycling. The business
sponsored eight week-long courses to teach children aged 5
to 12 about road safety and safe cycling, including a special
week dedicated to children with learning disabilities.
— GLS Spain transports and distributes materials and merchandising
for the 'Chocolatada Solidaria' project, which organises chocolate
parties in schools and organisations to raise funds for the fight
against childhood cancer.
In addition, GLS makes financial contributions to support numerous
local charitable projects, including kindergartens and hospitals,
and contributes to national and global fundraising campaigns.
Protecting human rights
We are committed to playing our part to uphold and protect
human rights in our businesses and across our supply chain
globally. We obey the laws, rules and regulations of every country
in which we operate and implement the UN Guiding Principles
on Business and Human Rights, the UN Declaration of Human
Rights and the International Labour Organization Fundamental
Conventions within our businesses and our supply chain. These
cover freedom of association, the abolition of forced labour,
equality and the elimination of child labour.
Building awareness of modern slavery forms part of Royal Mail’s
induction and compliance training, which is mandatory for all
managers. GLS provides online supply chain compliance training,
which also covers modern slavery. This training is mandatory
for all personnel with purchasing authority or depot supervisory
responsibility. In addition, modern slavery issues are highlighted
during face-to-face training with relevant GLS managers.
Royal Mail continues to focus on assessing supply chain risks
in relation to modern slavery and human trafficking, and is
exploring options for certification of third-party suppliers
for correct employment standards and signposting them
to modern day slavery training materials.
Our Modern Slavery Act Statement is available at
www.internationaldistributionservices.com/sustainability/reporting-
and-performance.
1. Data based on Cebr research, conducted by Royal Mail in May 2024,
comprising direct and indirect contributions.
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The Board is responsible for promoting the Group’s long-term
success. Fostering a trusting and inclusive culture across the
Group, ensuring a high standard of governance and the effective
implementation of our ESG strategy are integral to this. The Board
sets the tone from the top, demonstrating and encouraging values-
driven behaviours. Further information on how the Board monitors
culture is included on page 89.
ESG oversight and implementation
The following governance structure, processes and metrics are
in place to support the Board in its oversight of ESG matters and
ensure effective implementation of our ESG strategy:
— ESG Committee: Provides Board-level oversight of the
implementation of our ESG Principles (see page 27) across the
Group. Information about the ESG Committee’s responsibilities
and its activities during 2023-24 are included on pages 104
and 105.
— Executive sponsor: John Crosse, Investor Relations Director,
is our ESG sponsor and the person ultimately responsible for
Group-level stakeholder engagement.
— Royal Mail and GLS Executive Boards and dedicated ESG
functions: Responsible for ensuring effective execution of
their respective ESG strategies and alignment of targets,
policies and procedures with the Group’s ESG Principles
and ESG Policy Statement.
— Risk management: Relevant social and environmental issues are
assessed, monitored and managed using our risk management
framework (see pages 49 to 51). Management of climate-related
risks and opportunities is outlined on pages 41 to 48.
— Reward: Relevant ESG performance metrics are incorporated into
our remuneration arrangements. See page 126.
— Policies and frameworks: Implement strategies, policies and
processes tailored to the needs of our businesses and their
respective stakeholders. Information about key policies, including
the Group’s ESG Policy Statement, is set out below and their
implementation is described throughout this ESG Review.
Governance
Maintaining stakeholders’ trust by operating with integrity is
essential if we are to succeed and generate long-term value.
Operating responsibly
SDG
Key material issues
— Service responsibility: Maintaining integrity and
transparency and addressing data protection and
information security.
— Compliance: Operating high standards of governance
and complying with all applicable laws and regulations.
2023-24 highlights
— Royal Mail ‘Change for Good’ campaign launched.
— Royal Mail developed new supplier programme
covering the top 100 significant suppliers.
— Royal Mail achieved a 13% decrease in bullying
and harassment concerns.
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International Distribution Services plc Annual Report 2023-24
Our ethical standards
The overarching business policies that set out our approach
to responsible conduct in our business and supply chain are
outlined on the next page. Copies of the policies are available
at www.internationaldistributionservices.com/en/sustainability/
governance/policies and www.gls-group.eu/GROUP/en/about-us/
compliance.
Royal Mail employees have access to policies and guidance via the
People App, intranet or the MyRoyalMail communication channel
and the business operates a comprehensive ethics and compliance
training programme. All employees are required to undertake training
relevant to their role and managers are required to complete compliance
refresher training annually which includes an attestation of the Royal
Mail Business Standards. The overall completion rate for this annual
training for assigned managers in 2023-24 was 99%.
Colleagues, contractors, agency and casual workers, suppliers,
business partners and the public are encouraged to report any
suspected policy breaches through the business’ confidential
whistleblowing process. The confidential Speak Up helpline is
available 24/7 to current and former employees, contractors,
temporary workers, subsidiaries, and suppliers and members
of the public.
During the year Royal Mail launched the ‘Change for Good’
campaign, which encourages colleagues and managers to
role-model good behaviours, treat each other fairly and call out
inappropriate behaviours. As part of the campaign, the Royal Mail
Business Standards (see below) were re-launched to provide clarity
around expectations on behaviours and a new tool was introduced to
help colleagues navigate the right channels when raising concerns.
GLS employees with computer access are assigned relevant policies
and guidance through an online system. Employees without computer
access can access print versions of the policies in the depot locations.
GLS’ compliance training approach consists of training for all
office-based employees, including employees with purchasing or
depot supervisory functions. Training covers anti-corruption and,
where relevant, modern slavery awareness, and is provided online
and, for some sessions, in-person. The in-time completion rate for
compliance introductory training at the close of 2023-24 was 98.2%.
1
GLS operates a dedicated Whistleblowing Helpline that is available
for reporting and investigating allegations of criminal acts or similar
serious offences. GLS encourages employees, business partners
and third parties to report, in confidence, any concerns they have.
Embedding ethical standards across our supply chain
We are committed to embedding high standards of social, ethical
and environmental conduct across our supply chains and to ensuring
that modern slavery and human rights abuse, including trafficking
(together ‘modern slavery’) are not taking place in our business or
supply chains. Our Modern Slavery Statement is available at
www.internationaldistributionservices.com/en/sustainability/
reporting-and-performance.
During the year Royal Mail developed a holistic supplier ESG
programme that provides a comprehensive, coherent and effective
ESG approach across the business’ value chain. The programme
aims to ensure that ESG requirements are filtered through every
step of the sourcing process. As part of this programme Royal Mail
is working to identify initiatives that will support its ‘Steps to Zero’
environmental strategy and accelerate its decarbonisation process.
Royal Mail has identified its top 100 most significant suppliers based
on their Scope 3 emissions materiality or level of social or governance
risk. The business is starting to work with them to gather more granular
information on their emissions and risk areas in order to increase the
level of accuracy and transparency of its carbon reporting.
GLS operates a mandatory business partner approval process and
its Supplier Code of Conduct, based on the UN Global Compact
Principles framework, sets out the standards expected of suppliers.
1. The percentage of GLS employees as at 31.3.2024 who were assigned compliance basics
training prior to this date who either completed it or were still within the set time (typically
six weeks) to complete it.
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Reporting standards
We are committed to being as open and transparent as possible
about our business, and our ESG reporting meets our obligations
as a signatory to the United Nations Global Compact.
Royal Mail and GLS report in accordance with the Global Reporting
Initiative (GRI) Sustainability Framework and each business’ 2023-24
ESG Report has been prepared in accordance with the GRI Standards
for the period 1 April 2023 to 31 March 20241. The GRI index for the
Royal Mail report can be found as part of the Royal Mail ESG 2023-24
Appendix and the GRI index for the GLS report can be found as part
of the GLS ESG 2023-24 Appendix. Both Appendices are available
at www.internationaldistributionservices.com/en/sustainability/
reporting-and-performance.
Royal Mail and GLS engaged Bureau Veritas to provide limited
assurance on reported key non-financial performance indicators and
related assertions for 2023-24. Its assurance covers environmental
indicators and metrics used to monitor culture, such as health and
safety, sickness absence and diversity. Assurance in relation to Royal
Mail and GLS data was performed in accordance with the ISAE 3000
(Revised). Further information, including the assurance statements,
is available at www.internationaldistributionservices.com/en/
sustainability/reporting-and-performance.
Governance continued
Policy Scope
Group ESG Policy
Statement
Sets out our ESG strategy, governance and commitments, including our support for the UN Global
Compact and Universal Declaration of Human Rights.
Royal Mail Business
Standards
Outlines the behaviours Royal Mail expects from its employees, and others working on its behalf.
The standards are about doing the right thing, following the law, acting honourably and treating
others with respect. They help the business to do the best job for its customers, keep its people
safe and protect its reputation.
GLS Code of Business
Standards (the GLS Code)
Outlines the values and behaviours GLS expects from its employees and business partners.
It is available in local languages for GLS employees and business partners.
Royal Mail Ethical
Business Policy: Anti-
Bribery & Corruption,
Conflicts of Interest,
Prevention of the
Facilitation of Tax Evasion
Sets out Royal Mail’s approach to minimising the risk of bribery and corruption, and the facilitation of tax
evasion taking place in any part of the business. The business has a strict zero-tolerance policy towards
non-compliance with all applicable anti-bribery, corruption, money laundering, terrorist financing and tax
evasion laws. It requires employees to follow all internal procedures to prevent bribery, corruption, conflicts
of interest, money laundering, terrorist financing and the facilitation of tax evasion, as well as processes for
setting up new commercial arrangements with suppliers, customers and other business partners.
Royal Mail Supplier
Code of Conduct
Outlines the environmental, social and ethical commitments and behaviours Royal Mail expects from its
suppliers and aims to ensure that the business only engages suppliers that meet its standards. This code,
which is based on the UN Global Compact Principles, requires Royal Mail’s suppliers to adhere to the UN
Declaration of Human Rights, which is part of the business’ commitment to implementing the UN Guiding
Principles on Business and Human Rights. Royal Mail requires its suppliers to communicate the
Procurement Code in full to all relevant employees within their organisations.
GLS Supplier
Code of Conduct
Sets out the standards GLS expects of its suppliers and is also based on the UN Global Compact
Principles framework.
1. The Royal Mail and GLS ESG Reports both cover the period 1 April 2023 to 31 March 2024. While this time frame does not align with the Group’s financial year (53 weeks ended 31 March 2024) ,
the difference not considered to be material.
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International Distribution Services plc Annual Report 2023-24
TCFD Statement
We recognise climate change as a key global threat that poses particular risks
and opportunities for our Group. Identifying and managing these risks and
opportunities enables us to enhance our resilience and competitiveness.
We are committed to implementing the recommendations of
the Task Force on Climate-related Financial Disclosures (TCFD)
established by the Financial Stability Board. During the year we
made further progress against these recommendations and
continued to evolve our business, strategy and financial planning
processes to take account of our climate-related risks and
opportunities. As explained below, we have further work to
do to implement the recommendations in full and meet the
expectations of the Financial Reporting Council.
Statement of compliance
In accordance with Listing Rule 9.8.6R(8), this Annual Report is
consistent with ten of the TCFD recommendations as detailed below.
It is partially consistent with the TCFD recommended disclosures
relating to the impact of climate-related risks and opportunities
on business and financial planning. To be fully consistent with this
recommendation and the supplementary guide for non-financial
groups by no later than 2025, we are taking additional steps to
further embed climate-related risks and opportunities into our
business and budgetary planning cycles to better support
management's role in managing and assessing these (see page 47).
We also consider these disclosures to be compliant with the
Companies Act 2006 as amended by the Companies (Strategic
Report) (Climate-related Financial Disclosure) Regulations 2022.
In assessing our consistency, we have followed the ‘Guidance for All
Sectors’ and the Supplementary Guidance for Non-Financial
Groups.
Recommended disclosures Status Page
Governance a) Board’s oversight of climate-related risks and opportunities. Consistent 42 and 43
b) Management’s role in assessing and managing climate-related risks and opportunities. Consistent 42 and 43
Strategy a) Climate-related risks and opportunities identified over the short, medium, and long term. Consistent 43 to 46
b) Impact of climate-related risks and opportunities on businesses, strategy,
and financial planning.
Partially
consistent
47
c) Resilience of strategy, taking into consideration different climate-related scenarios,
including a 2°C or lower scenario.
Consistent 48
Risk
management
a) Processes for identifying and assessing climate-related risks. Consistent 48
b) Processes for managing climate-related risks. Consistent 48
c) How processes for identifying, assessing, and managing climate-related risks are
integrated into overall risk management.
Consistent 48
Metrics and
targets
a) Metrics used to assess climate-related risks and opportunities in line with its
strategy and risk management process.
Consistent 48
b) Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions, and the related risks. Consistent 48
c) Targets used to manage climate-related risks and opportunities and performance
against targets.
Consistent 48
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TCFD Statement continued
Climate-related governance
The Board
Board oversight
Role
The Board has formal oversight of climate-related risks
and opportunities (see below).
Relevant experience
The Board received training on ESG-related topics in 2023 and 2024.
In March 2024 Board members and the Executive Board of each
business received a dedicated training session provided by an external
specialist on decarbonisation and emerging regulatory requirements.
In addition to this, three Directors have prior specific ESG experience
(see page 84).
Key focus during 2023-24
The Board, through its Committees, increased its focus on climate-related matters in the year. The Committees are responsible for providing
updates to the Board on climate-related matters.
— In March 2024, the Audit and Risk Committee (ARC) was updated,
by way of spotlight papers, on the Group’s ‘Climate change and
environmental management’ principal risk, its climate risks and
opportunities risks and its climate-related metrics and targets.
The ESG Committee received two updates on Royal Mail’s
environmental strategies, and one from GLS, including progress
made against climate-related metrics and targets.
— The ESG Committee continued to monitor progress on TCFD
implementation via five updates from the Group’s multi-disciplinary
TCFD Working Group (see below).
— The ESG Committee received a verbal update on investor feedback
on the Group’s ESG performance, including the Group’s climate-
related metrics and targets. The Group IR Director is present at all
ESG Committee meetings and provides relevant feedback on an
ongoing basis.
Specific responsibilities are delegated to the Board’s Committees
Audit and Risk Committee
Oversees the Group’s ‘Climate change and
environmental management’ principal risk
and the progress made against goals and
targets for addressing climate-related issues.
The ARC is supported by the Royal Mail Audit
and Risk Committee (Royal Mail ARC) and the
GLS Audit and Risk Committee (GLS ARC),
while the Executive Board of each business
and its respective functions monitor day-to-day
management. It formally reports to the Board
five times a year. During the year, the ARC
received environmental remediation updates,
which included climate-related metrics, risk
indicators, remediation activities and targets.
→ See pages 96 to 103.
ESG Committee
Oversees the Group’s ESG agenda,
including the progress of Royal Mail and
GLS’ environmental strategies, stewardship
and performance, and steps to tackle climate
change and become a Net-Zero business.
The ESG Committee Chair updates the
Board on key topics discussed at the ESG
Committee. It formally reports to the Board
after each of its meetings, a minimum of four
times a year.
→ See pages 104 and 105.
Remuneration Committee
Determines how ESG metrics, including
environmental and climate-related issues,
are considered within the remuneration policy
and how they will be taken into consideration in
determining the final incentive pay decisions.
It formally reports to the Board four times a
year.
→ See pages 106 to 138.
Executive management and its functions oversee day-to-day management
Executive management
Royal Mail and GLS Executive Boards
Responsible for day-to-day assessment and management of risks
and opportunities, and the delivery of each business’ environmental
strategy. The Executive Board and relevant functions of each business
monitor day-to-day management of these risks, which are reported to
each business’ ARC. In addition, goals, targets and other updates relating
to the decarbonisation process being undertaken by each business (see
pages 29 to 31) are reported via dedicated workstream sponsors,
respective ESG teams and country managers on a quarterly basis.
Royal Mail ARC and GLS ARC
Responsible for overseeing the identification of and progress
against environmental and climate-related risks and remediation
plans. These committees report to the Group ARC five times a year.
A multi-disciplinary TCFD Working Group is responsible for progressing climate-related considerations from TCFD across the Group. This forum
comprises representatives from Company Secretariat, Risk Assurance, Finance, Legal, and the Royal Mail and GLS ESG teams, and is supported by
external consultants as required. It convened three times during 2023-24 and updated the ESG Committee on progress four times in the year.
42
International Distribution Services plc Annual Report 2023-24
1. Governance
(a) Board’s oversight of climate-related risks
and opportunities (consistent)
The Board and its Committees are responsible for oversight of
climate-related risks and opportunities, which they perform via
the governance and risk management framework outlined on the
previous page. The Board takes climate-related transitional risks and
opportunities into account during strategy development, planning
and investment decision making, which has resulted in the design
and implementation of our main decarbonisation initiatives, which
are monitored on an ongoing basis, and the development of more
environmentally friendly products and services.
(b) Management’s role in assessing and managing
climate-related risks and opportunities (consistent)
Management is responsible for assessing and managing climate-
related risks and opportunities. The management of specific climate-
related risks (transitional and physical) is integrated into the Group’s
risk management framework as a separate category, with dedicated
climate-risk profiles maintained by relevant members of the Royal
Mail and GLS Executive Boards.
2. Strategy
(a) Climate-related risks and opportunities identified
over the short, medium, and long term (consistent)
We have undertaken two scenario analyses (the first in 2021
and a second in 2023 to further enhance our understanding )
to identify the climate-related risks and opportunities facing
the Group over the short, medium, and long term. As part of
these analyses, climate-related physical and transition risks and
opportunities were ranked and their variation across scenarios,
operational geographies and time horizons were assessed.
As a result, transition risks were identified as more material
to the business than physical risks and the most impactful
transition risk identified was quantified for Royal Mail. The risks
and opportunities identified and assessed by the TCFD Working
Group are detailed in the tables on pages 45 and 46.
Climate transition strategies
We are committed to managing our transition to a low-carbon
economy through science-based decarbonisation strategies and
Royal Mail and GLS have developed strategies that are tailored to
their respective business models and markets. These strategies
include pathways, targets and mitigating actions that are helping
us achieve our ambition to become a low-carbon business, while
offering a wide range of green solutions to our customers, including
low- and zero-emission delivery routes, the Royal Mail carbon
calculator for account customers that estimates emissions of
parcels sent, and collection services that encourage more recycling.
We are committed to achieving Net-Zero
1
emissions from Royal
Mail’s operations by 2040 and zero emissions from GLS’ operations
by 2045,
2
and we have continued to progress and further define the
respective strategies of our businesses to achieve this. See pages
28 to 31.
In addition to our efforts, we recognise that technological
improvements and innovations are required to underpin
the successful delivery of Royal Mail’s and GLS’ respective
decarbonisation strategies. These include the availability of
low-emission heavy goods vehicles (HGV) at commercial scale
and competitive price points; increased deployment of charging
infrastructure in our markets; and the availability of biofuels for use
in air freight across our supply chain. Where long-term commercially
viable improvements and innovations are not yet available, we are
implementing temporary measures to continue progressing our
decarbonisation. For example, we have begun deploying hydrotreated
vegetable oil (HVO) in Royal Mail’s HGV fleet, which is a renewable
diesel alternative that does not require any engine or fuelling
infrastructure modifications. While the availability of HVO is limited
across most of GLS’ markets, the business has also begun
introducing it in Germany, Italy and Spain. We will continue to
monitor developments in these and other areas, and support
public-private partnerships that are helping drive change.
Scenario analysis and identification of risks and opportunities
We have undertaken climate-risk scenario analyses based on the
latest TCFD guidance using information and data scenarios from the
Network for Greening the Financial System (NGFS). The scenarios
selected (see table on the next page) are widely recognised and
comparable. We also consider them to be the most relevant to
the Group, as they are aligned with the use of carbon pricing in the
UK and relevant to the potential impact on the transport sector.
The scenarios apply the latest NGFS economic and climate data,
model versions and policy commitments in renewable energy and
mitigation technologies, and reflect new country-level commitments
to reach zero emissions. The time horizons considered for these
scenarios are Short term (< 2030); Medium term (2030-2040); and
Long term (> 2040) and they were selected as they align to Royal
Mail’s strategic planning and the business’ broader climate-related
policies and 2030 and 2040 targets. In our analysis, the perceived
materiality of the risks was also assessed in a qualitative manner by
the TCFD Working Group against the NGFS data scenarios.
As both Royal Mail and GLS operate in the same sector, no sector
variations have been applied. To account for geographic variation
in our transition risks and opportunities analysis, we considered
differences across geographies (UK, US, Canada, France, Germany,
Netherlands, Denmark, Italy and Ireland) and how previous policies
and operations might provide a blueprint for responses to transition
risk uncertainty. We assessed these at a high level across these
geographies, using carbon taxation as a proxy and looking at current
exposure and exposure under the 1.5°C scenario. We also considered
geographic variation of exposure to physical risks across the US,
Canada, UK and Europe; however, these were deemed not to be
sufficiently material at Group level to detail in this statement. Our final
analysis is presented at Group level and combines all geographic
considerations into a single assessment of the Group’s exposure.
1. Royal Mail’s Net-Zero by 2040 ambition is to reduce 90% of its Scope 1, 2 and 3 CO
2
e emissions by 2040, while offsetting the remaining 10% residual emissions through investment in certified carbon
removals against a 2020-21 base year of 1,325.1KtCO2
e. This has been verified by SBTi to be aligned to a 1.5°C decarbonisation pathway across all scopes of greenhouse gas (GHG) emissions.
2. GLS' zero emissions by 2045 ambition is to reduce 90% of its Scope 1, 2 and 3 CO2
e emissions by 2045, while offsetting the remaining 10% residual emissions through investment in certified climate
protection projects. A pathway to deliver this reduction will be developed (including the setting of interim carbon reduction targets) and to base this pathway on climate science, in December 2023 GLS
committed to set targets in line with the SBTi. GLS is expecting to complete the developing, submitting and approving process in line with the SBTi during the coming financial year.
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TCFD Statement continued
1.5°C rapid transition
(orderly)
The world takes the rapid and drastic policy measures required to meet the ambition of the 2015 Paris
Agreement. Key considerations are to ensure that Royal Mail’s and GLS’ decarbonisation and business
strategies are aligned with or are ahead of policy requirements. The Group’s decarbonisation plans and
business strategy will require regular review to ensure that they remain at pace with climate science and
are aligned to requirements across all areas of operation. The potential impact of physical risks is limited
in this scenario, but there is high potential for transition risks and opportunities. Both businesses are
committed to reaching zero emissions before 2050 and are aligning their decarbonisation strategies
in support of the Paris Agreement to limit global warming to 1.5°C (see pages 28 to 31).
2°C steady transition
(orderly)
Climate action policies are introduced early and become gradually more stringent, though not as rapidly or
as drastic as in the 1.5°C scenario. Carbon price remains relatively low, and the potential impact of physical
risks are relatively low, transition risks are moderate to high, and Net-Zero CO
2
e emissions are achieved
before 2070. This scenario would need regular reviews of the Group’s decarbonisation plans and business
strategy to ensure that plans remain aligned across all areas of operation. Most significantly, a ban on new
petrol/diesel vehicles could be expected, which would increase the demand and uptake of EVs, and have
follow-on impacts for the Group’s distribution network. Meanwhile, physical risks would be integrated into
business continuity and business risk mitigation and adaptation planning.
Delayed 2°C transition
leading to notable physical
impacts (disorderly)
Social, economic and technological trends do not shift markedly from historical patterns until 2030.
The delay and divergence in responses across sectors and countries results in a disjointed transition
ultimately reaching warming below 2°C. Carbon prices rapidly increase. Emission reductions need to be
sharper than in the orderly scenario to limit warming to the same target, so more severe transition risks
are experienced. This scenario highlights the increased volatility/market risks presented by a disorderly
transition. The potential impact of physical risks is significantly higher within this scenario, requiring more
significant business continuity planning to avoid or mitigate disruption to operations.
4°C business as usual
emissions, extreme
warming (disorderly)
Worst-case levels of global warming, with increasingly severe and frequent extreme weather causing
extensive business disruption, as well as chronic changes to seasonal weather patterns severely
damaging economic growth. The Group would be required to comply with current policy only from
a regulatory perspective, but the physical impacts of climate change would be significant, causing
disruption to operations and the value chain. In this scenario, transition risks are integrated into our
business continuity and business risk mitigation and adaptation planning.
We have applied the following three-step approach in our analysis
of climate-related risks and opportunities:
i. Conducted a survey and held workshop discussions with
representatives from the TCFD Working Group to discuss the risks
and opportunities in our operations, supply chain and markets.
ii. Examined the likelihood and impact of the climate risks and
opportunities identified for each scenario.
iii. Re-prioritised and ranked the identified climate-related risks
and opportunities.
The analysis undertaken was largely qualitative, with one risk
(carbon pricing) quantified for financial impact (see page 47),
and the appropriate strategic responses have been developed
where possible. The analysis showed how an identified risk can
be mitigated by taking advantage of associated opportunities,
while acknowledging the risks associated with each opportunity.
We consider materiality to correspond to risks and opportunities
we deem to be of sufficient importance to our shareholders.
We are continuing to quantify the financial impact of our climate-
related risks and opportunities (see below). Our definition of
financial materiality is set out on page 148.
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International Distribution Services plc Annual Report 2023-24
Transition risks and opportunities
Our transition risks are considered to be more material than physical risks due to our strong reliance on fleet and customers’ rapidly changing
expectations about decarbonisation. The transition risks and opportunities that could have an impact, which could lead to a material financial
impact, are listed in the table below.
Inherent risk assessment key
Likelihood
High: Regular or continuous
occurrence.
Medium: Likely to occur but not often.
Low: Unlikely to occur.
Time horizon
Short term (< 2030)
Medium term (2030-2040)
Long term (> 2040)
Impact
High: Significant/repeated financial
loss, damaging media coverage; high-
profile litigation resulting in restrictions
to freedom to operate.
Medium: External stakeholder
awareness; one-off financial
cost/loss; moderate regulatory breach
restricting some freedom to operate.
Low: Reputation intact; limited or no
direct/indirect financial cost/loss;
regulatory body issues verbal warning.
Opportunities assessment key
Effort
High: It is difficult for the business to
implement this action, based on current
available resources and investment.
Medium: It is neither easy nor
extremely difficult to implement
this action, based on current available
resources and investment.
Low: It is easy for the business to
implement this action, based on current
available resources and investment.
Impact
High: Significant reputational,
financial and regulatory benefit.
Medium: Moderate reputational,
financial and regulatory benefit.
Low: Little reputational, financial
and regulatory benefit.
Category Trend and impact
Likelihood
(risks) or effort
(opportunity)
Financial
or non-financial
impact Scenario
Time
horizon Response and resilience
Policy
& legal
Risk 1: The potential impact
associated with carbon taxes on
commercial fleet and logistics
activity, which could increase
operating costs.
High High Primary: 2°C
disorderly
Short
term
Transitioning last- and middle-mile fleets
to low- or zero-emission alternatives.
Main metrics: number of electric vans and
lower emissions larger trucks deployed.
High High Secondary:
1.5°C
Energy
source
Opportunity 1: The use of lower
emissions transport in commercial
fleet has the potential to reduce
maintenance and fuel costs over
the life cycle of a vehicle.
High High 1.5°C Short
term
Initial Royal Mail findings suggest fleet
electrification can significantly reduce
maintenance and fuel costs over the life
cycle of a vehicle when compared with
diesel equivalents, even after factoring in
costs associated with the installation of
charging infrastructure (see Royal Mail
ESG Report which is available at
www.internationaldistributionservices.com/en/
sustainability/reporting-and-performance).
Opportunity 2: The potential
use of government schemes
and other subsidies that
promote low-emission vehicle
alternatives among commercial
fleets, thereby reducing
investment and operating costs.
Medium High 1.5°C Short
term
Utilise these incentives where they are
available. For example, Royal Mail has bid
for the Government’s zero-emission road
freight trials funding, which enables price
parity with diesel equivalents, while GLS
Canada has used various programmes
by national and provincial authorities to
support the deployment of charging
infrastructure and zero-emission vehicles.
Reputation
Risk 2: Increased stakeholder
pressure to act in response to
climate-related risks that causes
reputational damage and misses
the opportunity to gain market
share, which could result in a
loss of revenues.
High High 1.5°C Short
term
Regularly engage customers and prospects to
provide updates and details on their respective
decarbonisation actions and plans, and broader
management of climate-related risks. Main
metric: GHG emissions Scopes 1, 2 and 3.
Policy
& legal
Risk 3: Ban on the sale of petrol
and diesel vehicles and the
introduction of low-emission
zones requiring alternative fuel
vehicles could impact costs
and create liabilities.
High Medium Primary:
1.5°C
Short
term
Transitioning last- and middle-mile fleets to
low- or zero-emission alternatives, such as
electric vans, to mitigate this risk. Main metrics:
number of electric vans and lower emissions
larger trucks deployed. See page 31.
High Medium Secondary:
2°C orderly
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International Distribution Services plc Annual Report 2023-24
TCFD Statement continued
Category Trend and impact
Likelihood
(risks) or effort
(opportunity)
Financial
or non-financial
impact Scenario
Time
horizon Response and resilience
Products
& services
Opportunity 3: Changing
consumer demands leading
to new products and services,
and gains in market share.
Medium High 1.5°C Short
term
Continuously develop products and services to
make them more environmentally friendly and
appealing to customers. Main metrics: GHG
emissions Scopes 1, 2 and 3, and emissions
per parcel delivered.
Policy
& legal
Risk 4: Claims by peers, regulators,
or customers that products and
services fail to meet the Group’s
claims of green/low-carbon
credentials could damage its
reputation, creating a loss in
revenues, and exposing it to
fines from regulators.
Medium High Primary: 2°C
orderly
Short
term
Adhere to all regulations and applicable
advertising and marketing guidance with
regard to environmental claims made.
Medium High Secondary:
1.5°C
Market
Opportunity 4: Joint ventures
with other companies/energy
providers in relation to electric
vehicles could help reduce costs
and increase revenues.
Medium High 2°C
disorderly
Short
term
Consider partnerships and joint ventures
that can facilitate the transition of fleets to
electric vehicles.
Physical risks
Physical risks include risks arising from the physical effects of climate change, such as an increase in extreme weather events. Some of
these risks are already having an impact on our businesses but are considered less materially significant than transition risks. They have
been present in our business for a longer time, are relatively familiar and have more mature mitigation actions.
The physical risks that could have an impact, which could lead to a material financial impact, are listed in the table below.
Category Trend and impact Likelihood Impact Scenario Time horizon Resilience
Acute
Risk 1: Extreme weather events
could cause damage to data
centres and reduce connectivity
to operations, resulting in a loss of
revenues and an increase in costs.
Low High Primary: 4°C Medium term
mainly, but with
potential impacts
in the short and
long term too.
As part of the management of operational
sites, consider a range of physical risks,
such as flooding and storms, and take
steps to prevent and minimise these
where possible.
Low High Secondary:
2°C disorderly
Chronic
Risk 2: Chronic risks might have
an ongoing impact on supplier
operations where we have sole
suppliers for certain raw materials/
components for electric vehicles
equipment, which could result in
increased costs.
Medium Medium 4°C Long term Work with a diverse pool of suppliers
to gather more information on climate
risk management.
Acute
Risk 3: Extreme weather events
impacting employee safety
and wellbeing could lead to an
increase in costs and liabilities,
and loss in revenues.
Medium Medium Primary: 4°C Short term Monitor and respond to the impact
of changing weather on employees’
wellbeing as part of ongoing health
and safety programmes.
Medium Low Secondary:
2°C disorderly
Acute
Risk 4: Extreme weather events
could impact operations and
facilities/equipment, resulting
in a loss of revenues and an
increase in costs.
Medium Medium Primary: 4°C Short term As part of the management of operational
sites, consider a range of physical risks
such as flooding and storms, and take
steps to prevent and minimise these
where possible.
Medium Low Secondary:
1.5°C
46
International Distribution Services plc Annual Report 2023-24
(b) Impact of climate-related risks and opportunities on
businesses, strategy, and financial planning (partially consistent)
As part of our strategic development, business and financial planning
processes we take account of the transitional and physical climate-
related risks and opportunities detailed in the tables above. Among
other areas, this has led to the development of strategies and investment
plans to transition our businesses to a low-carbon economy (see
pages 28 to 31), and actions to meet the increasing demand for more
sustainable products and services from our customers (see page 11).
We are now taking steps to further embed climate-related risks
and opportunities into everyday planning and decision making.
For example, Royal Mail has embedded carbon considerations
into the workstreams of its ongoing transformation programme
and begun the process of establishing an internal price for carbon
which will be used to more accurately reflect the commercial benefits
and risks of carbon impacts across different parts of the business.
We will continue this work through 2024-25, so that we are fully
consistent with this recommendation and the supplementary
guide for non-financial groups by no later than 2025.
Financial impacts
To better understand the potential impacts of one of our key
transition risks, carbon taxes, we have undertaken a quantitative
scenario analysis which is described below. We have estimated the
potential financial impact associated with carbon taxes on Royal
Mail’s road transport and logistics activity (see table below). If the UK
Government uses a carbon tax on the road transport and logistics
sector as a key instrument in limiting global warming, based on our
estimate, Royal Mail would experience significant increases in fuel
spend unless mitigation measures were put in place. By comparison,
at GLS, the cost of these various tax schemes (e.g. carbon, road,
congestion) would occur indirectly, to the extent that its logistics
partners choose to pass on their increased operational costs to GLS.
Our quantitative analysis determined how a carbon tax would impact
the cost of running Royal Mail’s commercial vehicle fleet in 2025
(short term), 2030 (medium term) and 2040 (long term). The risk
quantified is the unmitigated impact, without any of the planned
changes to operations or delivery models, and it was quantified for
Royal Mail as it was evaluated as likely to impact the business within
the next five years. NGFS fuel price and carbon taxes were used to
estimate how different climate futures could drive changes in Royal
Mail’s operating costs. A series of simplifying assumptions were
made to complete the analysis.
1
Based on our initial analysis and the view that the UK's current
climate goals and emerging policies are consistent with an
2°C orderly transition, we estimate that the Royal Mail vehicle
fleet fuel spend increase would be £20 million per annum in an
unmitigated Net-Zero scenario by 2025. A second calculation
in which assumptions have been adjusted to account for the
mitigation activities implemented to date and currently in plan
is set out on page 61. We will continue to review the financial impact
of our other climate-related risks , and modify our assessments
and mitigation plans accordingly. For details on how our climate
risks could impact the Group’s viability see page 61 and page 148
for our definition of financial materiality.
In the case of GLS, where a comparable quantification of the direct
impacts of this transition risk to its business cannot be made, we
have reviewed the differences in exposure to the additional vehicle-
related transition risks across various geographies.
Quantitative scenario analysis of carbon taxes¹
Scenario Key development Fuel spend increase (relative to FY2021-22)
1. Net-Zero orderly transition (1.5°C) In a rapid transition, the high level of ambition to mitigate climate
change means high carbon and fuel prices to reduce emissions,
so total fuel spend is projected to increase substantially.
2025: £120 million (+59%)
2030: £200 million (+93%)
2040: £390 million (+183%)
2. Below 2°C orderly transition In a steady transition, a gradual increase in climate policies
means carbon prices are kept lower than a rapid scenario, as
auxiliary policies absorb some of the decarbonisation burden.
Total fuel spend is projected to increase but not as much as
in the Net-Zero scenario.
2025: £20 million (+11%)
2030: £40 million (+21%)
2040: £80 million (+38%)
3. Delayed 2°C disorderly transition | fossil
fuel led economic recovery undermines
climate goals and assumes disorderly
management of physical risks
In a delayed and disorderly transition, projected fuel spend does
not increase significantly in the short-term horizon, but in the long
term, the high carbon price required to limit global warming
is projected to increase total fuel spend rapidly and substantially.
2025: -£4 million (-2%)
2030: £10 million (+4%)
2040: £420 million (+201%)
4. Current policies, NGFS
hot house world (3°C)
In a business-as-usual scenario, projected total fuel spend
does not vary significantly.
Projected fuel spend does
not vary significantly
1. Risks were quantified relative to Royal Mail’s current-state business with no forward-looking assumptions about future fuel use. The cost of its current fuel demand was quantified using future-looking fuel
price and tax assumptions from NGFS. In the case of the ‘below 2°C orderly’ transition scenario, this was equal to 72.5 US$2010/t CO2
in 2025; 96.7 US$2010/t CO
2
in 2030; and 145.0 US$2010/t CO
2
in
2040. This enabled the scale of future unmitigated costs to be estimated without introducing additional assumptions about how Royal Mail’s business could change or how mitigating activities could
impact future exposure. All quantifications will be updated within the next two financial years.
47
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
(c) Resilience of strategy, taking into consideration different climate-
related scenarios, including a 2°C or lower scenario (consistent)
We consider the strategies of our businesses to be resilient in
each of the climate-related scenarios detailed above, while it is
also noted that our overall resilience can also be impacted by
non-climate-related risks as outlined in the Risk Management
chapter of this report (see pages 49 to 58).
Our businesses closely manage any uncertainty risks associated
with, for example, the availability of low- and zero-emission
technologies, the widespread availability of charging infrastructure
and developments in local and national government policies.
We closely monitor these and where necessary have adapted
our existing assets. For example, we have deployed hydrotreated
vegetable oil (HVO) to continue progressing the decarbonisation
of our heavy goods vehicles (HGVs) given that low-emission
alternatives are not yet commercially viable at scale.
Our responses and resilience are further described within the
transition and physical risk tables on pages 45 and 46 and
are indicative of the Group’s overall resilience to climate change.
Following the identification of a full set of climate-related risks
and opportunities, we have assessed our existing responses and
mitigating strategies for our most material climate-related risks and
opportunities and we confirm they are broadly effective at present.
3. Risk management
In addition to the risk management oversight in recommendations
detailed on pages 42 and 43, we operate the following processes:
(a) Processes for identifying and assessing
climate-related risks (consistent)
We performed Group-level climate scenario analyses in 2021 and
2023 and ranked our climate-related physical and transition risks
and opportunities, and reassessed their variation across scenarios,
operational geographies and time horizons, based on the process
described on pages 43 and 44. A cross-section of senior
management provided insights for this exercise which identified
that transition risks were more significant to the Group than physical
risks. A risk-scoring methodology has been applied to identify,
assess, rank and ensure ownership of climate risks (see page 51).
(b) Processes for managing climate-related risks (consistent)
During 2023-24, our ‘Climate change and environmental management’
principal risk was managed through our risk management framework,
with respective executive leadership and their functions overseeing
its day-to-day management. The process used by the Group to
make decisions to mitigate, transfer, accept, or control those risks
is detailed on pages 49 to 51.
(c) How processes for identifying, assessing, and managing
climate-related risks are integrated into overall risk
management (consistent)
Having formally integrated climate-related risks into our risk
management framework as the principal risk ‘Climate change
and environmental management’, a risk-scoring methodology was
applied to identify, assess and rank all key climate risks and ensure
ownership by the businesses. The outcomes of this assessment
were presented to the ARC in March 2024 after the embedding of
climate-related risk assessments into the Royal Mail and GLS risk
management processes.
4. Metrics and targets
(a) Metrics used to assess climate-related risks and opportunities
in line with its strategy and risk management process (consistent)
We disclose key cross-industry metrics that are in line with our
strategy, which include absolute GHG emissions (see page 30).
These are included within the assessment of our ‘Climate change
and environmental management’ principal risk, which was managed
through our risk management framework during 2023-24 (see pages
49 to 51). Having formally integrated climate-related risks into this
framework, we applied a standard risk-scoring methodology to
identify, assess and rank key climate risks as a new sub-group of
climate-related risks and associated targets/metrics (see above).
ESG-related measures are included in the Short-Term Incentive Plan
(STIP) scorecard. 10% of the scorecard for the Group CEO and CFO
is based on environmental metrics in 2023-24 and these were met in
full during the year. We will continue progressing our metrics in line
with the development of our scenario analyses and taking into
consideration the seven metric categories from the TCFD guidance.
For example, we are in the process of developing an internal carbon
price for our Royal Mail business and are working to develop disclosures
aligned to the Transition Plan Taskforce that will require us to provide
further details on capital expenditure, financing, and investments
deployed toward climate-related risks and opportunities.
(b) Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions,
and the related risks (consistent)
We measure and disclose our Scope 1, Scope 2 and Scope 3 GHG
emissions (see page 30) following the GHG Protocol and consider
the related risks associated with these. In addition, Royal Mail and
GLS use other targets, including intensity metrics, to gauge the
effectiveness and progress of their respective environmental
strategies to become a low-carbon business.
(c) Targets used to manage climate-related risks and
opportunities and performance against targets (consistent)
We track, manage and disclose our most material climate-related
targets, including those related to GHG emissions and energy
usage, in addition to metrics related to mitigation actions, such
as the deployment of EVs and biofuels (see page 31). In our Royal
Mail business we have applied SBTi-validated targets to 2030
and 2040 across each GHG emission Scope. In each case, we
describe the type of targets that apply, the time frames over which
they apply and how they are measured. In December 2023 our GLS
business committed to set its near term 2030 and Net-Zero 2045
ambitions in line with the SBTi. GLS is expecting to complete the
developing, submitting and approving process in line with the SBTi
during the coming financial year. Our progress and performance against
these targets are described in more detail on pages 28 to 31.
Environmental targets also form part of our Directors’ remuneration
(see above and page 126).
TCFD Statement continued
48
International Distribution Services plc Annual Report 2023-24
Risk Management
Through the implementation of risk management processes that promote
a sound control environment, we seek to identify, assess and manage risks
that could impact our business.
Risk management framework
Risk management processes and controls are utilised across the
Group. The Board has overall accountability for ensuring that we
operate sound risk management and internal control systems and,
on an annual basis, assess their effectiveness.
The Board has delegated responsibility for reviewing the
effectiveness of the Group’s risk management and internal
control systems to the Group Audit and Risk Committee (the ARC).
The results of the ARC’s review are reported to the Board together
with the recommended disclosure to be included in this Annual
Report (see pages 102 and 103). The ARC seeks to ensure that the
Group operates prudent and effective controls that allow material
risks to be identified, assessed and managed. In fulfilling its duties, the
ARC is supported by the Royal Mail and GLS Audit and Risk
Committees.
Risk management policies and procedures are utilised across the
Group, and we provide guidance and support to relevant personnel
in their application. Management teams across Royal Mail and GLS
are responsible for the management of specific risks and developing
actions to mitigate their impact.
Our risk management processes and controls are designed to
manage rather than eliminate risk. Taking on manageable risks is an
inherent part of the Group’s commercial activities and the framework
we operate can only provide reasonable and not absolute assurance
against misstatement or loss.
Our risk management framework
Top down Principal risk management
Board Audit and Risk Committee Third line
— Review external environment.
— Set risk appetite.
— Determine strategic response.
— Assess effectiveness of risk
management and internal control
systems.
— Monitor principal risks.
— Report on Principal Risks and
Uncertainties.
Independent assurance provided to
the Board by internal and external
providers in relation to the adequacy
and effectiveness of controls.
Royal Mail Audit and Risk Committee GLS Audit and Risk Committee Second line
— Identify principal risks including
fraud risks.
— Oversee mitigation plans.
— Monitor progress towards risk appetite.
— Consider completeness of identified
risks (including fraud risks) and
adequacy of mitigation activity.
— Consider aggregate of risks across
the business.
Compliance monitoring
and oversight of first line
through regular reviews,
assessments and dedicated
oversight functions.
First line
Primary controls including
management of risks in
day-to-day operations.
Bottom up Business unit/Regional risk management
Royal Mail &
GLS Executive Boards
Royal Mail Business
Unit Leadership
GLS Regional
Management
— Execution and delivery of mitigating actions.
— Report on progress towards risk appetite.
— Report current and emerging risks.
— Identify, evaluate and mitigate risks.
— Maintain risk profiles.
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Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Risk Management continued
Risk appetite
The Board sets the Group’s risk appetite. This determines the
target level of risk we are prepared to take to achieve our strategic
objectives over the medium to long term and the extent of controls
we need to operate to mitigate the Group’s principal risks.
The ARC monitors the Group’s principal risk management activity
within the risk appetite throughout the year. Focused discussions
on progress towards target risk levels take place at the Royal Mail
and GLS ARC meetings at least twice a year.
Our Royal Mail and GLS Executive Boards and management teams
are accountable for identifying and managing risks and for delivering
the Group’s objectives in accordance with the Group’s risk appetite.
To achieve our strategic objectives, it is necessary to take on,
or accept, certain risks. In doing so, we seek to ensure that:
— We clearly understand our significant risks, their likelihood
and potential impact.
— The level of risk we take, or accept, is balanced against the
potential benefits.
Our risk appetite ranges across low, low to moderate and moderate
to high tolerance levels and is broadly mapped against three risk
categories as illustrated in the adjacent table.
Risk category
Risk appetite level and link to principal risks
(see pages 52 to 58)
Strategic/External
1
6
Moderate to high
Take well-informed moderate to high risks
to achieve strategic objectives if potential
benefits outweigh risks, particularly where
the external risks are less in management’s
direct control.
Operational/Financial
2
3
4
5
7
8
Low to moderate
Work to achieve strategic objectives
through accepting, managing and/or
reducing risk to a low to moderate level,
as appropriate.
Legal, compliance
and regulatory
9
10
11
12
Low
Seek to reduce the risk to a low level
as far as practically possible.
Our principal and emerging risks
Our principal risks are assessed by the Board on a bi-annual basis
and monitored by the ARC across the year. Emerging risks are
identified throughout the year and formally assessed by the ARC
annually. The Board confirms that robust risk assessments were
completed during the financial year.
Our principal risks are detailed on pages 52 to 58. They are broadly
ordered on a net risk basis which takes into account the estimated
magnitude of potential impact and likelihood of occurrence.
We define a principal risk as one which is currently or could have
a significant impact on the Group over the business planning cycle.
Our principal risks are also reflected in the key assumptions that form
part of our viability assessment process (see pages 59 to 61).
The graphic below illustrates our assessment of the likelihood of our
principal risks occurring and their estimated impact and takes into
account the mitigating actions in place to manage each risk.
Net risks can move depending on circumstances at any time.
Material movements in risk scores compared with the prior year
are highlighted on pages 52 to 58.
Risk heatmap
Impact
Likelihood
Low Low to moderate
Moderate to high
High
1
3
2
6
4
5
78
9
11
10
12
Principal risks (see pages 52 to 58)
1
Economic and political environment
2
Failure to reduce our operational cost base
3
Industrial relations
4
Major breach of information security, data protection
regulation and/or cyber attack
5
Customer expectations and our ability to grow revenue
6
Financial sustainability of the Universal Service
7
Talent: workforce for the future
8
Climate change and environmental management
9
Actual or suspected breaches of material law and/or regulation
10
Business continuity and operational resilience
11
Health, safety and wellbeing
12
Failure to manage liquidity and capital structure
50
International Distribution Services plc Annual Report 2023-24
Changes to our principal risks
The following risk has materially changed in its nature and severity
since the prior year:
— Financial sustainability of the Universal Service (previously
‘Failure to secure Universal Service reform’): We have been
lobbying the Government and Ofcom to reform the Universal
Service for several years. Urgent reform is now required to ensure
Royal Mail remains financially sustainable. In January 2024, Ofcom
launched a call for input on the future of the universal postal
service (see page 24). A summary of Royal Mail’s response to this
call for input is available at
www.internationaldistributionservices.com/en/about-us/
regulation/the-future-of-letter-deliveries. It is not sustainable to
maintain the costs of a network built for 20 billion letters when we
are now only delivering 6.7 billion. Without urgent reform, the
continuing structural decline in addressed letter volumes and
broader changes in the parcels market pose significant risks to the
financial sustainability of the Universal Service. As such this is now
categorised as a high risk.
Identification, analysis and response
The process we operate to identify and assess individual risks takes
account of the internal and external business environment as well
as the effectiveness of the risk controls we operate. Principal risk
profiles are maintained by relevant members of the Royal Mail and
GLS Executive Boards. Business unit risk profiles are maintained at
functional levels across the Royal Mail business and regional-level
risk profiles are maintained in GLS’ major countries of operation.
During the year, fraud risk profiles were formally presented to the
Royal Mail and GLS Audit and Risk Committees and to the ARC.
Gross, net and target risk scores are evaluated as a product of
potential impact and likelihood, and are represented visually on
heatmaps within risk profiles to facilitate analysis and management
focus. These risk profiles provide visibility to management over
the effectiveness of control activities and mitigations. Each risk is
assessed considering the likelihood of the event occurring based
on multiple factors, the range of potential impacts and their severity
should the event occur.
Monitoring and reporting
Throughout the year, Royal Mail business unit leadership
teams review the risk profiles covering their functional areas
of responsibility. Formal risk assessments are undertaken on
a bi-annual basis to coincide with the Group’s full- and half-year
reporting cycle. GLS regional management reviews country-level
risks and centrally managed principal risk profiles are reviewed
by subject matter experts, twice a year. The outcomes of these
bi-annual assessments are considered by the Royal Mail and GLS
Audit and Risk Committees and then by the ARC. In addition, for
Group principal risks, there is a periodic cadence of remediation
progress reviews by the ARC known as ‘spotlights on risk’ (see
pages 97 and 103). This process is used to inform, determine and
monitor the Group’s principal risks.
Emerging risks
We identify emerging risks through various discussions with
management and subject matter experts and other external insights.
All relevant information is captured in a horizon-scanning analysis
which serves to illustrate our potential future exposures across a
number of risk categories and helps us assess what preparations
may be required for new and potential future risks.
Emerging risk activity is considered by the Royal Mail and GLS
Audit and Risk Committees, taking into account both external
and internal factors to ensure that a holistic view is taken and
updates on emerging risk activity are regularly provided to the
ARC and formally assessed and reported annually. Emerging
risks identified as at the date of this report include risks and
threats associated with generative AI, fiscal, regulatory and
monetary risks that could arise from the UK general election
and emerging regulation including the requirements of the
UK Corporate Governance Code 2024 and ESG reporting.
Risk identification, analysis and response
Strategy and objectives
Assessment
Identification
Monitoring
Risk analysis
Risk management
Impact/Likelihood
Tolerate/Mitigate/Transfer
Risk response
Description and scope
Reporting
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International Distribution Services plc Annual Report 2023-24
Our Principal Risks and Uncertainties
Detailed below are the principal risks we consider could threaten our
business model, the execution of our strategy, and the preservation and
creation of sustainable value for shareholders and other stakeholders.
How we seek to mitigate these risks and the material changes in risk
score year-on-year are also explained below.
1. Economic and political environment – High risk
Risk
Macro-economic conditions and/or the political environment across
our markets may adversely affect the Group’s ability to control costs
and maintain and grow revenue due to reducing volumes or by driving
customers to adopt cheaper products or formats for sending letters
and parcels.
Status
The Group’s performance is closely aligned to economic growth in
the markets in which it operates. The current geopolitical outlook is
uncertain and economic growth remains subdued in the UK and EU,
with high interest rates weakening households’ disposable income.
Whilst inflationary pressures are subsiding, inflation remains high.
Conflicts across the globe could escalate which could negatively impact
the stability and security of international transport routes crucial to
the Group’s business.
Improving but low levels of consumer and business confidence are
expected to impact discretionary spend, creating further unfavourable
macro-economic headwinds over the course of 2024-25.
Future political developments in the UK, including a general
election in 2024-25, could affect the fiscal, monetary and regulatory
risk landscape. Prolonged fiscal tightening across our markets,
including national minimum wage and tax policy revisions, could
increase our costs or further affect consumer confidence, which
could impact parcel and letter volumes.
Across Europe (notably Belgium, Germany and Italy) the use and
tax treatment of subcontractors is coming under increasing scrutiny.
This could force GLS to change its operating model in affected countries
and, as a result, put pressure on margin.
Current and planned mitigations
— Ongoing monitoring of the economic and wider external environment
across all markets.
— Implementing transformation and efficiency programmes to stabilise
the Royal Mail business and build resilience into its operating model
(see Risk 2).
— Ongoing monitoring of the political landscape across all markets and
regular engagement with politicians and policy makers, as appropriate.
— Monitoring government policy and developments in GLS markets
relating to treatment of subcontractors and implementing appropriate
compliance measures, digital tools and adapting to local market
circumstances.
Material changes in risk score year-on-year
Increasing risk –
Low to moderate or moderate to high risk
Decreasing risk –
Moderate to low or high to moderate risk
Stable risk –
No material change
→ See graphic on page 50 for high,
moderate and low risk categorisations.
52
International Distribution Services plc Annual Report 2023-24
2. Failure to reduce our operational cost base – High risk
Risk
We must become more efficient and agile to compete effectively in the
parcel and letter markets.
We must also reduce our operational cost base and manage wider cost
pressures to achieve margin expansion and deliver productivity benefits
across the Royal Mail business.
Failure to reduce operational costs and, at the same time, deliver
high-quality services could result in a loss of customers, market
share and revenue.
Status
Royal Mail has a significant fixed cost base, with high operational gearing.
While the business’ delivery network provides a strong competitive position,
particularly in the combined delivery of letters and small parcels, it is not
currently optimised for the increased demand for flexible acceptance times
and larger parcels. In addition, the high fixed labour cost structure makes it
difficult to flex the cost base according to sales volumes.
Whilst some transformation benefits to right-size the operation have
been re-phased to 2024-25 and, despite challenging macro-economic
factors and the drag from the protracted dispute with the CWU leading
into 2023-24, we have stabilised our operational cost base. This has been
achieved by improved day-to-day cash management measures and
prioritising high-return investments. We are also seeing improvement in
levels of employee absence.
Whilst GLS’ cost structure is more flexible, we need to ensure that the
business’ networks and processes continue to be optimised to withstand
inflationary cost pressures and support sustainable growth.
Current and planned mitigations
Effective implementation of the Business Recovery, Transformation and
Growth Agreement (the Agreement), is key to the delivery of operational
efficiencies in Royal Mail and governance processes are in place to
oversee its timely implementation. There are also a number of initiatives
in place to drive efficiency whilst remaining focused on high quality of
service. These include:
— Measures to improve operational productivity, performance and
right- size the business through a programme of operational revisions.
— Improved automation through parcel hubs and mail centres to
increase throughput and reduce costs per parcel.
— Trialling frameworks to deliver operational improvements at a greater
pace, such as letter sortation methods within delivery offices.
— Use of digital tools to align scheduled and actual hours to match
variation in workload throughout the year and scan-in scan-out
technology across the delivery network.
— Improving network efficiency including introducing later start times
and longer spans, and a strategic review of the parcels network
including optimising synergies with Parcelforce Worldwide.
Implementation of actions in GLS to improve margin including:
— Productivity and efficiency improvements to optimise our operations
and control costs.
— Increased automation in hubs, depots and digitisation in the final mile.
— Targeted in-country actions and productivity initiatives including cross-
border synergies.
3. Industrial relations (previously 'Industrial action') –
High risk
Risk
There is extensive trade union representation across our UK workforce,
with strong and active trade unions.
One or more material disagreements or disputes could result in
widespread localised or national industrial action.
Industrial action would cause material disruption to our UK business and
would result in an immediate and potentially ongoing significant loss of
Group revenue. It may also affect Royal Mail’s ability to restore Quality
of Service (QoS) levels and meet targets prescribed by Ofcom, which may
lead to enforcement action, fines and loss of customers.
There is a further risk that Royal Mail will not successfully deliver the
Agreement, strategic transformation and Universal Service reform unless
management and the trade unions work effectively together.
Status
In July 2023, following a lengthy dispute, Royal Mail and the CWU reached
agreement on the terms of the Agreement. This is an important enabler in
the turnaround of the Royal Mail business.
Management continues to engage with trade unions on the Agreement,
strategic transformation and Universal Service reform.
Current and planned mitigations
— Joint implementation of the Agreement.
— Rollout of a modern and collaborative framework to allow quicker
decisions, trials and change implementation.
— Externally facilitated ways of working sessions to review the Royal Mail/
CWU relationship supported by appropriate expertise where required.
— Developed operational contingency plans in the event of local and/
or national industrial action.
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Our Principal Risks and Uncertainties continued
4. Major breach of information security, data protection
regulation and/or cyber attack – High risk
Risk
Due to the nature of our business, we collect, process and store
confidential business, operational and personal information. As a result,
we are subject to a range of laws, regulations and contractual obligations
around the governance and protection of various classes of data to
protect our customers, employees, shareholders and suppliers.
In common with all major organisations, we are the potential target
of cyber attacks that could threaten the confidentiality, integrity and
availability of data and systems, and trigger material service and/or
operational interruption.
Also, a major breach of information security, data protection laws and
regulations and/or a cyber attack could adversely impact our reputation,
resulting in financial loss, regulatory action, business disruption and loss
of stakeholder confidence.
Status
Given the evolving nature, sophistication and prevalence of cyber threats
and an increasing reliance on technology and data for operational and
strategic purposes, this continues to be a principal risk.
We recognise that in a business with around 154,000 staff who use data
and devices to deliver our services and process large quantities
of documentation, there is a possibility of human error in the protection
of data.
We continue to invest in our cyber-capabilities and have made progress
in deploying a number of controls across our technology estate, via our
ongoing multi-year programme that targets the highest priority areas.
Current and planned mitigations
— Ongoing investment in cyber-resilience including enhancing our
cyber-control capabilities across our technology estate to protect
our customers, employees, services and assets.
— Strengthening our ability to quickly detect and respond to threats
before they become incidents, including ransomware.
— Improving assurance of organisational and technical measures, including
disaster recovery and assessment of third-party supplier controls.
— Promoting good behaviours and stressing the importance of
maintaining vigilance through regular communication, training
and awareness across our workforce.
— Encouraging an open and prompt reporting culture so that appropriate
remedial action can be taken as soon as possible.
— Operate data privacy and protection policies and a compliance
framework, which includes assessment and monitoring of data risks
and controls across all our operations.
5. Customer expectations and our ability to grow
revenue (previously ‘Customer expectations and
responsiveness to market changes’) – High risk
Risk
Failure to deliver against existing and changing customer needs and
expectations, including improvements to quality of service, could impact
the demand for our products and services.
Our success at scaling and growing new areas of business is dependent
on identifying profitable and sustainable areas of growth and embedding
appropriate structures to support transformation.
Status
Societal expectations continue to change rapidly and demand is
continuing to grow for high-quality, convenient and sustainable deliveries
that are competitively priced. In response we are becoming more agile
and customer centric.
The impact of industrial action in Royal Mail in 2022-23 (see Risk 3) and
headwinds created by the economic environment (see Risk 1) have
impacted consumer confidence and spending, which places pressure
on parcels and letters revenue in Royal Mail.
In Royal Mail, we have introduced targeted pricing and surcharge
measures together with a programme to win back lost customers and
increase throughput in our Midlands Parcel Hub, which opened during
the second quarter of 2023-24.
We are moving fast with our OOH delivery plans, including the trial and
roll out of parcel lockers in conjunction with partners and continue to
target large retail networks in the UK to expand our parcel shop offering.
GLS has focussed on the expansion of its global OOH network and parcel
locker strategy, launched a number of customer-focussed digital
solutions and continues to grow its cross-border segment and exploring
new markets.
Current and planned mitigations
Royal Mail is focused on:
— Restoring quality of service.
— Implementing strategic pricing and surcharge actions.
— Expanding channel mix and service offerings such as OOH, parcel
shops, Collect+ and rollout of locker banks.
— Driving agility in new product development and simple digital services.
— Growing doorstep services such as Parcel Collect.
— Increasing tracked services and near-universal barcoding of products.
— Increasing Sunday deliveries.
GLS is focused on:
— Scaling OOH delivery offerings and locker banks.
— Driving digital services in the final mile.
— Securing strategic acquisitions and organic growth opportunities to
scale the business.
— Expanding delivery network capacity.
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6. Financial sustainability of the Universal Service
(previously ‘Failure to secure Universal Service reform’)
– High risk
Risk
Without urgent reform, the continuing structural decline in addressed
letter volumes and increased competition in the parcels market pose
significant risks to the financial sustainability of the Universal Service.
A modern and sustainable postal service is crucial for the customers we
serve, our people and our company.
Status
According to Ofcom, a financially sustainable Universal Service should
be able to achieve an EBIT margin of 5-10%. Since privatisation in 2013,
the Universal Service network has only achieved this twice. Letter
volumes have continued to decline since their peak in 2004-05. It is not
sustainable to maintain the costs of a network built for 20 billion letters
when we are now only delivering 6.7 billion. Reforming the Universal
Service is essential if Royal Mail is to have a sustainable future.
In January 2024, Ofcom published a call for input, setting out evidence
and options for how the Universal Service might need to evolve to more
closely meet consumer needs. Ofcom’s report demonstrates that reform
is urgently needed to protect the future of the Universal Service.
We have been calling on Government and Ofcom to tackle this issue for
several years, and the lack of action means that we are now facing a
much more serious situation. Whilst other countries have grasped the
opportunity to change, the UK is being left behind.
Ofcom’s call for input closed on 3 April 2024. A summary of Royal Mail’s
response is available at www. www.internationaldistributionservices.com/
en/about-us/regulation/the-future-of-letter-deliveries. We are calling on
Ofcom to open a consultation in the Summer, and for any changes to the
Universal Service to be live from April 2025.
Current and planned mitigations
— Continued engagement with Ofcom, the Government, our unions,
people and other stakeholders on the case for change.
— Ran an extensive customer engagement programme and international
benchmarking to assess the alternative possible options available for
a more modern and sustainable Universal Service.
— Undertook a consultation and detailed modelling exercise on potential
reform options which informed our response to Ofcom's call for input.
— Executing the Royal Mail transformation plan to underpin the
sustainability of the Universal Service.
7. Talent: workforce for the future – Moderate risk
Risk
Our performance, operating results and future growth depend on our
ability to attract and retain talent with the appropriate skills and expertise.
In Royal Mail, transformation and structural market change are creating
the need for new and different skills. There is a risk that we do not develop
the capability of our frontline managers or attract and retain senior
leaders with the right capabilities and behaviours. In light of an ageing
workforce, socio-economic factors and demographic change there is
also a risk that we do not maintain a robust pipeline to fulfil frontline roles.
In GLS, there is a risk we do not attract talent with new skills and retain
high-quality talent to deliver GLS’ strategy.
Status
Due to challenges in the business environment over the last 18 months,
we have seen an increase in retention risk across Royal Mail’s senior
management population. We are also experiencing higher than targeted
levels of new joiner attrition in our frontline workforce.
Following the end of the industrial dispute we are better placed in the
market and are finding more success in attracting high-calibre talent.
In GLS, we have made good progress with the establishment of
a corporate HR Centre and actions to attract high-calibre talent to
drive the digital and innovation agenda.
Current and planned mitigations
Royal Mail:
— Launched an Employee Value Proposition and developed an
employer brand.
— Developing a future leader framework that will provide an
understanding of leadership capabilities at all levels.
— Offer a number of development programmes including the Future
Manager Development Programme for frontline managers.
— Operate a performance management framework.
— Implementing a range of initiatives to improve diversity, equity and
inclusion across teams.
— Established the Operations Frontline Talent Steering Committee to
accelerate and bring together related workstreams.
— Introduced a new onboarding tool and updating induction and
supporting materials.
— Creating a ‘Talent Ecosystem’ to enable internal mobility, provide
opportunities for career progression and improve succession planning.
GLS:
— Established mechanisms to share expertise and best practice across
the business.
— Embedded a leadership and development framework including
succession planning and a high potential programme.
— Improving employer branding, including integration and
communication of GLS values.
— Developing and tracking people-related metrics and key
performance indicators to measure success.
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Our Principal Risks and Uncertainties continued
8. Climate change and environmental management –
Moderate risk (see also TCFD Statement on pages
41 to 48)
Risk
Climate change is a global threat and, in common with all major
organisations, it poses a number of risks and opportunities.
We have identified priority physical and transition risks that
could impact our businesses.
Transition risks: As our customers and stakeholders seek to adapt to
climate change, demand is increasing for more sustainable products and
services. The cost of operations could increase as we adapt to government
and regulatory changes (including potential carbon taxes) to progress
towards Net-Zero emissions and air quality targets for towns and cities.
Physical risks: An increase in the frequency of extreme weather events may
result in disruption to operations and impact our ability to meet customer
expectations, Royal Mail's obligations under the Universal Service or other
contractual requirements. We may also see cost inflation as a result
of resource scarcity, increased operational costs and required investment
to protect the business and our people from extreme weather events.
We must also ensure that we comply with an expanding framework of
environmental legislation and regulation, and prepare for emerging
requirements to avert the risk of reputational damage, increased costs
and potential fines.
Status
Demonstrating leadership on environmental issues, including the impact
of our activities, is the right thing to do. It is also essential if we are to
achieve competitive advantage, create value and deliver our strategy.
Our environmental strategies will help us reduce our environmental
footprint and play our part in the transition to a low-carbon future while
offering greener solutions to our customers.
We are committed to implementing the TCFD recommendations and
have made progress during the year on our ongoing TCFD
implementation project (see pages 41 to 48).
Current and planned mitigations
— Developed ESG ambitions and principles that are aligned to the
ESG issues that matter most to our businesses and stakeholders.
— Executing environmental strategies across Royal Mail and GLS,
including accelerated ambitions for decarbonisation to reach Net-Zero
emissions before 2050 in support of the Paris Agreement (see pages
28 to 31).
— Investing in low- and zero-emission vehicles and technology
and equipment to support energy and fuel efficiency across our
property estate.
— Improving network efficiency, including looking to rationalise Royal
Mail’s property estate and opening new GLS EcoHubs, which have
renewable energy generation and sustainable infrastructure.
— Engaging our people and suppliers in our efforts to become more
efficient and reduce our use of natural resources.
— Monitoring the impact of extreme weather events on operations
and across our property estate to determine suitable preventive
and precautionary measures.
— Reducing water consumption and reducing the amount of waste
we generate.
— Monitoring compliance with existing environmental legislation
and preparing for future regulatory changes including
the Corporate Sustainability Reporting Directive.
9. Actual or suspected breaches of material law
and/or regulation – Moderate risk
Risk
Failure to comply with relevant material laws and regulations that apply to
our business, including competition, anti-bribery, regulatory conditions
imposed by Ofcom (including QoS targets), trade sanctions, taxation and
corporate governance. Actual or suspected breaches could result in
financial loss, fines, regulatory enforcement action, criminal charges,
debarment and/or reputational damage impacting our ability to operate
and grow.
Failure to comply with material laws and regulations related to the
following matters are covered by the specified other risks GDPR (Risk 4),
health and safety (Risk 11) and environmental legislation (Risk 8).
Status
There continues to be a focus on controls in relation to material laws and
regulations with which the Group must comply.
Competition law:
Royal Mail’s appeal against the Competition Appeal Tribunal’s judgment
to uphold Ofcom’s decision to fine it £50 million has now concluded.
The fine and interest (c.£52 million) were paid to Ofcom on 10 August 2022.
The stay on Whistl’s related damages claim has been lifted. There have
been two case management conferences (in December 2023 and April
2024) at which a trial date has been set for November 2025, plus
significant milestones leading to the trial. Royal Mail believes
Whistl’s claim is without merit and will defend it robustly.
Regulatory conditions imposed by Ofcom:
In November 2023, following an investigation, Ofcom concluded that
Royal Mail was in breach of its First and Second Class mail Universal
Service QoS targets for the 2022-23 regulatory period. It fined Royal Mail
£5.6 million (£8m discounted for mitigations).
Our current year Universal Service QoS for First and Second Class mail
has been below the targets set by Ofcom who are expected to open an
investigation. We are focused on improving service levels and we
regularly engage with Ofcom on QoS.
See Notes 25 and 28 on pages 225 to 227 of the Financial Statements.
Current and planned mitigations
— Assess risks and obtain advice from specialist lawyers and
compliance/regulatory professionals on a regular basis.
— Horizon scan to prepare for legislative changes and develop
policies and processes to address them.
— Monitor compliance and assurance provision.
— Foster a culture where colleagues can speak up so we can
promptly address any issues and stop them happening again.
— Engage with Ofcom in relation to USO QoS monitoring and
restoration activity.
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10. Business continuity and operational resilience –
Moderate risk
Risk
We may fail to successfully respond to, recover from, or reduce
the impact of a major threat or disruptive incident that could cause
widespread operational disruption and financial loss to the Group, our
customers and our supply chain. This could also impact on the ability
of Royal Mail to meet its regulatory obligations.
Key threats include utility interruption and IT outages. Key threats
related to the following matters are covered by the specified other
risks: cyber attacks (see Risk 4), industrial relations (see Risk 3) and
extreme weather (see Risk 8).
Status
Royal Mail is classified as a critical part of national infrastructure and
also has a responsibility to provide sustained and continued postal
services under the USO.
Royal Mail has experienced several disruptive events in recent years,
including the COVID pandemic, national industrial action and a cyber
attack, and our crisis management response process has been shown to
be effective.
We continually focus on improving our business resilience and continuity
action plans and our capability to remediate current and future threats.
GLS has a growing geographical footprint and has an interconnected
international network across Europe and North America. Whilst there is
commonality in the threats and risk the Royal Mail business faces,
the multi-country nature of GLS means there is natural mitigation
which lowers the impact to the Group in the event of operational
disruption in a specific market.
Current and planned mitigations
— Ongoing strategic threat assessment and horizon scanning to
promptly identify and assess emerging and current risks and
develop prompt remediation strategies.
— Regularly review crisis management governance including
lessons learned following disruptive events.
— Delivered a refreshed training plan covering crisis
and continuity planning.
— Deploy a cross-functional strategic crisis and resilience
governance structure and response teams to ensure an
integrated resilience approach.
— Develop business impact assessments to map systems and
interdependencies of critical products and services and alignment
of disaster-recovery plans.
— Develop and implement tactical arrangements to support
operational contingency plans and incident management.
11. Health, safety and wellbeing – Moderate risk
Risk
A health and safety incident or global health crisis could result in the
serious injury, ill health or death of our people, third parties (including
contractors) or members of the public. An incident, near miss or health
and safety breach may lead to criminal prosecution or fines by the
enforcing authority or civil action by the injured party, resulting in large
financial losses and/or reputational damage.
Failure to manage the health, safety and wellbeing of our people could
lead to reputational damage, loss of employee goodwill and financial
losses through increased sickness absence, lower productivity, and
failure to deliver the USO, civil action or criminal prosecution.
Status
The health, safety and wellbeing of our people, customers and members
of the public is of paramount importance.
We have many employees, including seasonal staff and subcontracted/
agency workers. We also operate one of the largest commercial fleets in
the UK, manage a significant real estate footprint and interact extensively
with members of the public. A large proportion of our people spend most
of their time working outdoors on foot or driving, where the environment
is unpredictable and can be more difficult to control.
Key health and safety risks include outdoor accidents such as road
traffic as well as other accidents (such as dog attacks), and indoor
accidents in depots.
Royal Mail has a large number of properties that are required to be
maintained and kept safe for our employees and customers. In common
with other businesses with a large property estate, we survey sites to
ensure risk assessments are kept up to date, any new risks are
understood and remedial work is undertaken as required.
Whilst health and safety risks can be assessed and controlled,
the risk of harm to people cannot be eradicated.
Current and planned mitigations
IDS :
— Implement policies, directives, procedures and systems, supported
by tailored training and awareness to embed a compliance culture
and improve employee engagement.
— Senior leaders promote safe behaviours and reinforce compliance
to standards through participation in regular communications
and campaigns.
— Board and ESG Committee oversee performance metrics.
— Operate Group-wide measures to protect and support our employees
in line with guidance and provision of wellbeing programmes.
— Monitor and review measures in place to assist in risk control and
accident prevention, including undertaking appropriate investigation
following incidents and near misses.
Royal Mail:
— Launched a refreshed programme of focused site audit activity
to provide a more comprehensive baseline of compliance with our
internal Safety, Health and Environment Management System.
— Continue to streamline and simplify the various health and safety
systems in place to enhance their effectiveness.
— Undertake property surveys across the estate.
— Developed a Road Safety Plan aimed at reducing the number of road
traffic collisions.
GLS:
— Expanded global OHS training and awareness programme.
— Operate health and safety audit programmes in all markets.
— Undertake regular improvement visits with selected countries.
— Host annual health and safety focused conference.
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12. Failure to manage liquidity and capital structure
(previously 'Failure to manage liquidity') –
Low risk for IDS plc but material risk for the Royal Mail
business
Risk
There is a risk that the Group fails to secure ongoing access to finance.
Uncertainty in the macro-economic environment, a prolonged period of
high inflation and the impact of industrial action have adversely affected
Royal Mail’s business performance. These have driven operating losses
and trading cash outflows in that subsidiary.
As a result, there is a risk that Royal Mail fails to secure ongoing access to
finance and/or is unable to manage working capital and cash to support the
ongoing running of, and investment in, the Royal Mail business.
Status
IDS plc management has taken effective action to preserve Group
liquidity, including bond refinancing in the second quarter to provide
additional cash headroom. The Group also has access to a £925 million
bank syndicate loan facility that is available until September 2026 (see
Notes 23 and 24 for further information on financial risk management).
Royal Mail has implemented measures to manage its cash position
during the year through working capital management and prioritising
capital expenditure. Royal Mail’s generation of positive trading cashflows
is key to preserving liquidity. The Board will keep under review whether it
is appropriate to cross-subsidise Royal Mail. In the meantime Royal Mail
takes all reasonable steps to finance the necessary transformation and
turnaround from its own resources.
Current and planned mitigations
IDS plc:
— Ongoing monitoring of Royal Mail’s and GLS's performance, liquidity
and covenant headroom.
— Access to Group resources by Royal Mail and GLS subject to
satisfactory progress against business plan and/or short-term working
capital requirements.
— Ongoing review of capital allocation and priorities.
Royal Mail:
— Delivery of Royal Mail turnaround plan and effective implementation
of efficiency programmes.
— Measures to conserve cash and prioritisation of capital expenditure.
— Raising capital through asset-backed funding arrangements such
as sale and leaseback options.
— Exploring alternative means of raising capital including asset disposals.
Our Principal Risks and Uncertainties continued
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International Distribution Services plc Annual Report 2023-24
Viability Statement
This Viability Statement should be read in conjunction with the Group’s
business strategy as set out in the Royal Mail and GLS strategic updates.
The Directors have assessed the prospects of the Group and
its viability over the longer term as part of their ongoing risk
management and monitoring processes.
Assessment period
While the Directors have no reason to believe that the Group will not
be viable over the longer term, they have assessed the viability of the
Group over a three-year period to March 2027 (the Viability Period)
taking into account the Group’s current financial position and the
potential impact of our principal risks. This time period is considered
appropriate as it is within the Group’s five-year business planning
cycle (Business Plan), where the first three years provide for the most
certainty for determining the probability and likely impact of our
principal risks. A three-year period is also the most appropriate time
horizon over which to assess the evolving commercial and economic
environment across the Group’s letter and parcel markets, as consumer
expectations and the products offered by competitors continue to
develop rapidly. Furthermore, a three-year period most closely aligns
to the Group’s capital investment cycle and key liquidity risks.
Process, key factors and assumptions
The Group’s viability is assessed as part of our regular strategy and
budget reviews, financial forecasting, capital structure and ongoing
risk management. The assessment takes into account a number of
matters including:
— The Group’s strategic priorities and Business Plan. Financial
planning and forecasting processes covering the Group’s
profitability, cash flows and other key financial metrics underpin
the Business Plan, which comprises a budget for the next financial
year (based on a detailed commercial and operational
assessment) together with a projection for the following two years.
— The large fixed cost base required to deliver the Universal Service
Obligation in its current form.
— The Group’s principal risks and the measures in place to mitigate
those risks (see pages 49 to 58).
— The Group’s capital structure and the allocation of capital to
support Royal Mail and GLS’ respective growth strategies
(see page 73). This includes capital investment, liquidity position
(including liquidity available from the bank syndicate loan facility,
debt maturity profile, credit rating and dividend policy).
The key assumptions used in relation to the Business Plan that
supports the viability assessment are as follows:
— In relation to Royal Mail, low double digit volume growth in parcels
in 2024-25, supported by continued improvement in quality and
strategic growth initiatives including expanded channel mix (e.g.
lockers).
— Pricing actions taken to offset the long-term volume decline in
letters. Royal Mail also anticipate a benefit from a General Election
in 2024-25 which will boost letter volumes.
— Productivity improvements enabled by the pay deal which will
more than offset operational headwinds including the 2% pay
increase, the impact of higher workload and increasing fuel and
fleet maintenance costs.
— Continued focus on cost control which will enable an increased
investment to support transformation.
— The Business Plan also assumes that Royal Mail suffers no further
industrial disruption over the viability period.
— GLS has low to mid single digit revenue growth in 2024-25 and
some margin dilution linked to ongoing inflationary cost headwinds
and new investment.
— External dividends are forecast over the viability period from 2024-25.
Scenario modelling
The Business Plan projections were stress tested by modelling a
severe but plausible downside scenario which has the greatest
potential to threaten the Business Plan. The scenarios, detailed on
the next page, take account of the Group’s high principal risks which
due to their nature and likelihood of occurrence have been included
and analysed for their possible material financial impact over the
Viability Period. The plan does not anticipate any regulatory support
from Ofcom or Government, for example change in the scope of the
USO. Management believes modernisation of the USO is critical for
margins to be materially improved and for the sustainability of the
USO. Ofcom have defined a commercial rate of return for the
regulated business in the range of 5-10% EBIT margin.
Regulatory reform could materially improve the prospects of the
Royal Mail business.
The scenario was tested in aggregate to determine whether the
Group would be able to sustain its operations over the Viability
Period, the lowest liquidity available to the Group during the period
was c.£1.5 billion (£925 million undrawn bank syndicate loan facility
plus £442 million cash) and sufficient headroom was maintained
under its banking facilities.
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Viability Statement continued
The scenario took into account:
— The levels of committed capital and expenditure required to
support Royal Mail and GLS’ respective growth strategies.
— The Group’s loans and borrowings. See Note 23 to the Financial
— Statements (pages 213 and 214).
— The Group’s €550 million bond which matures in October
2026 and the bank syndicate loan facility which currently expires in
September 2026, both within the Viability Period. The Business
Plan assumes both facilities would be refinanced on similar
commercial terms but incorporating the current higher market
interest rates. However, in the very unlikely event that this is
not possible, to ensure that the obligation is satisfied, the
Group could use available cash/investments to repay the
bond and does not require drawing on the bank syndicate loan
facility. Other options could also be considered, including
property disposals and further reducing investment.
— The actions undertaken to manage and mitigate the Group’s
principal risks (see pages 52 to 58).
— Short-term cost and cash saving actions available to the Group.
The mitigating actions include:
— Reducing capital and investment expenditure
through postponing or pausing projects, change
activity and reduction in leasing.
— Deferring or cancelling discretionary spend
(including management bonus).
— Cost reductions through procurement and other
cost saving programmes.
— Reviewing dividend.
Based on our best view of the severe but plausible downside
scenario, including mitigating actions, and the outcome of the
assessments undertaken, the Directors have concluded that the
Group has reasonable expectation to remain viable supported by:
— Short-term cost and cash saving actions.
— Sufficient liquidity available to meet obligations as they fall due.
— The bank syndicate loan facility.
— Continued access to the debt markets.
— Sufficient assets and future cash flows to settle all liabilities in full.
The outcome of the assessments has also confirmed the importance
of maintaining a conservative balance sheet, including a low net debt
position on a pre-IFRS 16 basis. See page 73 for further information.
If outcomes are significantly worse, the Directors would need to
consider what additional mitigating actions were needed including
assessing the value of our asset base to support liquidity. Consequently,
the Directors have concluded that to stress test a level of increased
severity (beyond the downside scenario) which may cast doubt on
the Group’s ability to continue to be viable over the Viability Period
is not currently reasonable.
Scenarios modelled and assumptions Principal risks (See pages 52 to 58)
Scenario:
— Deteriorating economic and market conditions.
— Economic and political environment
— Customer expectations and our ability to grow revenue
Assumptions:
— Revenue growth in the Business Plan is not achieved
and decline in operating margins.
— Failure to reduce our operational cost base
— Business continuity and operational resilience
Scenario:
— Increased competition in the UK parcels sector including changes
in consumer expectations and/or market disruption.
— Customer expectations and our ability to grow revenue
Assumptions:
— Lower parcel revenues and failure to deliver new product offerings.
Scenario:
— Incurring costs to avoid industrial action in Royal Mail.
— Industrial relations
— Failure to reduce our operational cost base
Assumptions:
— Lower operating profit as a result of incurring additional
costs to avoid industrial action
— Customer expectations and our ability to grow revenue
Scenario:
— Delays in relation to the Royal Mail transformation plan.
— Failure to reduce our operational cost base
Assumptions:
— Delays in budgeted cost efficiencies being realised.
Scenario:
— Cyber attack triggering service and/or operational interruption.
— Major breach of information security, data protection
regulation and/or cyber attack
Assumptions:
— Cyber security breach impacting revenue/cost to rectify
— Business continuity and operational resilience
60
International Distribution Services plc Annual Report 2023-24
Consideration of non- binding proposal by EP Group to acquire IDS plc
On 14 May 2024, the Board received a revised non-binding proposal
of 370 pence per IDS share from EP Corporate Group a.s. (EP Group)
for the entire issued share capital of IDS plc not already owned by EP
Group and its affiliates, namely VESA Equity Investment S.à r.l. (Vesa
Equity) (the Proposal). The Proposal follows significant negotiation
including a number of earlier proposals from EP Group (the first of
which was made on 9 April 2024 at a price of 320 pence per share
in cash). The Board is minded to recommend the revised offer of
370 pence to IDS shareholders, should an offer be made at that level,
subject to satisfactory resolution of the final terms and arrangements.
The Group has a number of financial liabilities in the form of
unsecured senior fixed rate notes in place with a carrying value
of £1,454 million at 31 March 2024 and a bank syndicate loan facility of
£925 million undrawn at 24 May 2024 (see Note 23 for further details)
as well as other contractual arrangements which contain provisions in
relation to change of control of IDS plc. Upon a change of control, the
bank syndicate loan facility would be subject to renegotiation which
could result in withdrawal. In addition, the fixed rate notes contain
provisions that in the event of a change of control of IDS plc together
with an adverse credit rating change (downgrade to a non-
investment grade rating), or credit rating withdrawal, the loan notes
can be redeemed at the option of the noteholders.
Whilst the Board have been seeking assurances in relation
to EP Group financing arrangements through due diligence
and negotiation of contractual commitments, the financing
arrangements of EP Group are outside of the control of the Board.
The Directors have concluded that it is beyond their control to
dictate or confirm the actions of the EP Group if they were to acquire
the Group. Therefore, given the potential change in control, the
Directors consider these conditions to constitute a material
uncertainty which may cast significant doubt over the Group’s
viability. Notwithstanding this uncertainty, having assessed the
Group’s risks, existing facilities and performance, the Directors have
concluded that the Group has a reasonable expectation to remain
viable over the Viability Period.
Climate change
Utilising the Group’s risk assessment process, the Board
has also considered how climate risks could impact the
Group’s viability. The key conclusions relating to the viability
assessment were as follows:
The mitigated risk for carbon taxation to 2026-27 is £20 million
based on the decarbonisation initiatives in place in current business
plans, including the deployment of HVO a low carbon alternative fuel
which is expected to deliver a material reduction in carbon-intensive
fossil fuel use across our vehicle fleet.
The current net risk position is based on current decarbonisation
performance (18% reduction across Scopes 1 to 2 to date), along
with additional mitigating actions in plan, would mean there is not
expected to be a material financial impact over the viability period.
As such, the risk has been excluded from the scenario modelling
outlined above.
Going Concern Statement
The consolidated Financial Statements have been prepared
on a going concern basis. The financial performance and
position of the Group, its cash flows and its approach to
capital management are set out in the Financial Review.
The Board reviewed the Group’s projections for the next
12 months in conjunction with the downside scenario used
to stress test the Viability Period. In assessing the potential
impact of a change in control as a result of the non-binding
proposal by the EP Group, the Directors have concluded that
the extent of the uncertainty related to whether existing
finance will be recalled following a change in control, together
with a lack of visibility or control over the availability of funding
following a change in control, are conditions that constitute a
material uncertainty related to events or conditions that may
cast significant doubt on the entity's ability to continue as a
going concern and that it may therefore be unable to realise its
assets and discharge its liabilities in the normal course of
business. Notwithstanding this uncertainty, having assessed
the Company’s and the Group’s risks, existing facilities and
performance, the Directors have concluded that the Company
and the Group have adequate resources to continue in
operational existence for at least 12 months from the date of
approval of these financial statements. For further information,
see Note 1 to the consolidated Financial Statements (pages
171 to 184).
Viability Statement
Based on the results of their analysis, including a number
of severe but plausible scenarios assessed in aggregate,
and in the absence of a change in control, the Directors
have a reasonable expectation that the Group will be able
to continue in operation, meet and settle in full its liabilities
as they fall due, retain sufficient available cash and not
breach any covenants under any drawn or undrawn facility
over the three financial years to March 2027.
In assessing the potential impact of a change in control as
a result of the non-binding proposal by the EP Group, the
Directors have concluded that it is beyond their control to
dictate or confirm the actions of the EP Group if they were
to acquire IDS plc. Therefore, given the potential change in
control, and the associated impact on the Group’s borrowings,
bank facilities and other contractual arrangements the
Directors consider these conditions to constitute a material
uncertainty which may cast significant doubt over the Group’s
viability. Notwithstanding this uncertainty, having assessed the
Group’s risks, existing facilities and performance, the Directors
have concluded that the Group has a reasonable expectation
to remain viable over the Viability Period.
61
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Financial Review
Michael Snape
Group Chief Financial Officer
Results on a 53 and 52 week basis
The Group and Royal Mail reported results are for the 53 week period
to 31 March 2024. The 52 week 2023-24 results are derived by
removing the 53rd week revenue and incremental costs in relation to
Royal Mail, see the Groups APMs on page 238 to 243 for further
details on this adjustment. Percentage changes are on a 52 week
basis. The GLS financial year is 12 months to 31 March 2023 and 2024,
so no adjustment is made for GLS’ results. The 52 week results are in
line with how the Chief Operating Decision Maker as defined by IFRS 8
reviews performance. All comparisons between 2023-24 and
2022-23 income statements to adjusted operating profit/(loss)
in relation to the Royal Mail segment are on a 52 week basis
unless otherwise stated. The GLS financial year is 12 months
to 31 March 2024. Further details on the calculation of the
52 week results can be found in the section entitled ‘Presentation
of results and Alternative Performance Measures’ on pages 238
and 239.
“ Revenue has increased against
a challenging macroeconomic
backdrop. Due to Royal Mail’s
improved performance Group
adjusted operating loss reduced
year on year.”
62
International Distribution Services plc Annual Report 2023-24
Summary results (£m)
Reported
53 weeks
March 2024
Specific items
and other
adjustments
Adjusted
1
53 weeks
March 2024
Reported
52 weeks
March 2023
Specific items
and other
adjustments
Adjusted
1
52 weeks
March 2023
Revenue 12,679 – 12,679 12,044 – 12,044
Royal Mail 7,834 – 7,834 7,41 1 – 7,4 1 1
GLS 4,865 – 4,865 4,650 – 4,650
Intragroup revenue
2
(20) – (20) (17) – (17)
Operating costs (12,545) 162 (12,707) (12,248) (133) (12,115)
Royal Mail (8,020) 162 (8,182) (7,963) (133) (7,830)
GLS (4,545) – (4,545) (4,302) – (4,302)
Intragroup costs
2
20 – 20 17 – 17
Profit on disposal of property, plant and equipment 15 15 – 6 6 –
Operating profit/(loss) before specific items 149 177 (28) (198) (127) (71)
Operating specific items (123) (123) – (544) (544) –
Operating profit/(loss)
3
26 54 (28) (742) (671) (71)
Operating profit/(loss) margin 0.2% – (0.2)% (6.2)% – (0.6)%
Royal Mail (254) 94 (348) (1,039) (620) (419)
Royal Mail Operating (loss) margin (3.2)% (4.4)% (14.0)% – (5.7)%
GLS 280 (40) 320 297 (51) 348
GLS Operating profit margin 5.8% 6.6% 6.4% – 7.5%
Net finance costs (47) – (47) (39) – (39)
Net pension interest (non-operating specific item) 135 135 – 105 105 –
Profit/(loss) before tax 114 189 (75) (676) (566) (110)
Tax (charge)/credit (60) 5 (65) (197) (111) (86)
Profit/(loss) after tax 54 194 (140) (873) (677) (196)
Earnings/(loss) per share (basic) – pence 5.6 n/a (14.6) (91.3) n/a (20.5)
In-year trading cash flow (73) – (73) (34) – (34)
Royal Mail (246) – (246) (306) – (306)
GLS 173 – 173 272 – 272
Pre-IFRS 16 in-year trading cash flow⁴ (279) (213)
Royal Mail (371) (410)
GLS 92 197
Gross capital expenditure (380) – (380) (407) – (407)
Royal Mail (176) – (176) (255) – (255)
GLS (204) – (204) (152) – (152)
Net debt (1,716) – (1,716) (1,500) – (1,500)
1. Reported results are prepared in accordance with UK adopted International Financial Reporting Standards (IFRS). In addition, the Group’s performance is explained through the use of alternative
performance measures (APMs) that are not defined under IFRS. A full list of the Group’s APMs are set out on pages 238 to 243 and reconciliations to the closest measure prescribed under IFRS.
2. Intragroup revenue and costs represent trading between Royal Mail and GLS, principally a result of Parcelforce Worldwide operating as GLS’ partner in the UK.
3. 2022-23 reported operating loss has been re-presented to £742 million from £748 million. This is due to profit on disposal of fixed assets now being recognised in operating profit
4. Pre-IFRS16 in-year trading cash flow is a non-GAAP measure.
63
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Financial Review continued
Group results
Reported Group revenue was £12,679 million
(2022-23: £12,044 million) and reported Group operating
costs were £12,545 million (2022-23: £12,248 million).
Reported operating profit before specific items improved
by £347 million to £149 million (2022-23: £198 million loss).
Operating specific items were a cost of £123 million
(2022-23: £544 million). The operating specific costs in the
prior year were driven by an impairment charge in relation to
Royal Mail of £539 million. In the current year a further impairment
charge of £48 million has been recognised, mainly as a result of
a deterioration in the property market, resulting in lower property
disposal proceeds used in the impairment cashflows compared
to prior year. Further details are included in Notes 1 and 4 to the
Consolidated Financial Statements.
Reported Group operating profit was £26 million
(2022-23: £742 million loss) and the operating profit margin
was 0.2% (2022-23: 6.2% loss margin). Adjusted Group operating
loss was £28 million (2022-23: £71 million loss). Adjusted Group
operating loss margin was 0.2%, a slight improvement on the prior
year (2022-23: 0.6% operating loss margin). The improvement was
driven by a reduction in the losses within Royal Mail which more than
offset a decrease in profit within GLS. Royal Mail’s margin improved
from a 5.7% adjusted loss margin to a 4.4% adjusted loss margin
driven by the increase in revenue. GLS experienced a fall of 90 bps
to 6.6% in adjusted operating margin, due to the impact of strategic
investments and inflationary cost pressures which were not
able to be offset by pricing and efficiency measures.
Non-operating specific items were a credit of £135 million
(2022-23: credit of £105 million) and relate to net pension interest.
Reported profit before tax was £114 million (2022-23: £676 million loss)
which comprised a £143 million loss in Royal Mail (2022-23: £951 million
loss) and a profit of £257 million in GLS (2022-23: £275 million
profit). Basic reported earnings per share increased to 5.6 pence per
share (2022-23: 91.3 pence loss per share).
Revenue (£m)
1,5
53 weeks
March 2024
52 weeks
March 2024 ex.
53rd week in
Royal Mail
52 weeks
March 2023
% change 52 wks
2024 ex. 53rd wk
in Royal Mail vs
52 wks 2023
Group 12,679 12,539 12,044 4.1%
Royal Mail 7,834 7,694 7,41 1 3.8%
GLS 4,865 4,865 4,650 4.6%
Intragroup revenue (20) (20) (17) 17.6%
Adjusted Operating Costs (£m)¹,5
53 weeks
March 2024
52 weeks
March 2024 ex.
53rd week in
Royal Mail
52 weeks
March 2023
% change 52 wks
2024 ex. 53rd wk
in Royal Mail vs
52 wks 2023
People costs (6,793) (6,720) (6,440) 4.3%
People costs excluding voluntary redundancy (6,781) (6,708) (6,407) 4.7%
Voluntary redundancy costs (12) (12) (33) (63.6)%
Non-people costs (5,914) (5,885) (5,675) 3.7%
Total (12,707) (12,605) (12,115) 4.0%
1. Reported results are prepared in accordance with UK adopted International Financial Reporting Standards (IFRS). In addition, the Group’s performance is explained through the use of alternative
performance measures (APMs) that are not defined under IFRS. A full list of the Group’s APMs are set out on pages 238 to 243 and reconciliations to the closest measure prescribed under IFRS
5. The 52 week 2023-24 results are derived by removing the 53rd week revenue and incremental costs in relation to Royal Mail, see the Groups APM’s on page 238 to 243 for further details on this
adjustment. Percentage changes are on a 52 week basis. The GLS financial year is 12 months to 31 March 2023 and 2024, so no adjustment is made for GLS’ results. The 52 week results are in line with
how the Chief Operating Decision Maker as defined by IFRS 8 reviews performance.
Year-on-year Group revenue grew 4.1%. Growth was seen in both
businesses, despite the difficult macro-economic environment,
with Royal Mail increasing by 3.8% and GLS by 4.6%. In Royal Mail
revenue was aided by price increases during the year and parcel
volumes benefited from the successful win back of customers
following the industrial action in the prior year. In GLS revenue was
driven by volume growth with an increase achieved in almost all
markets, with the most notable exception of Canada and the US
where there is more exposure to the freight segment.
Adjusted Group operating costs increased by 4.0%, with people
costs up by 4.3% and non-people costs growing 3.7%. People costs
increased as a result of wage inflation, with a 6% pay award within
operational costs in Royal Mail as part of the Business Recovery,
Transformation and Growth Agreement with the CWU. This was only
partly offset by productivity improvements which resulted in a
reduction in overall frontline FTEs. In GLS people costs were
influenced by wage inflation across all countries. Group non-people
costs were impacted by higher inflation in Royal Mail, which saw
particular increases in fuel and fleet maintenance costs, whilst in
GLS costs rose due to increased subcontractor rates as a result of
wage inflation. More detail can be found in the “People costs” and
“Non-people costs” sections within the segmental analysis of this
Financial Review.
64
International Distribution Services plc Annual Report 2023-24
Segment – Royal Mail
Reported operating loss was £254 million (2022-23: £1,039 million). Royal Mail adjusted operating loss was £348 million (2022-23: £419 million).
Revenue grew year on year as the business successfully won back volume following industrial action in 2022-23 and implemented price
increases during the year. This was partly offset by cost increases from higher pay and workload and focus on improving quality of service.
Revenue
Revenue (£m)
5
53 weeks
March 2024
52 weeks
March 2024 ex.
53rd week
52 weeks
March 2023
% change 52
wks 2024 ex.
53rd wk vs 52
wks 2023
Royal Mail 7,834 7,694 7,41 1 3.8%
Total Parcels 4,108 4,040 3,910 3.3%
Domestic Parcels (excluding international)
6
3,382 3,327 3,226 3.1%
International Parcels
7
726 713 684 4.2%
Letters & Other 3,726 3,654 3,501 4.4%
Volume (m units)
2
53 weeks
March 2024
52 weeks
March 2024 ex.
53rd week
52 weeks
March 2023
% change 52
wks 2024 ex.
53rd wk vs 52
wks 2023
Royal Mail
Total Parcels 1,295 1,273 1,205 6%
Domestic Parcels (excluding international)
6
1,120 1,101 1,064 3%
International Parcels
7
175 172 141 22%
Addressed letters (excluding elections) 6,736 6,617 7,280 (9)%
5. The 52 week 2023-24 results are derived by removing the 53rd week revenue and incremental costs in relation to Royal Mail, see the Groups APM’s on page 238 to 243 for further details on this adjustment.
Percentage changes are on a 52 week basis. The GLS financial year is 12 months to 31 March 2023 and 2024, so no adjustment is made for GLS’ results. The 52 week results are in line with how the Chief
Operating Decision Maker as defined by IFRS 8 reviews performance
6. Domestic Parcels excludes import and export for both Royal Mail and Parcelforce Worldwide.
7. International includes import and export for Royal Mail and Parcelforce Worldwide.
In the following commentary all percentage changes in volume and
revenue are based on a comparison of 52 weeks March 2024,
excluding the 53rd week vs 52 weeks March 2023.
Total revenue increased 3.8% versus the prior year.
Revenue benefitted from the win back of customers following
disruption in the previous year from 18 days of industrial action as
well as pricing actions taken in the year. Revenue growth has been
achieved despite a backdrop of economic uncertainty from the
cost-of-living crisis, higher inflation and struggling UK retail
performance.
Parcels
Total parcel revenue increased 3.3% year-on-year.
Domestic parcel revenues were up 3.1% year-on-year, with volumes
up 3%. Royal Mail’s premium products, Tracked 24
®
/48
®
and
Tracked Returns
®
, experienced strong volume increases of 22%
year-on-year.
Within domestic parcels, account parcel revenues increased by
5.9% on the prior year. Volume and revenue benefitted from the
successful win back of customer volumes that were lost as a result of
industrial action in the prior year. In addition to this, strong growth
has been achieved through new volume from existing and new
customers. During the year revenue has also been supported by
pricing increases and surcharges for green and peak period
deliveries.
Consumer and small business parcels revenue saw a slight decline
on the prior year although we have seen a shift from Post Office Ltd
to online channels.
Total international parcel volumes were up 22% and revenues were
up 4.2% as a result of recovery following the 2023 cyber incident in
previous year and growth in Chinese import volumes.
Letters
Total letter revenue grew 4.4%, as the benefit from price
increases more than offset a decline in volume.
In 2023-24, the volume decline of addressed letters (excluding
elections) continued in line with recent trends, falling 9%, meaning
addressed letters volumes have fallen 32% since 2019-20. The
decline in volume was particularly significant in international import
and export letters and in advertising mail. The 11% downturn in
advertising mail volumes reflects both the impact of higher print
and production costs as well as more general economic uncertainty.
Stamped Letter revenues rose 14.2% as a result of two tariff
increases during the year, with volumes rising 1% versus 2022-23.
December is a pivotal month for stamp sales, and in 2022-23 sales
were badly affected by industrial action which necessitated the final
posting dates for Christmas being brought forward. December 2023
saw a significant recovery from this position, in the absence of
industrial action.
Business mail volumes declined 7% on 2022-23. However, price
increases introduced during the year led to year-on-year revenue
growth of 7.2%.
65
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Financial Review continued
Adjusted operating costs¹
5
(£m)
53 weeks
March 2024
52 weeks
March 2024 ex.
53rd week in
Royal Mail
52 weeks
March 2023
% change 52 wks
2024 ex. 53rd wk
in Royal Mail vs
52 wks 2023
People costs (5,683) (5,610) (5,409) 3.7%
People costs excluding voluntary redundancy (5,671) (5,598) (5,376) 4.1%
Voluntary redundancy costs (12) (12) (33) (63.6)%
Non-people costs (2,499) (2,470) (2,421) 2.0%
Distribution and conveyance costs (922) (906) (891) 1.7%
Infrastructure costs (874) (869) (868) 0.1%
Other operating costs (703) (695) (662) 5.0%
Total (8,182) (8,080) (7,830) 3.2%
1. Reported results are prepared in accordance with UK adopted International Financial Reporting Standards (IFRS). In addition, the Group’s performance is explained through the use of alternative
performance measures (APMs) that are not defined under IFRS. A full list of the Group’s APMs are set out on pages 238 to 243 and reconciliations to the closest measure prescribed under IFRS.
5. The 52 week 2023-24 results are derived by removing the 53rd week revenue and incremental costs in relation to Royal Mail, see the Groups APM’s on page 238 to 243 for further details on this
adjustment. Percentage changes are on a 52 week basis. The GLS financial year is 12 months to 31 March 2023 and 2024, so no adjustment is made for GLS’ results. The 52 week results are in line with
how the Chief Operating Decision Maker as defined by IFRS 8 reviews performance.
Total adjusted operating costs increased 3.2% year-on-year.
People costs
Total people costs increased by 3.7%.
Within people costs, operational people costs (excluding voluntary
redundancy) increased by £141 million (3.0%) on a 52-week basis.
The Business Recovery, Transformation and Growth Agreement,
agreed with the CWU included a 6% pay award from 1 April 2023
which was only partly offset in the year by savings delivered
as a result of productivity improvements. Frontline FTE were
110.1 thousand at the end of 2023-24, over 1,000 lower than
2022-23. Operational people costs were also impacted by the
changing volume mix towards parcels, with parcel volumes
representing 13% of total Royal Mail volume versus 11% in 2022-23.
Parcels, especially the high growth premium products, are more
complex and costly to deliver than letters. As a result of this, as
well as the impact of industrial action in 2022-23, total workload
(a measure of the effort involved in processing and delivering mail)
increased by 5.0% versus the previous year. Operational people
costs include investment made to improve quality, including a
£13 million peak incentive programme at Christmas.
Within people costs, non-operational people costs (excluding
voluntary redundancy) increased by £81 million (10.9%) on a 52-week
basis, primarily due to the inclusion of a bonus to eligible employees
for 2023-24 versus no payment in 2022-23. Voluntary redundancy
costs reduced by £21 million versus 2022-23.
Non-people costs
Non-people costs increased by 2.0% year-on-year.
Within non-people costs, distribution and conveyance costs
increased by 1.7% driven by fuel inflation and the increasing cost of
maintaining Royal Mail’s fleet of vehicles. This was partly offset by a
reduction in distribution costs related to international export volume.
Infrastructure costs were broadly flat year-on-year. The impact of
utility inflation was largely offset by other cost savings.
Other operating costs increased 5.0% year-on-year. This was
partly driven by the 2023 cyber incident and higher compensation
expenditure as a result of quality of service issues, exacerbated by
the industrial action in 2022-23.
66
International Distribution Services plc Annual Report 2023-24
Segment – GLS8
Summary results1 (£m)
12 months
31 March 2024
12 months
31 March 2023 % change
Volume (m) 905 862 5%
Revenue 4,865 4,650 4.6%
Operating costs (4,545) (4,302) 5.6%
Operating profit before specific items1 320 348 (8.0%)
(€m)
Revenue 5,635 5,384 4.7%
Operating costs (5,264) (4,981) 5.7%
Operating profit before specific items1 371 403 (7.9%)
1. Reported results are prepared in accordance with UK adopted International Financial Reporting Standards (IFRS). In addition, the Group’s performance is explained through the use of alternative
performance measures (APMs) that are not defined under IFRS. A full list of the Group’s APMs are set out on pages 238 to 243 and reconciliations to the closest measure prescribed under IFRS
8. The results for 2023-24 include the contribution from the acquisition of Altimax Courier Ltd, Versandmanufaktur GmbH, ProntoPacco and franchisees in Italy. Organic revenue growth was 3.8% in Euro
terms. Operating profit before specific items and excluding acquisitions effects declined by 8.1% in Euro terms.
In Sterling terms, reported operating profit was £280 million
(2022-23: £297 million).
Adjusted operating profit was £320 million (2022-23: £348 million),
a reduction of 8.0%. The net impact of foreign exchange movements
on operating profit was £nil (revenue adversely impacted by
£2 million and costs positively impacted by £2 million). Adjusted
operating margin declined by 90 basis points to 6.6% due to
operational cost pressures resulting from inflationary effects which
were not able to be offset through pricing and efficiency measures
and the impact of strategic investments.
Revenue
Revenue increased by 4.6% in Sterling terms (4.7% in Euro terms).
Excluding acquisitions, revenue was up 3.7% in Sterling terms,
driven by higher parcel volumes but partly offset by lower freight
revenues and product mix effects resulting in a higher proportion
of lower weight B2C shipments. Revenue growth was achieved in
most markets with the most notable exception of Canada and the
US which are more exposed to the freight segment. GLS’ European
markets represented 88.7% of total revenue (2022-23: 87.3%), with
the North American market contributing 11.3% (2022-23: 12.7%).
Overall volumes increased by 5% driven by a 10% increase in B2C
volumes whilst B2B volumes were down 3%. Cross-border volumes
grew by 8%. B2C volume share at 58% was three percentage points
above the prior year.
67
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Financial Review continued
People costs
In Euro terms people costs increased by 7.7%, (6.5% excluding
acquisitions). Wage inflation in all markets contributed to the
increase, including the effect from a further step-up in minimum
wages in Germany, labour reforms in Spain and above average
inflation rates in Eastern Europe markets.
Non-people costs
Non-people costs increased by 5.0%, (4.2% excluding acquisitions).
Distribution and conveyance costs were up 4.9%, (4.2% higher
excluding acquisitions), driven by higher subcontractor rates
resulting from wage inflation partly mitigated by lower fuel costs,
which in particular benefitted line-haul rates. Infrastructure costs
increased by 7.8% (6.3% excluding acquisitions) with other operating
costs flat. The increase in infrastructure costs was principally due to
higher depreciation resulting from increased investment in strategic
initiatives.
Country overview
The following individual market summaries detail revenue
growth in local currency terms.
In Germany, the largest GLS market by revenue, organic revenue
growth was 4.4% driven by improved pricing with volumes flat.
Price increases implemented in response to the increased German
minimum wage were partly mitigated by lower fuel surcharges due
to the lower average diesel price during the year. Overall operating
profit was in line with the prior year excluding acquisitions, which
represented a strong performance compared with other competitors
and the challenging market conditions. Effective 1 April 2023 the
acquisition of the e-fulfilment business Versandmanufaktur GmbH
was completed at an initial purchase price of €11 million of which
€3 million of the purchase is deferred. The deferred amount is
principally contingent on the expected achievement of the EBITDA
target for the year 2025-26. Versandmanufaktur GmbH is being
integrated into the GLS Germany operations and will complement
its product portfolio.
GLS Italy revenue grew by 5.2% with good volume growth partly
mitigated by softer pricing including mix effects from an increasing
proportion of B2C volumes. Operating profit declined due to
operational costs increases resulting from inflationary effects and
initiatives to strengthen the subcontractor base. In May 2023, the
acquisition of the parcel shop broker ProntoPacco was completed
at an initial purchase price of €10 million of which 50% is deferred.
The deferred amount is principally contingent on the expected
achievement of EBITDA targets in the next 3 years. The acquisition
solidifies GLS Italy’s presence in the out-of-home delivery segment.
Revenue in GLS Spain grew by 18.4% driven by double-digit volume
growth and improved pricing. Volume growth benefitted from new
key accounts particularly in the B2C segment. Higher minimum
wages due to Spanish labour reforms and additional costs during the
ramp-up phase of the new Madrid hub resulted in an increase in the
cost base. Nevertheless, operating profit improved compared with
the prior year with a strong foundation to further grow the business
in coming years.
GLS France revenue grew by 5.0%, due to a combination of higher
volumes and slightly better pricing despite a negative impact from
lower fuel surcharges. Volumes benefitted from significant growth
in cross-border, with domestic volumes also increasing. A small
operating loss was incurred due to inflationary effects on the cost
base which were not fully recovered through better pricing. A new
automated Paris hub will become operational in Autumn 2024
providing additional capacity to support volume growth.
This demonstrates our confidence in the longer-term outlook for
France.
Operating costs
(£m)
12 months
31 March 2024
12 months
31 March 2023 % change
People costs (1,110) (1,031) 7.7%
Non-people costs (3,435) (3,271) 5.0%
Distribution and conveyance costs (2,988) (2,847) 5.0%
Infrastructure costs (334) (310) 7.7%
Other operating costs (113) (114) (0.9%)
Total (4,545) (4,302) 5.6%
Total reported operating costs in Sterling terms increased by 5.6%. The reported increase in costs in Euro terms is presented below:
(€m)
Reported
12 months
31 March 2024
Reported
12 months
31 March 2023 % change
People costs (1,286) (1,194) 7.7%
Non-people costs (3,978) (3,787) 5.0%
Distribution and conveyance costs (3,459) (3,296) 4.9%
Infrastructure costs (387) (359) 7.8 %
Other operating costs (132) (132) 0.0%
Total (5,264) (4,981) 5.7%
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International Distribution Services plc Annual Report 2023-24
In the US, revenue declined by 4.2% in USD terms driven by lower
freight revenues which could not be compensated by strong B2C
volume growth. Despite the lower revenues losses were reduced
by around a third due to lower costs, as a result of a combination
of headcount reductions and operational efficiency improvements.
Measures focused on further improving unit operational costs
and the quality of revenue, including yield management activities,
are continuing.
GLS Canada organic revenues declined by 5.5% in CAD terms due
to a combination of lower freight revenues and lower fuel surcharges.
The weak economic environment is placing pressure on freight
volumes and led to a decline in operating profit in CAD terms, which
was exacerbated in Euro terms due to the 6% weakening of the CAD.
The unwinding of exceptional tailwinds which benefitted 2022-23
performance also impacted year on year development. On 1 June
2023 the acquisition of the parcel business Altimax Courier Ltd was
completed at an initial purchase price of CAD 30 million of which
CAD 5 million is deferred. The deferred contingent consideration
comprises around CAD 2 million related to the achievement of
expected EBITDA targets in three years after the acquisition date.
The remaining balance is for indemnity holdbacks payable within
18 months of the acquisition date. The acquisition of Altimax increases
GLS’ footprint in the Atlantic coast region of Canada and will be
integrated with existing Canadian operations. The integration of the
Rosenau business situated in western Canada continues to progress.
Revenue growth in GLS’ other developed European markets was
2.4%, driven by higher volumes. Operating profit was slightly below
the prior year.
Other developing markets, where GLS has a high exposure to
B2C, continued to grow despite the impact from the ongoing war in
Ukraine and weak economic conditions. Revenues were up 8.5% in
the period, with the strongest growth coming in Poland. Investment
in strategic initiatives such as the roll-out of parcel lockers, 2-person
handling services (Hungary) and the greenfield start-up in Serbia
with initial start-up losses, resulted in an overall decline in operating
profit compared with the prior year.
Other Group financial performance measures
Adjustments and specific items1
53 weeks
March 2024
52 weeks
March 2023
Exclude adjustments to reported operating profit/(loss) (£m):
Pension (charge)/credit adjustments (within people costs) (41) 133
Depreciation/amortisation adjustment for impaired assets (121) –
Profit on disposal of property, plant and equipment (15) (6)
Total adjustments to reported operating (loss)/profit (177) 127
Add back operating specific items (£m):
Regulatory and legal 57 33
GLS amortisation 21 19
Impairment 48 539
Damages award – (35)
Legacy/other items (3) (12)
Total operating specific items 123 544
Non-operating specific item - net pension interest 135 105
Total tax credit/(charge) on specific items 5 (111)
1. Reported results are prepared in accordance with UK adopted International Financial Reporting Standards (IFRS). In addition, the Group’s performance is explained through the use of alternative
performance measures (APMs) that are not defined under IFRS. A full list of the Group’s APMs are set out in the section titled ‘Presentation of results and alternative performance measures’ and
reconciliations to the closest measure prescribed under IFRS.
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International Distribution Services plc Annual Report 2023-24
The pension charge adjustment of £41 million comprises:
— £130 million credit (2022-23: £nil) in relation to a refund of cash
held in escrow by the Trustee of the Royal Mail Pension Plan
(‘RMPP’). This was subsequently used to provide a one-off
payment to UK employees following ratification of the Business
Recovery, Transformation and Growth Agreement;
— £1 million credit (2022-23: £133 million credit) relating to the
difference between the IAS 19 income statement pension charge
rate of 14.8% (2022-23: 22.9%) for the Defined Benefit Cash
Balance Section (‘DBCBS’) and the cash funding contribution rate
agreed with the Trustee of 15.6% (2022-23 15.6%); and
— £172 million charge (2022-23: £nil) relating to a change to the rate
of annual increases applied to the DBCBS (previously a specific
constructive obligation of CPI+2% now considered to be a non-
specific obligation of CPI+1.2%). This change has been recognised
as a past service credit in the income statement in line with IAS 19.
In the prior year a £539 million impairment charge was recognised to
write down the value of the Royal Mail excluding Parcelforce
Worldwide cash generating unit (CGU). In the current year a further
impairment charge of £48 million has been recognised mainly as a
result of a deterioration in the property market resulting in lower
property disposal proceeds used in the impairment cashflows
compared to the prior year. The impairment charge in the prior year
has resulted in a lower depreciation/amortisation charge in 2023-24
in infrastructure costs, and an adjustment of £121 million has been
made to the adjusted results to reflect the depreciation/amortisation
on a pre-impairment basis in line with how Management reviews the
underlying performance of the business.
The profit on disposal of property, plant and equipment mainly
comprises £12 million relating to the sale of Plot C2 of the Nine Elms,
London site.
Regulatory and legal charges of £57 million represent the best
estimate of costs to settle present obligations for Royal Mail and
GLS, in relation to regulated quality of service in Royal Mail, legal
claims and tax-related disputes in GLS Italy. In the prior year
£33 million was in respect of a GLS Italy VAT settlement.
The damages award in the prior year related to a claim by Royal Mail
against DAF trucks Ltd in December 2016 in respect of vehicles sold
to Royal Mail between 1997 and 2011.
Legacy/other items mainly relate to £10 million credit for court
awarded compensation resulting from the virtually certain recovery
of assets, following an investigation in 2016 and 2017 into an under
declaration of mail fraud, offset by specific asset write-offs. The prior
year credit of £12 million largely comprised a £10 million release of
the industrial diseases provision.
The tax credit of £5 million (2022-23: £111 million charge) consists
mainly of a credit in relation to the GLS amortisation of intangible
assets in acquisitions. The prior year charge consists of £115 million
charge in relation to the derecognition of the UK net deferred tax
asset and a net credit of £4 million in relation to the tax effect of
certain specific items and the pension charge adjustment.
Net finance costs
Net finance costs of £47 million (2022-23: £39 million) comprise
interest on leases of £43 million (2022-23: £32 million), interest on
bonds (including the cross-currency swaps and the two new bonds
issued in September 2023) of £44 million (2022-23: £24 million),
fees on the bank syndicate loan facility and the €500 million
backstop facility of £6 million (2022-23: £2 million), and other net
interest payable of £5 million (2022-23: £2 million). This was offset by
interest income of £51 million (2022-23: £21 million) which increased
as a result of higher interest rates and from the net proceeds of the
two bond issues in September 2023.
The blended interest rate on gross debt, including leases for
2024-25, is approximately 4%. The impact of retranslating the
€500 million 2028 and €550 million 2026 bonds is accounted
for in equity. The remaining €364.5 million 2024 bond is naturally
hedged for foreign currency risk by the Euro-denominated current
asset and cash equivalent investments held by the Group from the
proceeds of the €500 million 2028 bond.
Taxation
The Group recognised a reported tax charge of £60 million
(2022-23: £197 million) which consists of a tax credit of £8 million
(2022-23: £119 million charge) in Royal Mail and a tax charge of
£68 million (2022-23: £78 million) in GLS.
The GLS reported effective tax rate of 26.5% (2022-23: 28.4%) is
higher than the GLS weighted average effective tax rate of 21.3%
(2022-23: 21.0%) mainly due to the provision in respect of the
tax-related disputes in GLS Italy for which there is no tax credit and
the effect of losses in certain territories for which no deferred tax
credit is recognised.
The GLS adjusted effective tax rate of 24.6% (2022-23: 25.2%) is
lower than the reported effective tax rate as it does not include the
effect of the provision in respect of the tax-related disputes in GLS
Italy which is treated as a specific item.
The Royal Mail reported tax credit of £8 million (2022-23: £119 million
charge) mainly relates to an amount over provided in prior years. Due
to the uncertainty of generating future taxable profits, Royal Mail
continues to not recognise a tax credit for its losses and other
temporary differences.
Financial Review continued
70
International Distribution Services plc Annual Report 2023-24
Earnings per share
Reported basic earnings per share was a profit of 5.6 pence per share (2022-23: 91.3 pence loss per share) and adjusted basic earnings per
share was a loss of 14.6 pence per share (2022-23: 20.5 pence loss per share).
In-year trading cash flow
1
(£m)
53 weeks ending March 2024 52 weeks ending March 2023
Royal Mail GLS Group Royal Mail GLS Group
Adjusted operating (loss)/profit (348) 320 (28) (419) 348 (71)
Depreciation and amortisation 417 185 602 433 169 602
Adjusted EBITDA 69 505 574 14 517 531
Trading working capital movements (143) (24) (167) (70) 18 (52)
Share-based awards (LTIP and DSBP) charge 4 – 4 2 – 2
Gross capital expenditure (176) (204) (380) (255) (152) (407)
Estate Upgrade Programme
9
(5) – (5) (14) – (14)
Net finance costs paid (8) (24) (32) (22) (19) (41)
Income tax received/(paid) 13 (80) (67) 39 (92) (53)
In-year trading cash flow (246) 173 (73) (306) 272 (34)
Capital element of operating lease repayments
10
(125) (81) (206) (104) (75) (179)
Pre-IFRS 16 in-year trading cash flow (371) 92 (279) (410) 197 (213)
1. Reported results are prepared in accordance with UK adopted International Financial Reporting Standards (IFRS). In addition, the Group’s performance is explained through the use of alternative
performance measures (APMs) that are not defined under IFRS. A full list of the Group’s APMs are set out on pages 238 to 243 and reconciliations to the closest measure prescribed under IFRS.
9. Capital expenditure on the properties in this programme is funded via the disposal of other properties. The disposal proceeds are recognised outside of in-year trading cash flow.
10. The capital element of lease payments of £216 million (2022-23: £202 million) shown in the statutory cash flow is made up of the capital element of operating lease payments of £206 million
(2022-23: £179 million) and the capital element of finance lease payments of £10 million (2022-23: £23 million).
In-year trading cash flow
Group in-year trading cash outflow was £73 million, compared with
£34 million outflow in the prior period. This increased outflow was
predominantly driven by an increase in working capital, partially
offset by an improvement in Group EBITDA, and a reduction in
capital expenditure in Royal Mail.
Royal Mail in-year trading cash flow improved by £60 million year-on
year. This was driven by higher EBITDA and lower capital expenditure,
offset by an increase in trading working capital. Royal Mail trading
working capital movements declined by £73 million year-on-year,
primarily driven the timing of payroll and VAT payments as a result
of the 53rd week.
Royal Mail capital expenditure was £176 million (2022-23: £255 million),
of which £97 million (2022-23: £127 million) was transformational
spend. Transformational spend predominantly relates to our investment
in parcel hubs and automation. Royal Mail maintenance spend was
£79 million (2022-23: £128 million).
Royal Mail income tax received of £13 million (2022-23: £39 million)
was mainly in relation to tax losses carried back to previous years.
GLS paid income tax of £80 million (2022-23: £92 million), this was
£12 million lower than the prior year mainly due to lower profits.
GLS in-year trading cash flow decreased by £99 million year-on-year
due to lower EBITDA, an outflow in trading working capital and higher
capital expenditure, partially offset by lower income tax payments.
The Group capital element of operating lease repayments
of £206 million (2022-23: £179 million) reflects the net impact
on in-year trading cash flow as a result of adopting IFRS 16.
The increase is due to new leases in the current and prior year.
Adjusting for the capital element of operating lease repayments,
pre-IFRS 16 in-year trading cash flow would have been £279 million
outflow (2022-23: £213 million outflow).
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Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Net debt¹
A reconciliation of net debt is set out below.
(£m)
53 weeks
March 2024
52 weeks
March 2023
Net debt brought forward at 27 March 2023 and 28 March 2022 (1,500) (985)
Free cash flow (14) (89)
In-year trading cash flow (73) (34)
Cash cost of operating specific items (11) (53)
Proceeds from disposal of property, plant and equipment (excluding Estate Upgrade Programme
11
and London Development Portfolio) 18 3
Proceeds from disposal of property relating to the Estate Upgrade Programme¹1 – 8
Acquisition of business interests (35) (7)
Cash flows relating to
London Development Portfolio 87 (6)
Purchase of escrow investments (16) (13)
Reclassifcation to liabilities held for sale 18 –
Movement in GLS client cash
12
12 (2)
New or increased lease obligations (non-cash) (236) (204)
New asset finance (non-cash) (10) (27)
Foreign currency exchange impact 31 (53)
Amortisation of Bond discount (finance costs payable) (1) –
Dividends paid to equity holders of the Parent Company – (127)
Net debt carried forward (1,716) (1,500)
Operating leases
13
1,388 1,319
Pre-IFRS 16 net (debt)
14
(328) (181)
1. Reported results are prepared in accordance with UK adopted International Financial Reporting Standards (IFRS). In addition, the Group’s performance is explained through the use of alternative
performance measures (APMs) that are not defined under IFRS. A full list of the Group’s APMs are set out on pages 238 to 243 and reconciliations to the closest measure prescribed under IFRS
11. Capital expenditure on the properties in this programme is funded via the disposal of other properties, the capital expenditure is presented within in-year trading cash flow.
12. GLS client cash movements are presented as part of the working capital movements line in the statutory cashflow. The movement in the period excluding foreign currency exchange impacts is £12 million
inflow (2022-23: £2 million outflow). The foreign currency movement on GLS client cash in the period was a loss of £1 million (2022-23: £2 million gain) which is included in the £31 million foreign currency
exchange inflow line in the table (2022-23: £53 million outflow).
13. This amount represents leases that would not have been recognised on the Balance Sheet prior to the adoption of IFRS 16.
14. This measure is considered as the Group’s banking covenants are calculated on a pre-IFRS 16 basis.
Financial Review continued
The cash cost of operating specific items was an outflow of
£11 million (2022-23: £53 million outflow) consisting mainly of the
Ofcom regulatory fine payment of £6 million and Industrial Diseases
claims of £6 million offset by a £1 million receipt of court awarded
compensation. The prior year consisted mainly of Ofcom regulatory
fine payment of £52 million, Industrial Diseases claims of £3 million,
£33 million relating to GLS settlement of VAT adjustments in Italy
covering 2016-2021 and a £35 million receipt of damages awarded
following settlement of a court case.
Acquisition of business interests of £35 million outflow
(2022-23: £7 million outflow) relates mainly to the acquisition of
Altimax (£15 million), other smaller GLS acquisitions (£12 million) and
payment of deferred consideration on prior year acquisitions
(£9 million) less cash acquired on acquisition (£1 million). The prior
year outflow relates mainly to the acquisition of Tousfacteurs by GLS.
The net cash inflows relating to the London Development Portfolio
were £87 million (2022-23: £6 million outflow). Further details are
provided in the London Development Portfolio section below.
The amount of GLS client cash held at 31 March 2024 was
£47 million (2022-23: £36 million). There was a revaluation
movement of £1 million within the year.
New or increased lease obligations of £236 million (2022-23: £204 million)
relate to additional lease commitments that were entered into during
the year. Property lease additions, modifications and acquisitions
totalled £194 million (2022-23: £139 million).
New asset finance of £10 million (2022-23: £27 million) represents
borrowings to fund the purchase of tangible fixed assets in GLS.
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International Distribution Services plc Annual Report 2023-24
Net Debt (£m)
2023-24
Royal Mail
2023-24
GLS
2023-24
Corporate
Centre
2023-24
Group
Bonds – – (1,454) (1,454)
Asset finance – (29) – (29)
Financial leases (25) (10) – (35)
Cash and cash equivalent investments
15
202 359 366 927
Current asset investments – – 216 216
Client cash – 47 – 47
Inter-business loans (603) (186) 789 –
Net Debt pre-IFRS 16 (426) 181 (83) (328)
Operating leases (908) (480) – (1,388)
Net debt (1,334) (299) (83) (1,716)
15. Cash and cash equivalents includes bank overdrafts of £56 million at 26 March 2024 that are part of a cash pool for the UK companies which generally has a net £nil balance across the Group and forms
an integral part of the Group’s cash management.
Approach to capital management
The Group capital allocation framework until now has been to: invest in our business to support growth, maintain our investment grade rating,
pay a sustainable dividend and retain flexibility for selective acquisitions. Due to the high operational leverage in our business, we continue
to keep low levels of financial leverage. The net debt position (pre-IFRS 16) at 31 March 2024 was £328 million (2022-23: £181 million).
GLS is cash generative and we believe Royal Mail has the potential to be an independently cash generative business. In line with this
framework, the Group’s key 2023-24 capital management objectives are detailed below together with a progress update.
Objectives Enablers 2023-24 update
Meet the Group’s
obligations as they
fall due.
Maintaining sufficient cash
reserves and committed
facilities to:
— Meet all obligations,
including pensions.
— Manage future risks,
including the principal
risks.
At 31 March 2024, the Group had available resources of £2,068 million
(2022-23: £1,698 million) made up of cash and cash equivalents of £927 million
(2022-23: £773 million), current asset investments of £216 million (2022-23: £nil) and
undrawn committed bank syndicate loan facilities of £925 million (2022-23: £925 million).
At 31 March 2024, the Group met the loan covenants (which were amended on 24 March
2023 to replace Group EBITDA in the calculations with GLS EBITDA) and other
obligations for its bank syndicate loan facility and bonds.
On 14 September 2023, the Group issued two further bonds and partially repaid the
2024 bond, the remaining €364.5 million of which matures in July 2024.
As set out in the Viability Statement, the Directors have a reasonable expectation that the
Group will continue to meet its obligations as they fall due.
Support a
progressive
dividend policy.
Generate sufficient in-year
trading cash flow to cover
the ordinary dividend.
Maintain sufficient
distributable reserves
to sustain the Group’s
dividend policy.
The Group reported £73 million of in-year trading cash outflow (2022-23: £34 million
outflow). A final dividend of 2.0p for 2023-24 has been proposed, funded by GLS
(2022-23: £nil).
Capital managed by the Group, excluding the pension scheme surplus net of withholding
tax, is £1,851 million at 31 March 2024 (2022-23: £1,957 million).
The Group had retained earnings of £3,540 million at 31 March 2024
(2022-23: £3,761 million). The Group considers it has a maximum level of distributable
reserves of around c. £2 billion (2022-23: £2 billion), which excludes the impact of the
pension surplus on retained earnings.
Reduce the cost of
capital for the
Group.
Target investment grade
standard credit metrics
i.e. no lower than BBB-
under Standard & Poor’s
rating methodology.
During the year, the Group maintained a credit rating of BBB with Standard & Poor’s, the
outlook was also maintained as negative.
Retain sufficient
flexibility to invest
in the future of
the business.
Funded by retained cash
flows and manageable
levels of debt consistent
with our target credit rating.
During the year, the Group made total gross capital investments of £380 million
(2022-23: £407 million) and acquisition of business interests of £35 million
(2022-23: £7 million) while retaining sufficient capital headroom. The gross
capital investments of Royal Mail were £176 million (2022-23: £255 million).
The gross capital investments of GLS were £204 million (2022-23: £152 million).
73
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Objectives Enablers 2023-24 update
Maintain suitable
financial leverage
Retain sufficient leverage,
commensurate with the
Board’s assessment of
the risk environment
During the year, the Group made no dividend payments (2022-23 £127 million).
The net debt position (pre-IFRS 16) at 31 March 2024 was £328 million
(2022-23: £181 million).
Financial Review continued
Financial risks and related hedging
The Group is exposed to commodity price and currency risk.
Royal Mail operates a three-year layered rolling hedging strategy
for fuel and energy. Royal Mail has hedges in place for 84% of total
underlying commodity costs for 2024-25; as a result, a further 10%
increase in underlying commodity costs would reduce operating
profit by just £2 million. However, a 10% increase in fuel duty/other
additional costs would reduce operating profit by £13 million.
Without hedging, diesel and jet fuel costs for 2024-25 would be
around £2 million higher, while gas and electricity costs would be
around £20 million lower, based upon closing commodity prices
at 31 March 2024.
Additionally, within fuel costs, Royal Mail has a forecast unhedged
exposure to c.27 million litres of HVO in 2024-25, £49m at current
prices. Hedges are being considered for this exposure.
GLS generally out-sources its collection, delivery and line-haul
activities to subcontractors, and therefore is not significantly
directly exposed to higher fuel costs. Nevertheless, there is an
indirect exposure, as increasing fuel costs for subcontractors lead
to higher rates for their services as they seek to pass on the higher
fuel costs incurred. This indirect exposure is mitigated to a degree
by fuel surcharges paid by customers in a number of GLS markets.
The Group is exposed to foreign currency exchange risk in relation
to interest payments on the euro bonds, certain obligations under
Euro denominated finance leases, trading with overseas postal
administrations and various purchase contracts denominated in
foreign currency. GLS’ functional currency is largely the Euro, which
results in translational foreign currency exchange risk to revenue,
costs and operating profit. The €550 million bond, issued in October
2019 and maturing in 2026, is fully hedged by a cross-currency
interest rate swap with no residual exposure to foreign currency
or interest rate risk.
The average exchange rate between Sterling and the Euro was
£1:€1.16 (2022-23: £1:€1.16). This resulted in net nil impact on GLS’
reported operating profit before tax in 2023-24 (2022-23: £5 million
increase). The net impact on Group operating profit before tax was
£nil (2022-23: £5 million increase).
The Group manages its interest rate risk through a combination
of fixed rate loans and leasing, floating rate loans/facilities and
floating rate financial investments. At 31 March 2024, all the gross
debt (excluding bank overdrafts which were part of a cash pool)
of £2,906 million (2022-23: £2,309 million) was at fixed rates.
London Development Portfolio
In total we have invested £6 million in the period (2022-23: £6 million)
on works to separate the retained operational sites from the
development plots at Mount Pleasant and infrastructure works at
Nine Elms.
1) Mount Pleasant
This site was sold to Taylor Wimpey in 2017 subject to completion
of separation works. These works were completed in 2021, with
£180 million received as at 31 March 2024 with the remainder
of the cash due to be received through a final stage payment
in 2024-25 of £9.5 million.
2) Nine Elms
This 13.9-acre site with planning consent to develop 1,911 residential
units, was split into various plots and sold. As at 31 March 2024 the
sale proceeds received are £271 million.
Further investment by Royal Mail will be required in relation to
infrastructure obligations.
74
International Distribution Services plc Annual Report 2023-24
Pensions
Royal Mail makes contributions to two main schemes in the UK; the
Royal Mail Defined Contribution Plan (RMDCP) and the Defined Benefit
Cash Balance Section (DBCBS) of the Royal Mail Pension Plan.
The Group also operates two additional UK defined benefit schemes
which are closed to future accrual, the legacy section of the RMPP
and the Royal Mail Senior Executives Pension Plan (RMSEPP).
The buy-out of the RMSEPP was completed in June 2022, when
the bulk annuity policies held were exchanged for individual policies
between the insurers and all remaining members.
The Group’s obligations under the RMSEPP have now been
fully extinguished and the Plan was wound up in April 2024.
The residual assets were returned to the Group after the
remaining closure expenses and the deduction of withholding tax.
Royal Mail also aims to introduce a new pension scheme, the Royal
Mail Collective Pension Plan (RMCPP) which will replace the existing
DBCBS and the RMDCP for future accrual. The new pension scheme
will comprise a Defined Benefit Lump Sum Section (DBLS), similar to
the existing DBCBS, and a Collective Defined Contribution (CDC)
Section. The Trustee’s application to the Pensions Regulator for
authorisation has been approved so the RMCPP scheme is expected
to launch in FY 2024-25.
The CDC Section will be accounted for as a defined contribution
scheme and the DBLS as a defined benefit scheme with the accounting
treatment expected to be similar to the DBCBS. The new arrangements
will have fixed employer contributions of 13.6%, plus an additional
1.0% for employees who choose to save for an additional lump sum
payment. Standard employee contributions will be 6.0%.
Cash pension costs
The Group’s cash pension costs in respect of all UK pension
schemes were £347 million (2022-23: £376 million) in the year,
excluding Pension Salary Exchange (PSE). This represents the
pension funding costs as prescribed in the schedule of contributions
relating to the reporting period, rather than the cash payments made
in the period. In addition, the Group paid £19 million into the pensions
escrow account in respect of the DBCBS employer contributions for
February. Due to the timings of payments, the £22 million employer
contributions for March 2024 have been paid into the escrow
account in April 2024.
When the design of the RMCPP was agreed in 2018, the
fixed employer contribution rate of 13.6% of pensionable pay
was designed to be affordable and sustainable for Royal Mail.
The expected cost of RMCPP based on pensionable payroll at
that time was approximately the same as the cost of the existing
schemes, at around £400 million per year. The new RMCPP is
expected to increase cash payroll costs by c.£40 million per
annum, when it is introduced. The main reason for the increase
is that although the estimated cost of the RMCPP as a percentage
of pensionable pay will remain broadly the same as in 2018, payroll
costs have increased. In addition, since the RMPP closed to accrual in
2018, the cost of existing plans has been reducing over time relative to
overall pay costs, as DBCBS members leave and are replaced by new
employees who join the RMDCP, at a lower employer contribution rate.
Defined benefit schemes – balance sheet position
An IAS 19 deficit of £60 million (26 March 2023: £145 million) is
shown on the balance sheet in respect of the DBCBS; however,
the scheme is not in funding deficit and it is not anticipated
that deficit payments will be required. The reduction in DBCBS
accounting deficit of £85 million since March 2023 is mainly due
to a move from a specific to non-specific constructive obligation
for future increases in DBCBS (which has resulted in a decrease
of £172 million in the DBCBS liability). This impact has been offset
by index-linked gilt yields (against which the DBCBS liabilities are
hedged) increasing by more than corporate bond yields (which drives
the discount rate used to value the accounting liabilities). This has
meant that the assets have not grown in value by as much as the
liabilities (before allowing for the constructive obligation change).
The RMPP scheme closed to future accrual in its previous form from
31 March 2018. The pre-withholding tax accounting surplus of the
legacy section of the RMPP at 31 March 2024 was £2,462 million
(26 March 2023: £3,003 million). The overall accounting surplus
(before withholding tax) decreased by £541 million over the year.
The accounting liabilities decreased by £80m over the year, in part
due to the change in assumptions. The RMPP assets decreased by
£621 million over the year mainly driven by the fact that the assets
are hedged against gilt yields (used for cash funding purposes),
whereas the accounting liabilities are driven by corporate bond
yields. Over the year, gilt yields rose more than corporate bonds,
so the assets moved more than the liabilities on an accounting basis.
Further details of all the Group’s pension arrangements can
be found in Note 11 to the Consolidated Financial Statements.
Dividends
A final dividend of 2.0p for 2023-24 has been proposed, to be
funded by GLS.
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Non-Financial and Sustainability Information Statement
In accordance with sections 414CA and 414CB of the Companies
Act 2006, we set out below where information can be found in this
Annual Report relating to non-financial and sustainability matters,
including our commitment and approach to responsibly managing
our relationships with our people, customers, communities and
the environment. We also highlight, where relevant, the policies
to support our performance in these areas, and how we monitor
their effectiveness and their outcomes.
Environment
Material policies
ESG Policy Statement (Group)
Environment and Energy Policy (Royal Mail)
Environmental Standard (GLS)
Outlines our commitments to responsible management of natural
resources, climate change mitigation and adaptation, pollution
prevention and protection of the environment. Includes engagement
with our people, customers and suppliers.
Outcomes
— Our environment strategies, approach and policy outcomes. Pages 28
to 31.
— Environmental performance against key metrics including carbon
emissions and waste generation. Pages 30 and 31.
— The Board factors the impact of the Group’s operations on the
community and the environment into its decision making. Page 26.
— Disclosure consistent with ten TCFD recommendations (and partially
consistent with one of the recommended disclosures) and compliant
with the Companies Act 2006 as amended by the Companies
(Strategic Report) (Climate-related Financial Disclosure) Regulations
2022. Statutory climate-related financial disclosures as contained
within the TCFD Statement. Pages 41 to 48.
How we monitor effectiveness
— Monitor scores and rankings in sustainability benchmarks and indices.
— Measure performance against key environmental metrics which
are externally assured.
— Monitor customers’ expectations in relation to our environmental
performance.
— Regular audits against our environment management systems.
— Include environmental criteria in supplier selection frameworks
and monitor suppliers’ performance (Royal Mail).
— Board oversight of performance by the ESG Committee. Pages 104
and 105.
Risk management
— Principal risk: Climate change and environmental management.
Page 56.
Employees
Material policies
Royal Mail and GLS Health and Safety policies
Our commitments to managing health and safety risks, including removing
or reducing the likelihood of injury or harm to our employees or others.
ESG Policy Statement (Group)
Business Standards (Royal Mail)
Code of Business Standards (GLS)
Page 40.
People Policy (Royal Mail)
A single policy statement which sets out our overarching commitment
to colleagues throughout their employment with Royal Mail.
Royal Mail Speak Up (Reporting) policy and GLS Whistleblower system
Our commitments to investigating suspected wrongdoing, including the
system for raising concerns and our respect for whistleblower confidentiality.
Equality, Diversity and Inclusion Statement (Royal Mail)
Diversity Statement (GLS)
Our commitments to ensure that equality, diversity and inclusion are at the
heart of our business values, policies, processes and everyday practices.
Pages 34 to 36.
Outcomes
— Our people strategies, approach and policy outcomes.
Page 34.
— Our health, safety and wellbeing performance.
Pages 32 and 33.
— Our gender diversity profile. Page 35.
— Feedback from employee engagement activities and surveys.
Pages 34, 89 and 90.
— The Board factors the interests of our employees into its decision
making. Pages 25 and 26.
How we monitor effectiveness
— Monitor health and safety performance metrics which are externally
assured. Page 33.
— Undertake regular audits against our SHE management systems.
Page 32.
— Regular employee engagement forums and surveys allow us
to monitor culture and engagement. Pages 22, 34 and 90.
— Track workforce diversity (in GLS gender diversity only) across
job levels and different business areas. Page 35.
— Monitor the contact across our whistleblowing channels and
investigate concerns/incidents raised. Pages 39 and 98.
— Designated Non-Executive Director for engagement with the
workforce. Page 90.
— Board oversight of performance by the ESG Committee. Pages 104
and 105.
Risk management
— Principal risks: Industrial relations, Talent: workforce for the future,
Actual or suspected breaches of material law and/or regulation,
and Health, safety and wellbeing. Pages 55 to 57.
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International Distribution Services plc Annual Report 2023-24
Social and community
Material policies
ESG Policy Statement (Group)
Page 40.
Sustainable Procurement Code of Conduct (Royal Mail)
Supplier Code of Conduct (GLS)
Page 40.
Outcomes
— Our quality of service performance and customer feedback scores.
Pages 17 and 22.
— Our community investment approach and policy outcomes including
Royal Mail’s UK social and economic contribution.
Pages 36 and 37.
— Our supply chain approach and policy outcomes including monitoring
of suppliers (monitoring for Royal Mail only). Page 39.
— Payment practices, available at www.gov.uk/check-when-businesses-
pay-invoices (Royal Mail).
— The Board factors the interests of suppliers, customers and other
stakeholders into its decision making. Pages 25 and 26.
How we monitor effectiveness
— Research in relation to Royal Mail’s socio-economic impact
in the UK to understand the level of benefit we deliver to
the communities we serve. Page 37.
— Monitor the scores and rankings in sustainability benchmarks
and indices.
— Monitor customer feedback. Page 22.
— Monitor service performance. Page 22.
— Investigating breaches to our supplier codes, plus effective
monitoring and auditing of high-risk suppliers (Royal Mail).
— Monitor payment practices (Royal Mail).
— Board oversight of performance by the ESG Committee.
Pages 104 and 105.
Risk management
— Principal risks: Customer expectations and our ability to grow revenue,
Climate change and environmental management, and Business
continuity and operational resilience. Pages 54, 56 and 57.
Respect for human rights
Material policies
ESG Policy Statement (Group)
Page 40.
Equality, Diversity and Inclusion Statement (Royal Mail)
Diversity Statement (GLS)
Pages 34 to 36.
People Policy (Royal Mail)
Modern Slavery Act Statement
Sustainable Procurement Code of Conduct (Royal Mail)
Supplier Code of Conduct (GLS)
Page 40.
Outcomes
— Human rights approach and policy outcomes. Page 37.
How we monitor effectiveness
— Embed human rights risks into our compliance risk monitoring programme.
— Monitor high-risk supplier categories for evidence of breaches to our
standards (Royal Mail).
— Operate strict resourcing controls that govern the onboarding of new
permanent, temporary and contract staff to ensure compliance with
vetting standards (Royal Mail).
— Board oversight and review of Modern Slavery Act Statement by the
ESG Committee.
Risk management
— Our risk management framework governs how we identify, assess
and manage such risks. The risk appetite determines the level of
risk we are prepared to accept. Pages 49 to 51.
— Our Modern Slavery Act Statement.
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Anti-bribery and corruption
Material policies
Ethical Business Conduct Policy (Prevention of Bribery, Corruption,
Conflicts of Interest, Money Laundering, Terrorist Financing and the
Facilitation of Tax Evasion) (Royal Mail)
Page 40.
Business Standards (Royal Mail)
Code of Business Standards (GLS)
Page 40.
Sustainable Procurement Code of Conduct (Royal Mail)
Supplier Code of Conduct (GLS)
Page 40.
Royal Mail Speak Up (Reporting) policy and GLS Whistleblower system
Pages 39 and 89.
Outcomes
— Our approach to ethics and compliance and policy outcomes.
Pages 39.
— Completion rate of compliance training against target. Page 39.
How we monitor effectiveness
— Provision of mandatory compliance training for employees.
Pages 39.
— Require annual manager attestations to maintain the Business
Standards (Royal Mail). Page 39.
— Country Manager attestations as part of quarterly compliance
reporting (GLS).
— Regular screening of suppliers to check for instances of corruption.
— Monitoring contacts made across our whistleblowing channels.
Pages 39 and 89.
Risk management
Our risk management framework governs how we identify, assess and
manage such risks. The risk appetite determines the level of risk we are
prepared to accept. Pages 49 to 51.
Principal risks: Actual or suspected breaches of material law and/or
regulation. Page 56.
Other non-financial information Page
Our Business Model 14 and 15
Measuring Our Performance (non-financial KPIs) 21
ESG Review 27 to 40
TCFD Statement (Climate-related financial disclosures) 41 to 48
Most of the policies and procedures referred to above are available
at www.internationaldistributionservices.com/sustainability/
governance/policies and www.gls-group.eu/GROUP/en/about-us/
compliance.
This Strategic Report was approved by the
Board on 24 May 2024 and signed on its behalf by:
Martin Seidenberg
Group Chief Executive Officer
Michael Snape
Group Chief Financial Officer
Non-Financial and Sustainability Information Statement continued
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International Distribution Services plc Annual Report 2023-24
Corporate
Governance
Chair’s introduction 80
Board of Directors 82
Board at a glance 84
Governance framework 85
Division of responsibilities 86
Board activities 87
Culture 89
Shareholder and workforce engagement 90
Board evaluation 91
Nomination Committee Report 92
Audit and Risk Committee Report 96
Environmental, Social and
Governance Committee Report
104
Directors’ Remuneration Report 106
Directors’ Report 139
Statement of Directors’ Responsibilities 143
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International Distribution Services plc Annual Report 2023-24
Lastly, in response to the findings of our 2021-22 Board evaluation,
we were pleased to welcome Ingrid Ebner as a Non-Executive
Director and member of the Nomination Committee in June 2023.
The search for an additional Non-Executive Director with audit
experience is ongoing.
Biographical information for all Directors can be found on pages 82
and 83 and further information on recruitment and induction
processes can be found on pages 92 and 93.
Our purpose and culture
Our purpose – connecting customers, companies and countries –
is at the core of everything we do. To deliver long-term success
and generate value for all stakeholders, the Board seeks to uphold
strong governance standards. Fostering a trusting and inclusive
culture across the Group is integral to this and the Board sets the
tone from the top, demonstrating and encouraging values-driven
behaviours. Information on how the Board monitors culture is
included on page 89.
Stakeholder engagement
Stakeholder views and interests are at the forefront of the Board’s
decision making and we believe that this is critical to achieve long-term
success. We have continued to engage with our shareholders on key
issues throughout the year. I held 17 meetings with key investors to
discuss a variety of key themes, including performance against
strategy, industrial relations, and Universal Service reform.
Maria da Cunha, who was our Designated Non-Executive Director
for engagement with the workforce throughout the year, also
continued to meet with our employees across the Group and has
regularly updated the Board and the ESG Committee about the
valuable feedback our colleagues have provided. Following Maria's
three-year tenure, I am pleased to say that Ingrid Ebner, who has
extensive logistics experience, took over the role with effect from
1 April 2024. On behalf of the Board, I would like to thank Maria for the
energy, enthusiasm, and insight she has brought to the role and her
interactions with colleagues.
Information on how the Board has fulfilled its duties to our stakeholders
under section 172 of the Companies Act 2006 is included on pages
25 and 26 and further information on how we engaged with our
stakeholders is included on pages 22, 23 and 90.
Name change
During the year the Board considered and approved the Company’s
name change from International Distributions Services plc to
International Distribution Services plc. The change was registered at
Companies House on 10 May 2024. Whilst this was initially the
preferred name for the Company when the name was changed from
Royal Mail plc in October 2022, the Companies House registration
system did not allow the use of the name at that time.
Chair’s Introduction
Keith Williams
Non-Executive Chair
"Our approach to corporate
governance helps us deliver long term
success and generate value for our
stakeholders."
Dear Shareholder,
On behalf of the Board, I am pleased to present this year’s Corporate
Governance Report, which sets out the key activities of the Board
and its Committees during the year.
As explained in my statement on page 2, the Group has made good
progress this past year. Royal Mail's operational performance has
improved and the business has advanced its modernisation agenda.
GLS delivered a strong financial performance and continued to
deliver its strategic agenda.
In recent weeks, the Board has spent significant time considering the
proposals from EP Group for the entire issued share capital of IDS.
See page 2 for further information.
Board and Committee composition
This year has been one of transition for the Board. After a period of
instability within Royal Mail and the departure of Simon Thompson as
CEO Royal Mail, Martin Seidenberg, former CEO GLS and Executive
Director, was appointed as Group CEO with effect from 1 August
2023. The Board felt it was the right time to bring Royal Mail and GLS
together and centralise leadership via a Group CEO who could drive
collaboration and efficiency across both businesses to deliver change,
growth and value across the Group.
In January 2024, we announced that Michael Snape had been
appointed as Group CFO and Executive Director, taking over from
Mick Jeavons. I would like to take this opportunity to thank Mick for
the significant contribution he has made to the Board over the past
few years and to Royal Mail in his 30-year career.
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International Distribution Services plc Annual Report 2023-24
1. The Group Leadership Team includes the Group CEO, the Group CFO, the CEO Royal Mail,
the CEO GLS, the Group Company Secretary and their direct reports. This cohort aligns with
the FTSE Women Leaders Review definition of ‘leadership teams’ and the Code and the Parker
Review’s definition of ‘senior management’.
UK Corporate Governance Code 2018 (the Code)
The Board confirms that for the year ended 31 March 2024
the Company complied with all relevant Provisions in the Code.
A copy of the Code is available at www.frc.org.uk.
On 22 January 2024, the Financial Reporting Council published
an updated version of the Code, which will apply to financial years
beginning or after 1 January 2025 (other than in respect of Code
Provision 29 which applies one year later). We are preparing for
these upcoming changes and will report against the revised
Code in due course.
Application of Code Principles
1. Board leadership and company purpose Page
A. Effective Board 82 to 83
B. Purpose, values, strategy and culture 1
16 to 19
89
C. Resources and controls 14 and 15
49 to 58
85
D. Stakeholder engagement 22 to 26
90
E. Policies and practices and workforce concerns 38 to 40
76 to 78
2. Division of responsibility
F. Role of the Chair 86 to 88
91
G. Board composition 84
86
H. Role and time commitment of the
Non-Executive Directors
86
93
I. Board policies, processes, information,
time and resources
86
3. Composition, succession and evaluation
J. Board appointments and succession planning 92 to 94
K. Board skills, experience and knowledge 82 to 84
92
L. Board evaluation 91
4. Audit, risk and internal control
M. Independence and effectiveness of
internal and external audit
101 to 103
N. Fair, balanced and understandable 98
O. Risk management and internal control 49 to 58
102
5. Remuneration
P. Remuneration policies and practices 111
113 to 124
Q. Executive remuneration 110 and 111
125 to 138
R. Remuneration outcomes and
independent judgement
106 to 109
ESG
Our ESG Principles demonstrate the importance we place on ESG.
This year, following a growing convergence between Royal Mail’s
and GLS’ ESG strategies, we updated our ESG Principles to make
them more applicable at Group level and established a set of Group
ESG ambitions. The ESG Committee Report explains how it has
monitored implementation of these principles. In addition, reflecting
our commitment to comply with TCFD and develop our skills and
capabilities to better assess and manage climate-related risks and
opportunities, the Board participated in a training session in March
2024 focused on decarbonisation and upcoming regulatory changes
to environmental reporting.
Diversity, equity and inclusion (DEI)
The Board values the benefits that diversity brings and is pleased
that as at 31 March 2024, its composition aligned with the Financial
Conduct Authority (FCA) Listing Rule 9.8.6R(9). During the year, the
ESG Committee continued to monitor progress made against Royal
Mail’s and GLS’ DEI strategies, including Royal Mail’s diversity targets.
We also updated our Board Diversity Policy to include the following
new objectives in line with the recommendation of the Parker Review
to set a target for ethnic representation in senior management by
2027 and the requirement of the FCA Disclosure Guidance and
Transparency Rule 7.2.8A(R) for diversity across board committees:
— 10% ethnic representation within our Group Leadership Team.
1
— 40% women’s representation across our Board Committees.
— At least one member from an ethnic background across our
Board Committees.
→ For further information, please see pages 94 and 95.
Board evaluation
The Board undertakes a formal evaluation of the performance
of the Board, its Committees, the Chair and individual Directors
on an annual basis. After conducting internal evaluations in
2021-22 and 2022-23, the Board engaged Lintstock to complete
an external evaluation in 2023-24. Whilst we are pleased that
the overall outcome of the evaluation was positive, to ensure
continuous improvement, the Board has agreed several actions
for implementation in 2024-25.
→ Further information can be found on page 91.
I hope that you find this report useful and I look forward to meeting
shareholders at our forthcoming AGM on 25 September 2024.
Keith Williams
Non-Executive Chair
24 May 2024
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International Distribution Services plc Annual Report 2023-24
Board of Directors
Keith Williams
Independent Non-Executive Chair
Appointed to the Board
Non-Executive Director on 1 January 2018
Non-Executive Deputy Chair on 7 November 2018
Non-Executive Chair on 22 May 2019
Interim Executive Chair on 15 May 2020
Non-Executive Chair on 1 February 2021
Skills and experience
— Proven business leader with significant chair and board
leadership experience. Keith spent 18 years at British
Airways, including five years as CFO, three years as CEO
and two years as Executive Chair, during which time he
led the transformation of British Airways. Formerly a
Non-Executive Director and Deputy Chairman of the
John Lewis Partnership, a Non-Executive Director of
Aviva plc and an Executive Board member and Chair
of the Audit Committee at Transport for London.
— Extensive industrial relations, operational and
customer service experience.
— Chartered accountant.
Significant external appointments
— Chair of Halfords Group plc
— Chair of Great British Railways Transition Team
Maria da Cunha
Independent Non-Executive Director
Designated Non-Executive Director
for engagement with the workforce
until 31 March 2024
Appointed to the Board
22 May 2019
Skills and experience
— Extensive experience in industrial relations,
transformation programmes and employee
engagement gained through her 18-year career
at British Airways, where Maria was the Director of
People, Legal and Government and Industry Affairs,
and the Director of People and Legal. Maria was
formerly a Non-Executive Director of De La Rue plc.
— Qualified solicitor with significant risk, compliance
and legal knowledge, having held various positions
with Hogan Lovells, Lloyd’s of London and Law
College of Europe.
Significant external appointments
— Panel Member of the Competition and
Markets Authority
Michael Findlay
Independent Non-Executive Director
Appointed to the Board
22 May 2019
Skills and experience
— Extensive strategy, finance and M&A experience.
Michael spent 27 years in investment banking at
Robert Fleming & Co, UBS and most recently Bank
of America Merrill Lynch, where he was Co-Head
of Investment Banking and Corporate Broking for
the UK and Ireland.
— Significant knowledge of the letters and parcel sector.
He is a former Non-Executive Director of UK Mail
Group plc, where he was also the Senior Independent
Director, Chair of the Remuneration Committee and
a member of the Audit Committee.
Significant external appointments
— Chair of Morgan Sindall Group plc
— Chair of London Stock Exchange plc (a subsidiary
of London Stock Exchange Group plc)
Lynne Peacock
Independent Non-Executive Director
Appointed to the Board
1 November 2019
Skills and experience
— Significant board and executive experience, having
served as the CEO of National Australia Bank Europe
Limited (NAB) and the CEO of Woolwich plc. Lynne
was formerly a Non-Executive Director at Standard
Life Aberdeen plc, Scottish Water, Jardine Lloyd
Thompson Group plc and Nationwide Building Society.
— Transactional experience gained through her
involvement in Woolwich plc’s IPO and FTSE 100
listing and its sale to Barclays, the disinvestment
of NAB’s Irish operations and the integration of
Clydesdale and Yorkshire Banks.
Significant external appointments
— Senior Independent Director of Serco Group plc
— Non-Executive Director of TSB Banking Group plc
— Senior Independent Director of TSB Bank plc
(a subsidiary of TSB Banking Group plc)
— Non-Executive Director and Deputy Chair
of Royal London Group
Martin Seidenberg
Group Chief Executive Officer
Appointed to the Board
Executive Director on 1 April 2021
Group Chief Executive Officer on 1 August 2023
Skills and experience
— Significant international and logistics experience.
Martin spent 15 years with Deutsche Post DHL
in a variety of senior logistics, parcel-related
and strategic roles including CEO of the DACH
region at DHL Supply Chain.
— Deep knowledge of GLS, having joined in 2015 as
Chairman of GLS Germany, becoming GLS CEO
in June 2020.
Significant external appointments
— None
Michael Snape
Group Chief Financial Officer
Appointed to the Board
18 January 2024
Skills and experience
— Extensive turnaround experience and financial
leadership gained in a number of leading international
companies during their transformation.
— Michael was previously Chief Financial Officer (CFO)
of Boots, part of Walgreens Boots Alliance. Prior to
Boots Michael was International CFO for Tesco and
his earlier career was spent with Waitrose, part of
the John Lewis Partnership, and J Sainsbury plc.
Significant external appointments
— None
E A R
N
A N RR E N
N R
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International Distribution Services plc Annual Report 2023-24
Ingrid Ebner
Independent Non-Executive Director
Designated Non-Executive Director
for engagement with the workforce
from 1 April 2024
Appointed
28 June 2023
Skills and experience
— Extensive logistics and supply chain experience,
including the optimising and automation of systems,
and more recently oversaw the development of a
global contract logistics capability and led the design
and implementation of a global organisation structure.
Ingrid is Vice President, Global Fulfilled by Maersk
Standards and Regional Delivery IMEA & LAM of A.P
Moller-Maersk, and reports to the Executive Committee.
— Previously, Ingrid spent 21 years at Amazon within
their divisions across Europe, in various supply chain
roles including Director of Supply Chain Operations
Continental Europe where she was responsible for
building the AMXL end-to-end operations organisation.
Significant external appointments
— None
Mark Amsden
Group General Counsel
and Company Secretary
Appointed
1 May 2019
Skills and experience
— Significant legal and company secretarial experience.
Mark was the former General Counsel and Company
Secretary of Wm Morrison Supermarkets plc and
the interim Company Secretary of Yorkshire Water.
Formerly a partner at Addleshaw Goddard LLP, where
he specialised in corporate litigation and headed up
the national IT litigation practice.
— Data and technological experience. Mark helped
oversee Morrisons’ move online with Ocado and then
Amazon, and dealt with the response to Morrisons’
employee data theft in 2014.
Significant external appointments
— None
Baroness Hogg
Senior Independent Non-Executive Director
Appointed to the Board
1 October 2019
Skills and experience
— Extensive board and governance experience, having
served as Chair of 3i Group plc and as a Non-Executive
Director of several companies, including BG Group
and GKN plc. Baroness Hogg won the Sunday Times
Lifetime Achievement Award for Non-Executive
Directors in 2017.
— Significant political and regulatory experience
through her former roles as Lead Independent
Non-Executive Director of HM Treasury, Chair of
the Financial Reporting Council and Head of the
Prime Minister’s Policy Unit under John Major.
She was granted a life peerage in 1995 and sits
in the House of Lords as a crossbencher.
Significant external appointments
— None
Shashi Verma
Independent Non-Executive Director
Appointed to the Board
29 September 2021
Skills and experience
— Proven business leader with extensive experience
in developing innovative technology. Shashi is the
Director of Strategy and Chief Technology Officer
at Transport for London (TfL), a role in which he
is responsible for the operation of TfL’s revenue
collection system. He also led the development
and implementation of contactless payments
on TfL’s systems.
— Significant customer service experience gained
through his responsibility for integrating TfL’s
customer-facing activities and for running its
customer service operations.
Significant external appointments
— None
Jourik Hooghe
Independent Non-Executive Director
Appointed to the Board
1 June 2022
Skills and experience
— Extensive financial, accounting, operations and
strategy experience in consumer goods and retail
businesses. Jourik is Chief Financial Officer of
Swissport International AG, and his responsibilities
cover group finance, including controlling, accounting,
M&A, IR, tax, procurement, fleet and ESG.
— Jourik was previously Executive Vice President and
Group Chief Financial Officer of Wizz Air Holdings plc.
Prior to that he spent 18 years at Procter & Gamble in
various finance roles, including Head of Global
Strategy and Regional CFO, in businesses across
Europe, India, China, the Middle East and Africa.
Jourik also spent time at Adecco Group, where he
transformed the finance and accounting function
into a data and technology-driven organisation.
Significant external appointments
— None
A NE NA E N
N
Committee
membership key:
A
Audit and Risk
E
ESG
N
Nomination
R
Remuneration
Committee Chair
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International Distribution Services plc Annual Report 2023-24
Board at a Glance
Key activities in 2023-24
— Board changes:
→ See pages 80, 92 and 93.
— Universal Service reform:
→ See page 24.
— Overseeing plans to stabilise Royal Mail
and improve its quality of service.
→ See pages 17 and 18.
Board tenure (as at 31 March 2024)
Board gender diversity (as at 31 March 2024)
60%
40%
Board skills and experience
3.00
0.20
6.30
4.50
4.90
4.90
4.40
2.50
1.80
0.75
Martin Seidenberg
Michael Snape
Keith Williams
Baroness Hogg
Maria da Cunha
Michael Findlay
Lynne Peacock
Shashi Verma
Jourik Hooghe
Ingrid Ebner
0
1 2 3
Years
4 5 6 7
Board ethnic diversity (as at 31 March 2024)
9
1
British or other White
Asian/British Asian
7
7
8
5
3
3
7
8
7
4
Industrial relations
Customer
Transformation
Audit and risk management
ESG and sustainability
Accounting and finance
Corporate governance
Regulated businesses
Health, safety and wellbeing
Logistics
Board independence (as at 31 March 2024)
75%
6
2
Independent Non-Executive Directors
Executive Directors
1
Independent Non-Executive Chair
2023-24 2022-23
Female 40% 33%
Male 60% 67%
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International Distribution Services plc Annual Report 2023-24
Governance Framework
Our governance framework sets out where accountability for decisions
resides and is integral to good corporate governance. The Board has overall
responsibility for governance but delegates certain responsibilities to its
Committees which are detailed below. The Matters Reserved for the Board
and the Terms of Reference for each of the Committees are available at
www.internationaldistributionservices.com/about-us/management-and-committees.
The Board
The role of the Board is to promote the long-term success of the Company and generate value for all stakeholders.
Nomination Committee
Chair: Keith Williams
Remuneration Committee
Chair: Maria da Cunha
— Reviews the structure, size and composition of the Board
and its Committees, taking into consideration the balance
of skills, knowledge, experience, independence and diversity
of the Board.
— Supports the development of a diverse executive pipeline
and ensures appropriate plans are in place for the orderly
succession of the Board and the senior management team.
→ See pages 92 to 95.
— Sets the Remuneration Policy and, within the terms of the
agreed Policy, determines and approves remuneration and
incentive arrangements for the Chair, the Executive Directors,
the members of the Royal Mail and GLS Executive Boards
and the Group Company Secretary.
→ See pages 106 to 138.
Audit and Risk Committee
Chair: Michael Findlay
Environmental, Social and Governance Committee
Chair: Lynne Peacock
— Oversees the Group’s financial reporting.
— Oversees the relationship with the external auditor, including
monitoring the effectiveness of the external audit process
and the independence and objectivity of the auditor.
— Oversees the Group’s risk management and internal
control processes.
— Receives regular reports on internal audit work carried
out and assesses the effectiveness of internal audit.
→ See pages 96 to 103.
— Oversees Royal Mail’s and GLS’ environmental strategies
and targets and reviews their respective ESG Reports.
— Oversees Royal Mail’s and GLS’ DEI strategies and culture.
— Monitors Royal Mail’s and GLS’ health and safety performance
and wellbeing initiatives.
— Ensures Royal Mail and GLS support community and societal
issues, including services to support vulnerable customers.
— Oversees the Group’s participation in key ESG benchmarks
and engagement with investors and other stakeholders on
ESG issues.
→ See pages 104 to 105.
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Division of Responsibilities
The role of each Director, which is summarised below, ensures a clear division
of responsibility between Executive and Non-Executive Board members, which
supports the integrity of the Board’s operations.
Non-Executive
Independent Non-Executive Chair
— Responsible for the leadership and effectiveness of the Board and
for promoting high ethical and governance standards, taking into
account the interests of the shareholders and other stakeholders.
— With the support of the Group Chief Executive Officer, considers
the appropriateness of risk management across the Group.
— With support from the Group Company Secretary, ensures that the
Board receives high-quality information, that Board effectiveness is
considered and that all new Directors are provided with a thorough
and tailored induction programme.
— Ensures an effective and complementary Board and fosters
relationships between all Directors, driving a culture that supports
constructive discussion, challenge and debate.
— Maintains effective communications with shareholders and other
stakeholders, ensuring that their views are understood and considered
appropriately during Board discussions.
Senior Independent Director
— Acts as a sounding board for the Chair.
— Serves as a trusted intermediary for the other Directors.
— Oversees the annual appraisal of the Chair’s performance.
— Available to meet with shareholders, should they have
issues or concerns.
Independent Non-Executive Directors
— Responsible for contributing sound judgement and objectivity to
the Board’s deliberations and overall decision-making process.
— Provide constructive challenge and monitor the Executive Directors’
delivery of the strategy within the Group’s risk and governance structure.
— Provide independent insight and support based on relevant experience.
— Satisfy themselves of the integrity of the Group’s financial information and
of the effectiveness of financial controls and risk management systems.
— Determine the appropriate level of remuneration for Executive
Directors and ensure that there is appropriate succession planning
in place at both Executive and Board level.
— Engage with internal and external stakeholders and feed back insights
as to their views in relation to Royal Mail’s and GLS’ cultures.
Designated Non-Executive Director for engagement
with the workforce
— Represents the Board in engagement with the workforce.
— Develops a thorough understanding of the workforce’s views
and Royal Mail’s and GLS’ cultures.
— Develops, implements and feeds back on employee
engagement initiatives in conjunction with management.
— Provides an employee voice in the Boardroom by raising
relevant matters on issues raised.
— Communicates to the workforce the outcomes and
developments made by the Board on specific matters.
Executive
Group Chief Executive Officer
— Executive responsibility for the Group’s strategy and, together
with the Board, oversees its implementation.
— Executive responsibility for the Group’s management, subject
to matters that are reserved to the Board.
— Leads the Royal Mail and GLS Executive Boards in the day-to-day
running of the businesses, consistent with the strategy and
commercial objectives agreed by the Board.
— Considers the appropriateness of risk management across the Group.
— Ensures due consideration is given to environmental and ESG
matters, as well as the Group’s culture and values.
— Together with the Chair, represents the Group to its customers,
suppliers, shareholders and other stakeholders.
Group Chief Financial Officer
— Provides strategic financial leadership.
— Responsible for the day-to-day management of the Group
finance function.
— Oversees and monitors the Group’s internal control systems
and the accurate reporting of its financial results.
— Ensures commercial focus across all business activities.
— Oversees the Group’s treasury, investor relations, tax, insurance
and pension arrangements, and monitors regulation.
Group Company Secretary
— Ensures that Board procedures are complied with, applicable rules
are followed and that good information flows exist to the Board and
between its Committees.
— Supports the Chair to provide advice to Board members, particularly
in relation to corporate governance practices, induction training and
personal development.
— Communicates with shareholders and other stakeholders as
appropriate and ensures that due regard is paid to their interests.
— Works with the Chair, the Group Chief Executive Officer and the
Group Chief Financial Officer, to ensure that the Board and Board
Committees have high-quality information, adequate time and
appropriate resources in order to function effectively and efficiently.
— Supports the Chair and Chairs of Board Committees in considering
Board effectiveness.
— Provides support to the Chair and Board members as required.
— Ensures that relevant policies of the Group, Royal Mail and GLS are
reviewed by the Board or the relevant Committee on an annual basis.
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Board Activities
Board meeting agendas are derived from the Board’s forward planner which
sets out the topics expected to be discussed during each year. In advance of
each Board meeting, the Group Company Secretary holds an agenda-setting
meeting with the Group CEO and Group CFO. The agenda is then agreed
with the Chair.
The Board held 12 in-person scheduled meetings during the year,
one of which was held in Madrid during a site visit to GLS. Details
of individual attendance are set out in the adjacent column. In
addition, two virtual ad-hoc meetings were held to discuss items
related to the 2022-23 audit and to approve the appointment of
the Group CFO. The Board also met several times with the Royal Mail
Executive Board in the early part of the financial year to closely
monitor Royal Mail’s performance and its recovery following
resolution of the dispute with the CWU at the end of April 2023.
Details of Committee membership and meetings are set out on
pages 92, 96, 104 and 106. Agenda setting for each Committee
meeting follows a similar process to that described above.
All Directors are committed to attending all scheduled Board
meetings, and relevant Committee meetings, and only fail to do
so in exceptional circumstances. Similarly, every effort is made by
Directors to attend ad-hoc meetings. Board and Committee papers
are made available to Directors via an online portal one week before
a meeting takes place to allow sufficient time for review. Where an
individual was unable to attend a meeting, feedback was sought in
advance of the meeting by the Chair and a debrief offered following
the meeting.
During the year, the Board regularly considered a number of
items, including health and safety, updates from the Group CEO,
Committee Chair updates following Committee meetings, Group
financial performance, regulatory reports, investor relations reports
and employee engagement feedback. In addition to the regular
topics discussed, set out in the table below is a summary of the
key matters considered and approved during the year. Stakeholder
issues, and the impact of decisions on stakeholders, formed part
of the Board’s discussion.
Director Attendance (scheduled meetings)
Keith Williams 12/12
Martin Seidenberg 12/12
Michael Snape
1
3/3
Baroness Hogg 12/12
Maria da Cunha 12/12
Michael Findlay 12/12
Lynne Peacock 12/12
Shashi Verma 12/12
Jourik Hooghe
2
11/12
Ingrid Ebner
3
8/9
Mick Jeavons
4
8/9
Simon Thompson
5
2/2
1. Michael Snape joined the Board on 18 January 2024.
2. Jourik Hooghe was unable to attend one meeting due to an unavoidable meeting clash.
3. Ingrid Ebner joined the Board on 28 June 2023. Ingrid was unable to attend one meeting
due to a family emergency.
4. Mick Jeavons stood down from the Board on 18 January 2024. Mick was unable to attend
one meeting due to illness.
5. Simon Thompson stood down from the Board on 12 May 2023.
Matters considered Matters approved
Strategy — Royal Mail’s pricing strategy.
— Royal Mail’s network strategy.
— GLS acquisitions.
— Expansion/construction of new GLS depot at Ringsted (see page 26).
— Royal Mail’s vehicle replacement plan.
Business — Plans to stabilise Royal Mail.
— Industrial relations.
— Universal Service reform.
— Possible offer from EP Group
(see page 2).
— Royal Mail and GLS business plans and budgets.
— Business Recovery, Transformation and Growth Agreement (see page 24).
— Response to Ofcom’s call for input on Universal Service reform.
— Quadient locker agreement (see page 13).
Financial
management
— Capital allocation.
— Group liquidity.
— Results announcements and trading statements.
— Dividend (see page 3).
— Blocklisting of shares.
— Bond issue (see page 26).
— Tax strategy.
Risk management
and internal control
— Risk management and
internal control systems
(see page 49 to 51).
— Principal and emerging risks, including risk appetite (see pages 49 to 58).
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Board activities continued
The Board continued its long-standing practice of having individuals
from relevant business areas present at its meetings on key items.
This gives the Board the opportunity to meet key individuals from
across the Group and gain a deeper insight into its business. This
year, more than 60 senior managers presented at, or attended,
one or more Board or Committee meeting.
Outside of Board meetings, the Non-Executive Directors and
the Chair meet regularly without the Executive Directors, helping
to further develop the working relationships between the Non-
Executive Directors and assess the performance of the Executive
Directors. In addition, the Non-Executive Directors continued to make
themselves available to meet with senior management to assist in
areas of specialty.
Conflicts of interest
Directors are required to notify the Chair and Group Company
Secretary of any potential or actual conflicts of interest. These
are then formally reported at the beginning of a Board meeting
for approval. The Board also monitors the content of the conflicts
of interest register annually. During the year, several external
appointments were considered by the Board and, in all cases,
it was agreed that there was no evidence of a conflict.
Board visit to Royal Mail’s Quality Control Centre
Improving Royal Mail’s quality of service is a key priority and
several actions have been taken, including using data more
effectively to monitor service performance. In November
2023, the Board was taken on a tour of the Quality Control
Centre at our Mount Pleasant site, led by the Royal Mail Chief
Operational Officer and the Customer and Quality Director.
The purpose of the tour was to demonstrate how enhanced
technology and real-time data were being used to monitor
and improve service levels. During the visit, the Board was
shown how Business Recovery, Transformation and Growth
Agreement initiatives were being implemented and updated.
The Board was particularly impressed to see how the
triangulation of data from different sources was being
used to address the business quality of service, one
of customers’ core criticisms.
Matters considered Matters approved
Governance, ESG
and regulation
— Royal Mail Collective
Pension Plan.
— Royal Mail’s and GLS’
whistleblowing processes.
— Material litigation.
— Relationship, and issue faced
with, the Post Office.
— Subsidiary directorships.
— Board changes (see pages 80, 92 and 93).
— Name change.
— 2023-24 Board evaluation actions (see page 91).
— Matters reserved to the Board and role responsibilities.
— Committee Terms of Reference.
— Modern Slavery Statement.
— Board Diversity Policy (see page 94).
— Group ESG Policy Statement.
— Royal Mail Health and Safety Policy.
— Royal Mail Speak Up (Reporting) Policy.
— Group Communications Policy.
— Occupational health contract.
— Conflicts of interest register (see page 88).
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Purpose: To connect customers, companies and countries
Royal Mail values
— Be positive – about what we can achieve
— Be brilliant – for our customers
— Be part of it – each one of us is responsible
GLS values
— Reliability
— Security
— Transparency
— Flexibility
— Sustainability
How the Board monitors culture: engagement channels
Considers employee survey
feedback (see page 34).
Reviews whistleblowing
reports and processes.
Participates in site visits
(see page 90)
Considers feedback from the
Designated Non-Executive
Director for engagement with
the workforce (see page 90).
How the Board monitors culture: dashboard indicators
Indicator 2023-24 performance
Sickness absence
1
(see page 33) Royal Mail: 6.75% GLS: 4.73%
Lost time accident frequency rate
1
(see page 33) Royal Mail: 0.78 GLS: 1.98
Gender diversity (see pages 34 to 36) Royal Mail: 20% female 80% male GLS: 30% female 70% male
Ethnic minority representation (Royal Mail only
2
) Royal Mail: 13%
Key 2023-24 insights and outcomes
Royal Mail
— A need to turn feedback into action: Introduced a simplified
approach of ‘just one thing’, developed an action planning
support guide for managers and provided managers with
more training to support better action planning.
— A need to restore levels of company pride and ensure
employees feel valued and recognised for their
contributions: Launched the ‘Change for Good’ campaign
which aims to build a company culture everyone can be proud
of. The ‘Heart of Royal Mail Awards’, a new peer-nominated
recognition programme, will launch later this year.
— Employees want more opportunities to get involved in
decisions that affect them: Growing a network of
engagement champions and wellbeing ambassadors to
enable more upward feedback and support local activity.
‘Always on’ listening approach, with channels to feedback on
issues and suggestions, both locally, and at a company level.
— Employees want more direction and insight into future
planning: Royal Mail’s Chief Operating Officer toured the
UK with a strategy roadshow, onboarding managers with
operational priorities for the year ahead. A regular calendar of
events is being put in place to ensure leaders and managers
are kept up to date on performance and priorities.
GLS
— GLS Austria: ‘Strengthening healthy living’ project launched to
help employees stay healthy in response to 2022 survey findings.
Areas identified to support healthier lifestyles, with employee
working groups set up throughout Austria to define measures for
implementation. A further survey will be carried out in two years’
time to check whether employees’ wellbeing has improved.
— GLS Hungary: Several actions put in place in response to
2022 survey findings, covering salary and benefits, development
and training, and team building. 2023 survey findings showed
commitment to GLS remained high, but there was a need to further
focus on development and individual progress.
— GLS Croatia: Several actions put in place in response to 2022 survey
findings, covering improved collaboration and exchange between
departments, internal knowledge sharing, employee development
and management of career opportunities.
1. Refers to direct employees only.
2. GLS operates predominantly in the EU and therefore does not collect ethnicity data in line with EU data protection laws.
Culture
If we are to achieve long-term success, it is essential that we foster a trusting
and inclusive culture across the Group. The Board sets the tone from the top,
demonstrating and encouraging values-driven behaviour. The Board monitors
the culture across Royal Mail and GLS to ensure it is aligned with our purpose
and each businesses’ respective strategy.
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Shareholder and Workforce Engagement
Shareholder engagement
To achieve long-term success, it is vital that we understand
shareholder views so that we can factor them into our decision
making. The Board, supported by our investor relations team,
engages regularly with shareholders.
We carry out a comprehensive investor relations programme,
which this year covered the activities detailed below. Monthly
investor relations reports are submitted to the Board, covering
investor sentiment, share price movements, analyst commentary
and share register movements, and the Board receives regular
in-person updates from the Group’s Investor Relations Director.
— Full year 2022-23 and half year 2023-24 roadshows,
attended by the Group CEO and Group CFO.
— Bond roadshow in September 2023, resulting in a
successful raise of €500m and £250m.
— ESG engagement programme with our largest shareholders.
— Five investor conferences, two of which were attended by
the Group CFO.
— 101 meetings with 74 institutional investors, including 22
shareholders, representing 59 % of our equity and 86%
of our actively managed equity.
1
17 of these meetings were
attended by the Chair, and on occasion other Non-Executive
Directors. Two meetings were attended by the entire Board.
Discussions covered a variety of topics, including the
potential separation of our two businesses, performance
against strategy and financial targets, Royal Mail customer
win-back activities, the Company’s plan to become cash
generative and pay a dividend, leadership changes, industrial
relations, Universal Service reform, GLS investments and
margins, progress against environmental targets, health
and safety performance, and culture.
As part of the Remuneration Committee’s 2023 review of the
Directors’ Remuneration Policy, Maria da Cunha, Chair of the
Remuneration Committee, wrote to our top 15 shareholders to
seek their feedback on the proposed changes. We were pleased
that the current Policy received over 97.9% support at our 2023
Annual General Meeting (AGM). We are seeking a further change
to the Policy at our forthcoming AGM and Maria da Cunha has
written to our top 20 shareholders seeking their feedback.
Further information can be found on page 109.
Engagement with our retail shareholders is also important.
The Board was therefore pleased to again hold a hybrid AGM in
2023, which was attended by all Directors. The AGM is a key forum
for our retail shareholders to ask questions to the Board and the
hybrid format enhanced engagement, allowing questions to be
submitted in person, via the online platform and via telephone.
In addition, shareholders attending in person had the opportunity
to meet our Board immediately after the AGM. The 2024 AGM,
which will again be in hybrid format, will be held on Wednesday
25 September 2024 in Newbury and online.
In addition to the AGM, retail shareholders are able to email
in any questions they may have throughout the year. These
are typically dealt with by the Company Secretariat team.
Workforce engagement
Many of the decisions we make could impact our colleagues
and it is therefore important that we engage with them and
understand their views.
At the start of the year the Board visited GLS’ new Madrid-based
hub, which commenced full scale operation in March 2023.
During their visit, the Board met with a number of GLS employees,
who shared their thoughts on working for GLS. Throughout the year
the Board was also encouraged to undertake other site visits in
different locations and collectively Board members undertook
25 site visits across the UK, Spain, Germany and Denmark.
During the year Maria da Cunha, who was our Designated Non-
Executive Director for engagement with the workforce throughout
the year, held 11 Royal Mail Employee Voice Forums with frontline
and managerial colleagues across delivery offices, mail centres
and the north-west super hub. One of these was attended by three
other Non-Executive Directors. The following key themes arising
from these discussions, and the actions we are taking to address
them, are set out below.
— At the start of the year a lack of clarity on change. Throughout
the year, the business worked hard to communicate the change
initiatives being deployed across its operations and, as a result,
in Employee Voice Forums held towards the end of the year,
change had dissipated as a key theme and colleagues were
more accepting of it.
— Concerns around the fleet and workload and a view that revisions
had not worked in all areas. A vehicle replacement programme was
approved by the Board during the year and revisions will be revisited
with better data where needed. While further work is required, the
Board is satisfied that these issues are being progressed.
— Universal Service reform. Colleagues want the Universal Service
to change and management believes reform would bring significant
benefit to managers and their teams. The Board is supportive of
a change to the Universal Service and approved Royal Mail’s
response to Ofcom’s call for input on the future of the universal
postal service in March 2024 (see page 24).
Maria also held two GLS Employee Voice Forums in Spain and
France. The following key themes arising from these discussions,
and the actions we are taking to address them, are set out below.
— Difficulty in retaining talent and attracting new suitable candidates
in Spanish IT and sales labour market. To enhance attractiveness
for both current and potential employees, opportunities are being
explored to make work more convenient including up to 100%
home working where feasible.
— Challenges around learning new operative processes at the
Madrid hub. There is an initiative called ‘Escuela de la Excelencia’
(Excellence School) where operations processes are explained to
GLS warehouse employees around Spain, including employees
working at the Madrid hub.
— Opportunity to enhance information exchange and interconnection
with other departments as well as increased exchange of experience
across the Group. GLS Group HR has created a knowledge base
across the entire GLS Group.
Ingrid Ebner succeeded Maria as the Designated Non-Executive
Director for engagement with the workforce with effect from 1 April
2024. Further information on how the Board has fulfilled its duties to
our stakeholders under section 172 of the Companies Act 2006 can
be found on pages 25 and 26. Information on how we engaged with
our stakeholders is set out on pages 22 and 23.
1. Calculated based on share register as at 31 March 2023.
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Board Evaluation
The Board formally evaluates its performance and effectiveness annually
through the Board evaluation process. The 2023-24 Board and Committee
evaluations were externally facilitated by Lintstock, an independent consultancy
that has no other relationship with the Group or its individual Directors. This
followed the internal Board and Committee evaluation that was led by the
Senior Independent Director in 2022-23, details of which can be found in
our Annual Report and Financial Statements 2022-23.
Progress against 2022-23 evaluation actions
Actions Progress
— Recruit an additional Non-Executive
Director with accountancy experience.
— The search for an additional Non-Executive Director is ongoing.
— Increase focus on talent retention
as a key risk, by both the ARC and
Remuneration Committee.
— During the year Royal Mail and GLS presented plans to the ARC for tackling talent retention as a key
risk. Talent retention was also considered by the ARC as part of regular discussions around key risks.
— The challenge of recruiting, retaining and engaging key talent has framed many of the
Remuneration Committee’s decisions.
— Nomination Committee to consider
Non-Executive Director succession
planning (taking note of Committee
needs) and talent management.
— During the past two years three new Non-Executive Directors have been appointed.
— Committee membership and succession, as well as Committee Chair succession, were
considered during the year.
— The Board’s balance of skills and experience was reviewed by the Nomination Committee during the year.
— As far as possible, Committee Chairs
to ensure that topics are considered
by only one Committee and/or the
Board to minimise overlap and ensure
effective management of issues.
— The Terms of Reference for each Committee are regularly reviewed by the Committees and the Board.
— The Matters Reserved for the Board are regularly reviewed ensuring that the correct matters
are delegated to the correct Committee.
— Detailed forward planners for the following year are considered by the Chairs of the relevant
Committees, ensuring that the relevant matters are considered by the relevant committee,
to remove any duplication.
2023-24 Board evaluation process
Stage 1 – Selection of independent evaluator – December 2023
— Following a beauty parade, Lintstock was identified as the
preferred external evaluator.
— After seeking the opinion of the Board, Lintstock was engaged
to conduct the 2023-24 Board and Committee evaluation.
Stage 2 – Evaluation development – January/February 2024
— Material from previous two Board and Committee evaluations
shared with Lintstock.
— Questionnaires developed by Lintstock in consultation with
the Deputy Company Secretary and the Group Company
Secretary. Questions structured around agreed topics,
comprising Board composition, Board dynamics, Committees,
information and support, meetings and decision making,
strategic oversight, risk and external environment, people
and succession, and overall Board experience.
— Proposed questionnaires reviewed by the Chair, the Senior
Independent Director and each Committee Chair.
Stage 3 – Evaluation process – February/March 2024
— Questionnaires issued to Board members.
— Responses returned to Lintstock.
Stage 4 – Findings and actions – April 2024
— Lintstock produced the Board and Committee evaluation
reports for review.
— Board and Committee evaluation reports presented to the
Board and key priority actions agreed for 2024-25.
2023/24 Board evaluation findings
The findings of the Board evaluation were positive, with composition
seen to be strong and Board dynamics having improved with the
appointment of the Group CEO. Other areas which scored well,
relative to an external benchmark, were external environment
(government/regulatory and investor sentiment), induction and
ongoing education, monitoring employee sentiment and monitoring
culture. Whilst the overall findings were positive and confirmed the
Board operates effectively, to ensure continuous improvement,
several actions were agreed.
Priority actions for 2024-25
— Appoint a Non-Executive Director with audit experience.
— Further improve the quality of papers.
— Enhance use of external insight on topics.
Individual Director performance
Individual Director performance was considered by the Chair
as part of the Board evaluation. The findings, in combination with
the individual skills (see page 84) and time commitment of each
Director, support the proposal for those Directors to stand for
re-appointment at the 2024 AGM.
Chair performance
The performance of the Chair was evaluated in conjunction with
the Board evaluation. The Board's feedback confirmed that Keith
Williams is an inclusive and highly committed Chair who provides
strong leadership and has a deep understanding of the Group’s
businesses. He benefits from excellent relationships with Board
members and has built a network of stakeholders that he utilises
and supports in an effective and measured manner.
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Nomination
Committee Report
Dear Shareholder,
I am pleased to present this year’s Committee Report which
sets out the Committee’s activities during the year.
Board composition and succession
Our long-term success is dependent on attracting and retaining
the right balance of skills and experience across the Group.
This starts with the Board. During the year, the Committee
continued to review and assess Board and Committee
composition, taking into consideration the balance of skills,
experience, knowledge, independence, and diversity.
As mentioned in my introduction on page 80, this year has been
one of transition for the Board and the Committee has overseen the
appointment of a Group CEO, a Group CFO and a Non-Executive
Director. In doing so, the Committee has sought to construct an
effective, robust, well-balanced and complementary Board, with
the appropriate balance of skills, experience, independence and
knowledge of the Group. Information on the process used for each
of these appointments is set out on page 93.
Biographical information for each Director is included on pages 82
and 83 and information on Board composition, including the skills
matrix, is included on page 84.
Executive Management appointments
During the course of the year the Committee oversaw the
appointments of a new Group CEO, a new Group CFO and new
CEOs for GLS and Royal Mail.
In preparation for the revision of the Group’s leadership structure
(see page 80) the Committee recommended the appointment of
Martin Seidenberg as Group CEO. During the previous three years,
the Committee had had the opportunity to evaluate Martin’s
performance as CEO GLS and as an Executive Director. He had
proven his ability as a CEO and demonstrated many strengths,
including setting GLS’ strategy and overseeing its effective delivery.
His people skills and deep knowledge of the parcels industry had
also benefitted the business and the Group. The Board was delighted
to approve his appointment, which was announced on 20 July 2023
and became effective on 1 August 2023.
Odgers Berndtson was engaged to undertake the search for a
new Group CFO and compiled a longlist of external and internal
candidates. Following the recruitment process detailed in the panel
on page 93, the Committee recommended the appointment
of Michael Snape as Group CFO. In making this recommendation
the Committee took into account Michael’s extensive turnaround
experience and excellent financial leadership across a number of
international companies during their transformation. The recommendation
was approved by the Board and announced on 18 January 2024 and
became effective that day.
Role of the Committee
The Committee’s role and responsibilities
are summarised on page 85.
Key activities in 2023-24
— Recommended the appointment of Martin Seidenberg
as Group CEO.
— Oversaw recruitment of Michael Snape as Group CFO
and recommended his appointment.
— Oversaw the recruitment of Ingrid Ebner as an independent
Non-Executive Director and recommended her appointment.
— Approved the appointment of Karl Pfaff as CEO GLS and
oversaw the recruitment of Emma Gilthorpe as CEO Royal Mail.
— Considered succession planning for the Chair and Non-
Executive Director roles and Committee composition.
— Reviewed talent capability and development, and
succession planning within Royal Mail and GLS.
— Ongoing search for an additional independent
Non-Executive Director.
2024-25 priorities
— Continue to monitor talent capability and development,
and succession planning across Royal Mail and GLS.
— Continue to consider Board-level succession planning.
— Continue the search for an additional independent Non-
Executive Director.
Committee membership and attendance
The table below contains information about the Committee’s
membership and the number of scheduled meetings each
Director attended and was entitled to attend during the year
ended 31 March 2024. In addition, four ad-hoc meetings were
held to consider the appointment of Martin Seidenberg as Group
CEO, future Non-Executive Director recruitment, the appointment of
Michael Snape as Group CFO and to discuss talent and succession
planning within Royal Mail and GLS.
Director Joined
Attendance
(scheduled
meetings)
Keith Williams
(Chair since 22 May 2019) 19 April 2018 2/2
Maria da Cunha 25 September 2019 2/2
Michael Findlay 25 September 2019 2/2
Baroness Hogg 1 October 2019 2/2
Lynne Peacock 1 November 2019 2/2
Shashi Verma 29 September 2021 2/2
Jourik Hooghe 1 June 2022 2/2
Ingrid Ebner
1
28 June 2023 0/1
1. Ingrid Ebner joined the Nomination Committee on 28 June 2023. She was entitled to attend
one meeting during the year but was unable to do so due to a family emergency.
Committee meetings were attended by the Group CEO, the Group
Company Secretary and other members of senior management,
where relevant. In line with our Conflicts of Interest Policy, Directors
are asked to absent themselves from any discussions regarding
their own re-appointment or succession. The Committee is
supported by the Group Company Secretary.
Keith Williams
Non-Executive Chair
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Non-Executive Director appointment
In response to the findings of the 2022-23 Board evaluation (see
page 91), the Committee engaged Egon Zehnder to undertake
a search for a new Non-Executive Director. The search is ongoing.
As mentioned in last year’s report, in response to the findings of our
2021-22 Board evaluation, Ingrid Ebner was appointed to the Board
on 28 June 2023. Korn Ferry supported the recruitment process
that resulted in her appointment. Further information on Ingrid’s
recruitment process can be found in our 2022-23 Annual Report
and Financial Statements.
Our recruitment process
Stage 1 – Agree objective of the process
and candidate specification
Stage 2 – Engage external search agency
and confirm requirements
Stage 3 – Longlist of candidates reviewed against the
Committee’s latest Board composition, diversity and skill set
Stage 4 – Shortlist of candidates interviewed
by Chair and Directors
Stage 5 – Preferred candidate is identified,
and background checks are completed
External search agencies
Korn Ferry, Odgers Berndtson and Egon Zehnder were retained
during the year to support the recruitment processes described
above. Egon Zehnder has been a leader in the recruitment sector for
over 50 years, and Odgers Berndtson have international expertise
enabling them to identify a diverse range of candidates.
The Committee determined that all three firms had the relevant skills
and experience to successfully undertake the briefs. All are
signatories to the Voluntary Code of Conduct for Executive Search
Firms, which promotes gender diversity and best practice
for corporate board recruitment searches. None of the agencies
have any other connection to the Group or any of its Directors.
Board induction programme
We develop a tailored and comprehensive induction programme
for each externally appointed Director which aims to ensure that
new appointees are equipped to fulfil their role and participate in
Board discussions as quickly as possible. The programme usually
includes one-to-one meetings with the Chair, other Directors, the
Group Company Secretary and senior management across
the Group, as well as meetings with the Company’s advisers and
operational site visits.
During the year Ingrid Ebner and Michael Snape joined the Board
as a Non-Executive Director and the Group CFO respectively.
As part of her induction programme, Ingrid visited GLS’ office in
Copenhagen, where she met the Danish leadership team.
During tours of Royal Mail’s Mount Pleasant operations and its
Hammersmith delivery office, she met with the Regional Operations
Director, the Customer Operations Manager and a number of
employees, and did a postie walk.
Michael’s induction is ongoing and includes scheduled visits to
a number of Royal Mail’s and GLS’ operations.
Director re-appointments
Our Non-Executive Directors undertake a fixed term to expire at the
end of the third AGM after their appointment, which can be extended
by a further two three-year terms. The Committee monitors the
tenure of Non-Executive Directors to ensure that it plans sufficiently
in advance of retirements from the Board to ensure orderly succession.
There were no re-appointments during the year.
All Directors are required to stand for appointment or re-appointment
at each AGM. Ahead of the 2024 AGM, the Committee considered
the performance and effectiveness of each Director as well as their
skills and time commitment. The Committee concluded that all
Directors were valuable members of the Board and subsequently
recommended to the Board that all Directors should stand for
re-appointment at our forthcoming AGM.
Copies of the Executive Directors’ service contracts and the
Non-Executive Directors’ letters of appointment are available for
inspection by appointment at the Company’s registered office
during normal office hours and at the AGM.
Time commitments
The terms of appointment of each Non-Executive Director require
them to devote, on average, a minimum of two days a month to the
Group’s business. In practice, they tend to devote considerably more
time than this, supporting projects where their areas of expertise
contribute to specific initiatives.
The Committee has reviewed the time each of the Non-Executive
Directors has spent discharging their duties to the Company and
confirms that each has demonstrated that they have sufficient time
to fulfil their role properly.
Each Non-Executive Director is required to declare any significant
outside commitments prior to their appointment with an indication
of the time commitment involved. In November 2023 Lynne Peacock
advised the Chair that she was to be appointed Deputy Chair and
independent Non-Executive Director of Royal London and a member
of its Remuneration Committee and its Nominations and
Governance Committee. Following consideration by the Chair and
the Group Company Secretary the matter was discussed with the
Board. Following such discussion it was determined that Lynne’s new
role would not impact her ability to properly fulfil her duties to the
Group.
Talent and succession planning
During the year the Committee spent a significant proportion
of its time considering talent capability and development, and
succession planning within senior levels of Royal Mail and GLS.
Royal Mail
The Committee noted that whilst there had been a marked
improvement, there was a continuing talent risk within Royal
Mail. The business has taken several actions to mitigate this,
including renewing its focus on talent management and
launching new management development programmes.
See pages 34 and 35 for further information.
The Committee reviewed Royal Mail’s Executive Board succession
plans and identified a need to improve succession development
within the business. The Committee also reviewed the findings of
the senior leadership talent review, which focused on assessing
potential for growth, identifying successors, and mitigating flight
risks. The Committee noted that action plans were being put in place
to address these issues.
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GLS
The Committee noted the talent management and succession
planning activities underway within GLS including the introduction
of a structured onboarding and offboarding process across all GLS
countries and the development of a GLS Leadership Development
and Training Framework including the provision of development and
training to potential successors. See page 34 for further information.
DEI
We recognise the importance of fostering a diverse and inclusive
culture across the Group. To fulfil our purpose and support the
delivery of Royal Mail’s and GLS’ growth strategies, it is essential
that our workforce reflects the broad diversity of the customers
and communities we serve. We must offer an inclusive, fair and
accessible workplace where all our people can grow, develop
and succeed. While some progress has been made during the
year in this important area, the Committee noted that there was
still much to do to achieve Royal Mail's 2025 diversity targets
largely due to attrition. The Committee considered the measures
being implemented to increase diversity and agreed that their
effectiveness should be monitored on an ongoing basis.
Our Board Diversity Policy, which covers the Board, its Committees,
the Group Leadership Team and senior leadership, aims to ensure
that the Board has the appropriate balance of skills, experience
and background to deliver stakeholder value. A copy is available at
www.internationaldistributionservices.com/about-us/governance.
The adjacent table sets out the policy’s current objectives, how the
Committee has implemented them and the outcomes as at the
date of this Annual Report.
Board Diversity
Policy objectives Implementation and results
Endeavour to achieve
40% female representation
on the Board.
Female representation on the
Board as at 31 March 2024
was 40%. See page 84.
Endeavour to have at least one
woman in a senior Board role
(Chair, Senior Independent
Director, Chief Executive or
Chief Financial Officer).
Our Senior Independent
Director is a woman.
See page 83.
Endeavour to achieve 40%
women’s representation and
have at least one member from
an ethnic minority background,
across its Board Committees
(including the Audit and Risk,
Remuneration and Nomination
Committees).
Female representation
across the Board
Committees as at
31 March 2024 was 55%.
Ethnic minority
representation across the
Board Committees as at
31 March 2024 was one.
Encourage management to
achieve (by the end of 2025)
40% women’s representation in
the Group Leadership Team.
1,2
Female representation in the
Group Leadership Team as
at 31 March 2024 was 33%.
See page 95.
Encourage management to
achieve (by the end of 2027) 10%
ethnic minority representation in
the Group Leadership Team.
3
Ethnic minority
representation in the Group
Leadership Team as at
31 March 2024 was 4%.
Place emphasis on development
of diversity within the Group and
commit to further pursuing
diversity, as appropriate and on
merit, within the senior leaders
of the Group.
See pages 34 to 36.
Endeavour to have at least one
Director on the Board from an
ethnic minority background.
A member of our Board is
from an ethnic minority
background. See page 84.
Only engage executive search
firms that are signatories of the
Voluntary Code of Conduct for
Executive Search Firms.
See page 93.
When recruiting Non-Executive
Directors, ensure that the
Board’s Diversity Policy’s
commitments, as well as
personal strengths,
are considered.
See page 93.
Consider candidates for
appointment as Non-Executive
Directors from a wider pool.
See page 93.
1. The Group Leadership Team includes the Group CEO, the Group CFO, the CEO Royal Mail,
the CEO GLS, the Group Company Secretary and their direct reports. This cohort aligns with
the FTSE Women Leaders Review (FWLR) definition of ‘leadership teams’ and the Code and the
Parker Review’s definition of ‘senior management’.
2. In line with the FWLR target.
3. In line with the Parker Review recommendation to set a target for ethnic minority representation
for ‘senior management’.
Nomination Committee Report continued
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International Distribution Services plc Annual Report 2023-24
Statement on compliance against regulatory targets
on gender and ethnicity
The Board confirms that as at 31 March 2024 (being the reference
date selected by the Board for the purposes of this disclosure),
the Company complied with the following regulatory targets:
— One of our senior Board positions (Chair, CEO, SID or CFO)
is held by a woman.
— One member of our Board is from a non-white ethnic
minority background.
— The proportion of women on our Board is 40%.
The data required in relation to this statement and the Board
and Executive Management diversity table below are based
on information contained within our payroll systems.
Group Leadership Team diversity
As at 31 March 2024, the gender balance of our Group Leadership
Team was 33% female and 67% male. As at the date of this report,
24 May 2024, female representation in the Group Leadership Team
has increased to 35%.
Board and Executive Management
1
diversity as at 31 March 2024
Number of Board
members
Percentage
of the Board
Number of senior
positions on the Board
(CEO, CFO, SID
and Chair)
Number in
Executive
Management
Percentage of
Executive
Management
Men 6 60% 3 4
2
100%
2
Women 4 40% 1 0 0%
Not specified/prefer not to say 0 0% 0 0 0%
Number of Board
members
Percentage of
the Board
Number of senior
positions on the Board
(CEO, CFO, SID
and Chair)
Number in
Executive
Management
Percentage of
Executive
Management
White British or other White
(including minority-white groups) 9 90% 4 4 100%
Mixed/Multiple Ethnic Groups 0 0% 0 0 0%
Asian/Asian British 1 10% 0 0 0%
Black/African/Caribbean/Black British 0 0% 0 0 0%
Other ethnic group, including Arab 0 0% 0 0 0%
Not specified/prefer not to say 0 0% 0 0 0%
1. Executive Management includes the Group CEO, the Group CFO, the CEO Royal Mail, the CEO GLS and the Group Company Secretary. This cohort aligns with the FCA’s Listing Rules definition of
Executive Management.
2. As at 24 May 2024, Executive Management consisted of 4 men and 1 woman, translating to 80% male and 20% female.
Committee evaluation
The Committee’s annual evaluation of its performance was undertaken as part of the Board effectiveness evaluation (see page 91).
Keith Williams
Chair of the Nomination Committee
24 May 2024
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Audit and Risk
Committee Report
Dear Shareholder,
I am pleased to present this year’s Committee Report which
sets out the Committee’s activities during the year.
The Board considers that I have recent and relevant financial
experience, having spent nearly 30 years in investment banking.
I was also previously a Non-Executive Director of UK Mail Group plc
and a member of its audit committee. The Board considers that the
Committee, as a whole, has the competence relevant to the Group’s
businesses (see pages 82 and 83 which include biographical
information about each Committee member).
The Committee meets regularly with the external auditor,
independent of the Executive Directors, to ensure that financial
reporting is subject to rigorous review throughout the year. I also
meet regularly with the Global Director of Risk & Audit, independent
of the Executive Directors, to discuss risk assurance matters.
Committee advisers
To support the Committee in carrying out its responsibilities,
it receives independent assurance from the Group’s Risk
Assurance function and regular reports from the Compliance
function. The Committee is also supported by the Royal Mail and
GLS Audit and Risk Committees, the Group General Counsel and
Company Secretary, and the Group CFO. I regularly attend the GLS
ARC along with the Global Director of Risk & Audit, the Group CFO,
and the Group General Counsel and Company Secretary.
The Committee is also supported by the Group’s actuary, Willis
Towers Watson Limited, which provides expert opinion and long-
term assumption advice with respect to pension accounting, and
Aon Limited, which provides similar expertise in relation to other
long-term liabilities.
The Committee receives regular reports from the external auditor
across a wide range of issues related to its oversight responsibilities.
Committee activity
During the year, the Committee regularly considered a number
of items including updates from the Royal Mail and GLS Audit
and Risk Committees and the Pensions Committee, together
with updates on compliance across the Group and the status of
actions identified through the 2022-23 Committee evaluation.
The Committee also approved policies in relation to Non-Audit
Services, Ex-Auditor Employment, Information Security,
Acceptable Use of IT and Data Privacy.
Role of the Committee
The Committee’s role and responsibilities are summarised
on page 85.
Key activities in 2023-24
— Oversaw the Group’s financial reporting and reviewed
results announcements for recommendation to the Board.
— Approved the Group’s key accounting estimates and
judgements, in particular the carrying value of Royal Mail given
its current financial position, for recommendation to the Board.
— Reviewed KPMG’s audit strategy and fees.
— Monitored progress to improve the effectiveness of the
Group’s financial reporting controls.
— Monitored progress made against Risk Assurance’s
transformation strategy.
— Monitored and reviewed the Group’s principal and emerging risks,
including progress and risk assessments in relation to fraud.
— Reviewed climate-related risks and remediation across the
Group including preparedness for future legislation and
reporting requirements.
Priorities for 2024-25
— Ensure the accuracy of the Group’s results announcements.
— Continue to monitor the delivery of improved financial
reporting controls.
— Continue to monitor the Group’s principal and emerging
risks, taking into account evolution of the Group’s strategy,
and progress on fraud risk management.
— Oversee the Group’s response to and compliance with
Code changes and the application of the Minimum Standard:
Audit Committees and the External Audit.
Committee membership and attendance
The table below contains information about the Committee’s
membership and the number of scheduled meetings each
Director attended and was entitled to attend during the year
ended 31 March 2024. In addition, two ad hoc meetings were
held to consider matters in relation to the half-year results
announcement and risk management.
Director Joined
Attendance
(scheduled
meetings)
Michael Findlay
(Chair since 30 May 2019) 30 May 2019 5/5
Baroness Hogg 1 October 2019 5/5
Lynne Peacock 1 November 2019 5/5
Jourik Hooghe
1
1 June 2022 4/5
1. Jourik Hooghe was unable to attend one meeting due to illness.
Committee meetings were routinely attended by the Non-Executive
Chair, the Group CEO, the Group CFO, the Royal Mail CFO, the Global
Director of Risk & Audit, the Group Financial Controller, the Group
General Counsel and Company Secretary, and representatives from
the external auditor, KPMG. Other non-members attended certain
meetings by invitation as appropriate.
Michael Findlay
Chair
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During its meetings, the Committee also participated in risk spotlight
discussions coordinated by the Global Director of Risk & Audit and
presented by relevant members of the management team. These
covered cost management, revenue growth, margin erosion, cyber
security, data protection, health and safety, GLS subcontractor risks,
talent: workforce for the future, business continuity, breach of material
laws/regulation and climate change and environmental management.
In addition to the regular topics discussed, set out in the table below is a
summary of the key matters considered and approved during the year.
Matter considered Activity
Financial Reporting
Half-year and full-year results
Significant matters
and judgements
— Reviewed and satisfied itself on the integrity of the half-year and full-year results, including consideration
of the significant accounting estimates and judgements, legal claims, contingent liabilities, impairment
assessments, alternative performance measures, the policies being applied, the statutory audit findings,
covenant compliance and pension assumptions.
Alternative performance
measures
— Reviewed the Group’s alternative performance measures (APM), including new measures introduced
in the year, to ensure that they remain relevant, are given no more than equal prominence to GAAP
measures, have a reasonable materiality threshold and have good quality reconciliations between
the APM and the closest GAAP measure.
Fair, balanced and
understandable
— Reviewed and assessed the Annual Report and Financial Statements to be fair, balanced and
understandable (see page 98).
Going concern and
viability statements
— Considered the going concern basis of preparation of the Financial Statements (see page 98).
— Considered the Viability Statement (see pages 59 to 61).
Regulatory accounts — Reviewed and approved the regulatory financial statements 2022-23.
Matter considered Activity
External Auditor
Re-appointment — Recommended to the Board the re-appointment of KPMG as external auditor.
— Reviewed and approved the external auditor’s engagement letter.
— Reviewed and recommended to the Board the approval of the external auditor’s letter of representation.
KPMG reports — Reviewed KPMG’s control and audit findings, including its appraisal of significant accounting
judgements, its audit opinion for the full-year results and its review for the half-year results.
— Reviewed and approved KPMG’s audit plan and strategy.
Effectiveness — Conducted a review of the effectiveness of the external audit process (see page 101).
Independence and objectivity — Reviewed the independence and objectivity of the external auditor (see page 101).
Audit cycle and non-audit
services and fees
— Reviewed the external audit cycle and identified improvements for future audits.
— Reviewed and approved the external audit fee, as well as the review and pre-approval of fees in relation
to non-audit services.
Matter considered Activity
Risk Management and Internal Controls
Controls and effectiveness — Received regular updates on financial reporting controls and the Group’s programme of activity to
enhance the financial reporting control environment.
— Reviewed the effectiveness of the Group’s risk management and internal control systems (see pages 102
and 103).
— Reviewed assessments of the impact of changes to the Code and plans to comply with new
requirements in respect of internal controls.
Principal and emerging risks — Reviewed the Group’s risk profile and the principal risks that might impact the achievement of the
Group’s strategy, any changes in the size and nature of these risks, and progress towards target
on a regular basis.
— Reviewed the principal risks and uncertainties statement for inclusion in this Annual Report.
— Discussed new and emerging risks, their impact and timeframe, and response strategy.
Fraud risks — Received updates on fraud risks across the Group and activities to formalise the fraud risk management
framework and monitoring.
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Matter considered Activity
Risk Management and Internal Controls continued
Assurance map — Reviewed the assurance map that assessed the adequacy of the second lines of defence in place over
Royal Mail’s and GLS’ principal risks and improvement actions required.
Internal Audit — Reviewed and approved the Annual Internal Audit plan and amendments during the year.
— Received reports and regular updates on Internal Audit activity.
— Oversaw progress against Risk Assurance’s transformation strategy (see page 103).
— Reviewed the effectiveness and independence of the Risk Assurance function.
— Reviewed and approved changes to the Risk Assurance Charter.
Matter considered Activity
Other Matters
Whistleblowing — Reviewed regular whistleblowing reports.
— Reviewed and recommended to the Board the Royal Mail Speak Up (Reporting) Policy in relation
to whistleblowing.
Ethics and business conduct — Reviewed and approved the Royal Mail Ethical Business Conduct Policy (Prevention of Bribery, Corruption,
Conflicts of Interest, Money Laundering, Terrorist Financing and the Facilitation of Tax Evasion).
Treasury and taxation — Reviewed the Group’s Treasury Policy and made recommendations to the management team.
— Reviewed and recommended to the Board the approval of the 2024-25 tax strategy.
— Reviewed the Group’s tax risks.
Governance — Reviewed the Committee’s 2024 forward planner.
— Reviewed and recommended the Board approve changes to the Committee’s Terms of Reference, taking
into account the FRC’s Minimum Standard: Audit Committee and External Audit published in May 2023.
— Approved changes to the Terms of Reference for the Royal Mail ARC, the GLS ARC and the
Pensions Committee.
— Received an update on duty to report payment practices and performance for the half year and full year.
— Approved the Committee’s report for the Annual Report and Financial Statements 2023-24.
— Reviewed and considered the implications of the FRC’s Annual Review of Corporate Reporting,
issued in October 2023.
Audit and Risk Committee Report continued
Going concern and viability statements
The Committee considered the basis of preparation of the Financial
Statements as a going concern, as set out in Note 1 to the Financial
Statements. The Committee also reviewed the form and basis of
conclusion underlying the long-term Viability Statement. Action taken
by the Committee in undertaking these assessments is set out on
page 99.
In assessing the potential impact of a change in control as a result of
the non-binding proposal by the EP Group, the Committee satisfied
itself that it is beyond the control of the Directors to dictate or confirm
the actions of the EP Group if they were to acquire IDS plc. Therefore,
given the potential change in control, and the associated impact on
the Group’s borrowings, the bank syndicate loan facility and other
contractual arrangements the Committee consider these conditions
to constitute a material uncertainty which may cast significant doubt
over the Group’s going concern and viability.
The Going Concern Statement and Viability Statement are set out
on page 61.
Fair, balanced and understandable
At the request of the Board, the Committee assessed whether the
Annual Report and Financial Statements 2023-24, taken as a whole,
were fair, balanced and understandable, and provide the information
necessary for shareholders to assess the Group’s position, performance,
business model and strategy. The Committee’s assessment took
into account the disclosures, as well as the processes and controls
underlying its production, including:
— Internal verification of factual content.
— Comprehensive reviews undertaken by the Group’s legal team
and key members of the senior management team.
— Consistency checks against the Group’s market disclosures
and strategy.
— External reviews undertaken by advisers and the external auditor.
The Committee concluded that the Annual Report and Financial
Statements 2023-24 were fair, balanced and understandable, and
the Board confirmed this view. The Board’s statement is contained
on page 143.
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International Distribution Services plc Annual Report 2023-24
Significant matters and application of judgements
During the year, the Committee considered and discussed a number of significant matters and/or judgements made by management.
The table below details the key issues discussed and the actions taken.
Matter Action taken by the Committee
Going concern and viability assessments
The going concern and viability assessments of the Group are
significant judgements in preparing the Financial Statements.
The financial performance and position of the Group, its cash
flows projections and its approach to capital management are
considered as part of the Board’s going concern and viability
assessment. The business plan, taking account of the Group’s
principal risks (see pages 52 to 58), capital structure and the
severe but plausible downside scenario (see page 60) are
also considered. Following a revised non-binding proposal
from EP Group for the entire issued share capital of IDS plc
on 14 May 2024, the change in control provisions in the
Group’s unsecured fixed rate notes, the bank syndicate loan
facility and other contractual arrangements were considered
as part of this assessment and the impact that might have
on the Group’s funding and liquidity position.
The Committee reviewed and challenged the appropriateness of
the scenarios modelled, the mitigating factors, and the three-year
viability assessment period reflecting the Group’s outlook and the
effects of the macro-economic uncertainties faced by the Group.
The Committee also considered the position of the Group in the
event of a change of control and the provisions in the Group’s
unsecured senior fixed rate notes and the bank revolving credit
facility. The Committee also considered the financing arrangements
of EP Group in the event of a change in control, and the fact that
these financing arrangements are outside the control of the Directors.
The Committee concluded that it is beyond the control of the Directors
to dictate or confirm the actions of the EP Group if they were to acquire
the IDS plc Group. Therefore, given the potential change in control,
the Committee recommended to the Board that these conditions
constitute a material uncertainty which may cast significant doubt
over the Group’s going concern and viability.
The external auditor reviewed the conclusions and recommendation
to the Board in relation to the going concern and viability assessments.
The Committee also reviewed the detailed disclosures and
concluded that they were appropriate.
Deferred revenue – advance customer payments
The Group recognises advance customer payments on its
balance sheet, predominantly relating to stamps and meter
credits purchased by customers but not used at the balance
sheet date. The majority of this balance is made up of stamps
sold to the general public, referred to as Stamps in the hands
of the Public (SITHOP).
In 2023-24 management has applied a new methodology to
calculate the deferred revenue balance. One of the primary data
inputs for this new methodology is the use of barcoded stamp
scan data to build a profile of how long stamps are held by
customers before being used for postage. These 'usage curves' are
then applied to historic sales to derive a deferred revenue balance.
Management uses estimates and judgements in applying the new
SITHOP methodology. Areas of estimates and judgements include:
products removed from both the scan and sales data to reflect fact
that certain stamps are not typically purchased for use e.g.
collector stamps; non scan percentage; method of extrapolating
usage for periods where barcoding information is not available;
bucket size; buy forward of stamps; retail stamp stock days; level of
breakage, breakage period; and adjustments to reflect posting
patterns around key events close to the reporting year end e.g.
tariff increases. For further details see Note 1 to the Financial
Statements on pages 171 to 184. These estimates and judgements
impact revenue, profit and net assets.
At 31 March 2024 the Group recognised £138 million (March
2023: £147 million) of deferred revenue in respect of stamps
sold to the general public but not used at the balance sheet date.
The Committee examined a report from management summarising
the new deferred revenue calculation and the estimates and
judgements applied including sensitivity analysis to understand the
range of possible outcomes. The Committee considered the controls
and additional procedures performed by management in relation to
the integrity of the data and the calculation model. The Committee
also considered the outputs of the model compared with the previous
methodology, noting that the deferred revenue balance was within
the range of expected outcomes.
Separately, the external auditor reviewed the methodology and
calculation and assessed the assumptions made.
The Committee concluded that the level of deferred revenue
remained appropriate.
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Matter Action taken by the Committee
Pensions – Defined benefit obligations
The valuation of the defined benefit pension plan obligations relies on
the estimation of long-term assumptions, i.e. discount rate, inflation,
mortality and pension increases. Small movements in these
assumptions can lead to material impacts on the balance sheet.
The valuation of certain unquoted pension scheme assets also
includes a high degree of estimation uncertainty.
In view of the complexity of accounting for pension schemes,
significant focus is required on the associated disclosure to
ensure that it is fair, balanced and understandable.
Key long-term assumptions were prepared by the Group’s actuary,
Willis Towers Watson Limited, and benchmarked against prevailing
economic indicators and other large pension schemes. All of
these assumptions are disclosed in Note 11 (pages 194 to 203) to the
Financial Statements. Changes in the assumptions were
summarised for the Committee, and explanations were provided
for the movements in returns on scheme assets, particularly as a
result of the liability hedging strategy. The results of the assumption
benchmarking were also discussed.
The external auditor used its own independent actuarial experts to
confirm that the assumptions used were reasonable and appropriate.
The Committee was also satisfied with the approach taken to
verify third-party valuations for unquoted scheme assets and
the associated disclosures.
DBCBS constructive obligation
When the Royal Mail Defined Benefit Cash Balance Section (DBCBS)
of the Royal Mail Pension Plan (RMPP) commenced in 2018-19, the
Directors agreed that an appropriate IAS19 accounting treatment
was to recognise a ‘specific’ constructive obligation to award annual
increases of CPI plus 2% over the lifetime of the scheme.
To date, the average of the actual increases awarded has been below
CPI plus 2% per annum, and therefore the Group’s view is that it is
more appropriate to use a ’non-specific’ constructive obligation
commencing in 2024-25, which will reflect the average increases
over the last five years (but reserving the right to adjust this if future
expectations are significantly different). Based on the average of the
last five years of increases, the accounting constructive obligation at
31 March 2024 is CPI plus 1.2%. Note 1 provides more details,
including the impact of this change on the Financial Statements.
The Group’s actuary, Willis Towers Watson Limited, has determined
the impact that a change in the constructive obligation from CPI
plus 2% to CPI plus 1.2% will have on the DBCBS liabilities.
The Committee reviewed the assessment and concluded that the
change in the accounting constructive obligation was reasonable
and appropriate including the treatment through the reported profit
and loss account in the current year.
The external auditor used its own independent actuarial experts to
review the impact of this change and it has confirmed that the Group’s
accounting treatment adopted is reasonable and appropriate.
Impairment testing
At the year end date an impairment test was carried out in respect
of the Royal Mail (excluding Parcelforce Worldwide) cash
generating unit (CGU).
Royal Mail UK has significant non-current assets, both tangible
and intangible, that form part of the Royal Mail UK (excluding
Parcelforce Worldwide) CGU.
Judgement is exercised in reviewing the carrying value in respect
of possible impairment. As a result of the poor trading performance
of the Royal Mail UK business, management identified an indicator of
impairment, and as a result performed an impairment assessment in
2022-23, leading to the recognition of a partial impairment of the CGU.
In assessing whether the CGU remained impaired in 2023-24, and
whether a further impairment charge or reversal was required the
carrying value of the CGU was compared to its recoverable amount.
Management assessed the recoverability of the CGU using the
higher of a value in use (VIU), or fair value less cost to dispose
(FVLCD). The FVLCD methodology resulted in a higher recoverable
amount. The FVLCD considers a discounted cash flow modelling
from the perspective of a ‘market participant’. The model includes a
number of assumptions in relation to trading expectations, execution
risk associated with realising the transformational benefits in the
business plan, long-term growth rate, and discount rate.
The Committee reviewed and challenged the methodology and
results of the impairment review, including the appropriateness
of key assumptions and data points used. This included review
and challenge over the growth rates, risk associated with the
transformational benefits and the discount rate used. Particular
focus and challenge were given to the risk and opportunities
associated with the cash flows, including the cashflows in relation
to property disposals and the wider economic environment.
The Committee also considered the sensitivity of the impairment
calculation and the wide range of possible outcomes.
The Committee satisfied itself that the assumptions used
within the CGU impairment model, together with the resulting
impairment charge, were reasonable. The Committee also
reviewed the allocation of the impairment charge and the
associated disclosure for inclusion within the Financial Statements.
Audit and Risk Committee Report continued
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Matter Action taken by the Committee
Parent Company, IDS plc (see pages 233 to 235)
The carrying amount of the Parent Company’s investments in, and
amounts due from, subsidiaries represents 72% (2022-23: 83%)
and 28% (2022-23: 17%) of the Parent Company’s total assets
respectively. Their recoverability is not at a high risk of significant
misstatement or subject to significant judgement. However, due
to the materiality in the context of the Parent Company Financial
Statements, this is considered to be the area that has the greatest
effect on the Parent Company balance sheet.
The Committee received confirmation from management that
it had adequately assessed the recoverability of investments in
subsidiaries and intercompany indebtedness, by assessing and
confirming that the net assets of the relevant subsidiaries (being
an approximation of their minimum recoverable amount) were
in excess of their carrying value at the balance sheet date.
Provisions for liabilities
The Group has significant provisions totalling £184 million, including:
£3 million in relation to voluntary redundancy; £39 million in relation
to industrial diseases claims; £52 million in relation to regulatory
and legal obligations; and £22 million in relation to property
decommissioning costs.
Judgement is exercised in making these assumptions that form the
basis of the provision calculations (see Notes 1 and 25 to the Financial
Statements on pages 171 to 184 and pages 225 and 226 respectively).
The Committee reviewed the methodology and key assumptions
used in determining significant provisions, including the basis for
any release of provisions. The Committee considered the past
utilisation of each provision, when reviewing the appropriateness
of the provision. The Committee concluded that the amounts
recorded in respect of provisions were appropriate and represented
the current best estimate of each liability, and that associated
disclosures were appropriate.
External auditor
KPMG was appointed by shareholders as the Group’s statutory
auditor at the 2015 AGM following a formal tender process
undertaken in 2014. The firm’s re-appointment was confirmed
by shareholders at the 2023 AGM. The current lead audit partner
is Andrew Bradshaw, who was appointed at the beginning of the
2022-23 audit process. The external audit contract will be put out
to tender at least every ten years in line with the provisions of the
UK Competition and Markets Authority’s Statutory Audit Services
for Large Companies Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit Committee Responsibilities)
Order 2014 (the CMA Order). The Committee therefore considers
that it would be appropriate to conduct an external audit tender
by no later than the 2025-26 reporting year, by which time KPMG
will have been the Group’s external auditor for ten years.
We have complied in all material respects throughout the year with
the CMA Order.
Effectiveness of the external audit process
The Committee is responsible for the relationship with the external
auditor, including examining the effectiveness of the audit process.
The FRC’s Minimum Standard: Audit Committees and External
Audit was published in May 2023. In many cases our practices
already reflect these standards in relation to our external audit
and we will endeavour to incorporate additional standards into
our practices going forward.
At its meeting in May 2024, the Committee carried out its annual
review of the external auditor’s performance and the effectiveness
of the external audit process, taking into account:
— The terms and scope of the external auditor’s engagement,
as set out in its engagement letter.
— The audit work plan for the financial year 2023-24.
— The effectiveness of the working relationship and interactions
with the Committee.
— The quality of the audit, the handling of significant judgements by
the external auditor and responses to questions from the
Committee.
— A report from KPMG on its own internal quality procedures.
— Feedback from the Committee evaluation process.
— Feedback from the external auditor effectiveness survey, which
was completed by key stakeholders involved in the external audit
process and confirmed that the KPMG audit team had sufficient
experience and technical knowledge, and displayed adequate
professional scepticism. However, additional time was requested
late in the audit process to complete the usual standard audit
procedures which caused delays in the agreed audit timetable.
Based on its review, the Committee concluded that whilst the external
audit process was effective, the delays in the audit timetable was a
significant concern and the Committee were therefore unsatisfied
with the 2023-24 audit by KPMG. These matters will be discussed
with KPMG and addressed in advance of the 2024-25 audit.
Assessment and safeguarding the independence
and objectivity of the external auditor
The Committee considered the independence and objectivity
of the external auditor through:
— Assurances provided by the external auditor on the safeguards
in place to maintain independence.
— Oversight of the Non-Audit Services Policy (see below).
— Reviewing the external auditor’s non-audit services and fees
(see below).
— Oversight of the Ex-Auditor Employment Policy.
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Non-Audit Services Policy
Our Non-Audit Services Policy governs the process for approving
certain non-audit services provided by the external auditor. The
purpose of the Policy is to ensure that the level of fees earned from
non-audit services and the type of services provided do not impair
the external auditor’s independence and objectivity. The Policy is
overseen and was reviewed by the Committee during the year to
ensure that it remained fit for purpose.
In general, the external auditor is not approached to perform
non-audit work. The Committee does, however, currently permit
the external auditor to provide non-audit-related services, insofar
as permitted by auditor independence rules, and the external
auditor may be engaged to perform such non-audit services if
it is uniquely placed to undertake them, or if the performance
of the non-audit services will support a future statutory audit
(including the provision of buyer assist due diligence) and would
not compromise the auditor’s independence. The engagement
may follow a competitive tender process. The Committee
has delegated authority to the Group CFO to pre-approve
assignments up to £25,000, with an annual limit of £500,000.
During both the current and prior years, the Committee permitted
the auditor to provide non-audit services in relation to the half year
review, regulatory audit required by Ofcom, audit related assurance
services as well as work required as part of the debt issue in
September 2023, as the auditor was uniquely placed to complete
them and the Committee was comfortable that these services did not
compromise its independence.
External auditor fees
The Committee keeps under review the services and fees incurred
by the external auditor. Total fees for audit and audit-related work
during the year amounted to £4,681,000 and total fees for non-audit
services during the year amounted to £ 797,000, which represented
around 21% of the external audit fee. Non-audit services primarily
related to the Financial Statements, regulatory audit, the half-year
Condensed Consolidated Financial Statements and other non-audit
services relating to regulatory reporting and raising of debt. The
Committee was satisfied that the non-audit work was best handled
by the external auditor because of its knowledge of the Group, and
that undertaking the work did not put under threat the independence
of the external auditor. All non-audit services were approved in
accordance with the Non-Audit Services Policy.
In addition to the fees earned from the Company, KPMG has been
engaged by the respective Pension Trustee as external auditor of the
Royal Mail Pension Plan, the Royal Mail Defined Contribution Plan and
Royal Mail Trustees Limited, the fees for which were £225,000 in
2023-24.
Re-appointment of external auditor
The Committee concluded that it is satisfied with the independence
and objectivity of KPMG. This, together with the findings that the
external audit process was effective, supports the Committee’s
recommendation to the Board that it seeks shareholder approval
at the 2024 AGM for the re-appointment of KPMG as the external
auditor for the year ending 30 March 2025.
FRC’s Audit Quality Review (AQR) of the Group’s 2023 audit
The FRC routinely monitors the quality of the audit work of certain
UK audit firms through inspections of sample audits and related
procedures at individual audit firms, and during the year KPMG’s
2023 audit of the Group was reviewed by the AQR team. There was
one finding identified relating to KPMG’s consideration of IT controls.
The AQR also highlighted good practice observations in relation to
KPMG’s challenge over methodology and key assumptions used in
the SITHOP model, assessment and challenge of the uncertainties
within assumptions underpinning the Royal Mail CGU impairment
model, and challenge provided by the KPMG actuaries in respect
of key judgements relating to the valuation of pension schemes.
The Committee discussed the review findings with KPMG and
agreed that a specific action would be implemented in relation to
how KPMG evidenced its conclusions in relation to the specific area
identified as part of the 2024 audit. Overall, the review raised no
concerns with the Committee in relation to the fundamental quality
of the 2023 audit and the Committee remains satisfied with the
efficiency and effectiveness of the 2023 external audit process.
Risk management and internal control
The Board believes that effective risk management and a sound
internal control environment are fundamental to the Group’s
success. It has established a risk management framework that
seeks to identify, assess and manage risks that could impact our
businesses (see pages 49 to 51) and reviews the effectiveness of this
framework annually. The Committee supports the Board through its
ongoing review of the Group’s principal and emerging risks (see
pages 52 to 58) and by advising the Board on the effectiveness of
risk management and internal control systems.
In relation to the Group’s financial reporting process, the
Committee relies on a number of specific internal control
mechanisms to ensure that the Group provides accurate
and timely financial results and implements accounting
standards and judgements effectively, including in relation
to going concern and viability. The Committee receives:
— Regular updates on the evolving regulatory environment,
including FRC, best practice guidance and the requirements
of the Code and the Disclosure Guidance and Transparency
Rules. The Committee also receives reports on proposed
changes to legislation and regulatory reviews and the potential
impacts. During the year the Committee was updated on the new
accounting standard ‘IFRS 17 Insurance Contracts’ and it was
noted that this would not have a material impact on the Group.
— Management reports, including analysis of results and
comparisons against last year’s results.
— Reports from the external auditor, including management
letters on controls.
Audit and Risk Committee Report continued
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Review of risk management and internal control systems
The Committee has reviewed the effectiveness of the Group’s risk
management and internal control systems. This covered financial,
operational and compliance principal risks.
The evaluation process is ongoing throughout the year. An annual
paper is presented to the Committee and Board providing a summary
of risk and assurance activity to support their annual assessment.
The assessment included consideration of the following:
— Status of principal risks (including fraud risks) and the assurance
activity undertaken in relation to them in accordance with the
Group’s risk management framework (see pages 49 to 51).
— ’Spotlights’ on risks sessions, led by relevant members of the
management team, that take place throughout the year and
focus on existing controls and additional remediation required.
— Assurance map for the Royal Mail and GLS principal risks,
assessing the second-line controls and actions required to
improve them.
— Bi-annual reporting from Compliance and Ethics on the operating
effectiveness of compliance controls.
— Progress made against the Internal Audit plan and the conclusions
provided by the internal audit reports issued in the year.
— Timeliness of implementation of actions agreed to mitigate any
risk and control gaps identified during internal audits.
— Year-end finance letters to the Group CFO to confirm
completeness of key risks impacting the Group, compliance with
relevant legislation, any known fraud instances, financial reporting
and controls requirements.
— Testing of key controls over the higher-risk processes and
balances in the preparation of the Financial Statements.
— Reports from the Finance team on the progress and status
of the financial reporting control programme.
— The opinion and reports of the external auditor.
Whilst the Committee considered the system of risk management
and internal control across the Group to be generally effective in the
year, in light of the increasing risks facing the Royal Mail business
as it transforms and the increasing future requirements under the
Code, there is recognition of the need to improve its effectiveness.
Key activity underway and planned to be performed in
2024-25 includes:
— Continuing to formalise, systemise and remediate financial
reporting controls, with a particular focus on remediating IT
general controls, controls over payment processes and
outsource suppliers (part of a set of ‘super key controls’).
— Further improving cyber security controls to address identified
control weaknesses in response to increasing external threats
and lessons learned from recent incidents.
— More formally defining the Group’s Controls framework including
material controls, systems and accountabilities, and developing
a formalised assurance plan across the principal risks and
external financial and non-financial reporting in response
to revisions to the Code.
— Continuing to enhance risk management across the Group,
particularly in relation to principal operational risks including
customer expectations and ability to grow revenue, operational
cost base reductions as well as fraud management.
Internal audit
Internal Audit provides independent assurance to the Committee
through its Internal Audit projects. This assurance is used as input to
the Committee’s and Board’s monitoring of the effectiveness of risk
management and internal control systems. Internal Audit sits within
the Risk Assurance function, which is led by the Global Director of
Risk & Audit, who has direct access to me and the Board Chair,
which ensures the independence of the function.
At each Committee meeting, an update on Internal Audit activity is
provided, including an overview of audits completed in the period, with
a focus on unsatisfactory audits; progress made against the Internal
Audit plan; and the status of actions arising from completed audits.
An Internal Audit plan aligned to the Group’s principal risks is
developed annually and updated for changes in risks and priorities
with the Committee’s approval. Prior to the start of the new financial
year, the Committee reviewed and approved the Internal Audit plan
for the next financial year, which incorporates risk-based audits that
encompass both the Royal Mail and GLS businesses.
During the year, the Committee also oversaw progress against
Risk Assurance’s transformation strategy. The Committee noted
that good progress had been made in relation to several strategic
pillars which are noted below under the section on effectiveness
of risk assurance.
Effectiveness of Risk Assurance
During FY22, in accordance with the Chartered Institute of Internal
Auditors Standards (CIIA Standards), Deloitte, on behalf of the
Committee, conducted an independent external quality assessment
(EQA) on the effectiveness of Royal Mail’s and GLS’ respective
Internal Audit functions. The CIIA’s Standards recommend that an
external assessment must be conducted at least once every five
years by a qualified, independent external assessor or assessment
team. The next EQA will be conducted no later than the 2026-27
reporting year. During the year the Committee reviewed the
effectiveness of Risk Assurance. In particular, the following
matters were noted:
— Continued progress in the performance of audits over the
technology environment at Royal Mail and GLS, and use
of data analytic audit techniques in the UK business.
— Successful implementation of software to support central
management and reporting of audits over Royal Mail and GLS.
— Continued progress in the implementation of risk-based audits
across GLS.
— Improved audit action tracking and reporting processes over
open and overdue actions.
— Broader coverage of principal risk spotlights and formalisation
of fraud risk reporting across the Group.
— Implementation of an assurance map within GLS and an updated
assurance map for Royal Mail.
Committee evaluation
The Committee’s annual evaluation of its performance was undertaken
as part of the Board effectiveness evaluation (see page 91).
Michael Findlay
Chair of the Audit and Risk Committee
24 May 2024
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Environmental,
Social and Governance
Committee Report
Dear Shareholder,
I am pleased to present this year’s Committee Report which sets
out the Committee’s activities during the year. It should be read in
conjunction with the ESG Review on pages 27 to 40.
Following a growing convergence between Royal Mail’s and GLS’
ESG strategies, we updated our Group ESG Principles to make them
more applicable at Group level and established a set of Group ESG
ambitions.
Environment – supporting the transition to a low carbon future
Throughout the year, the Committee continued to monitor the
implementation of Royal Mail’s and GLS’ environmental strategies
and is particularly pleased that Royal Mail has received SBTi
accreditation for its 2040 Net-Zero target and that GLS is applying
for accreditation of its own Net-Zero 2045 target. Whilst the
Committee is pleased with the progress Royal Mail has made on
emissions reductions this year, particularly so given the challenging
financial constraints faced by the business, it accepts there is a need
to accelerate progress. See pages 28 to 31 for further information.
The Committee continued to receive standing updates on the
Group’s TCFD implementation and is pleased that the Group is
now compliant with 10 of the 11 TCFD recommendations, with
work ongoing to ensure compliance with the one outstanding
recommendation relating to the impact of climate-related risks
and opportunities on business and financial planning. Our TCFD
Statement is set out on pages 41 to 48.
Reflecting our commitment in this area and to develop our skills
and capabilities to better assess and manage climate-related
risks and opportunities, in March 2024 the Committee participated
in a wider Board training session provided by an external specialist
focused on decarbonisation and upcoming regulatory changes to
environmental reporting.
Social – delivering economic and social benefits
Health, safety and wellbeing
The health and safety of our workforce, and those impacted by our
operations, is of the utmost importance. Ensuring that our people go
home safe to their families each night is one of our primary concerns.
Reflecting this, each Committee meeting begins with a ‘safety
moment’, delivered in turn by Royal Mail and GLS, that focuses on
a topical safety matter and any lessons learned from it. This process
has promoted greater collaboration between the two businesses,
with Royal Mail sending out a ‘safety flash’ based on information
from one of GLS’ safety moments.
Role of the Committee
The Committee’s role and responsibilities are summarised
on page 85.
Key activities in 2023-24
— Monitored the implementation of Royal Mail’s and GLS’
environmental strategies.
— Monitored Royal Mail’s and GLS’ health and safety
performance.
— Monitored Royal Mail’s and GLS’ cultures and progress
against DEI strategies.
— Reviewed relevant ESG policies and procedures.
— Reviewed Royal Mail’s early plans to develop a Scope 3
emissions reduction strategy.
— Reviewed Royal Mail’s employee benefits and wellbeing support.
Priorities for 2024-25
— Continue to monitor implementation and progress against
Royal Mail’s and GLS’ environmental strategies.
— Continue to monitor Royal Mail’s and GLS’ health, safety
and wellbeing performance.
— Review Royal Mail’s Scope 3 emissions reduction strategy.
— Continue to monitor progress against Royal Mail’s diversity targets.
— Monitor GLS’ preparedness for the Corporate Sustainability
Reporting Directive.
Committee membership and attendance
The table below contains information about the Committee’s
membership and the number of scheduled meetings each
Director attended and was entitled to attend during the year
ended 31 March 2024.
Director Joined
Attendance
(scheduled
meetings)
Lynne Peacock
(Chair since 20 July 2022) 1 February 2022 5/5
Maria da Cunha 25 September 2019 5/5
Baroness Hogg 4 February 2021 5/5
Shashi Verma 29 September 2021 5/5
Committee meetings were routinely attended by the Non-
Executive Chair, the Group CEO, the Group CFO, the Group
Company Secretary and the Group Director of Investor Relations.
Other members of senior management attend certain meetings
by invitation as appropriate. The Committee is supported by the
Group Company Secretary and members of the Royal Mail and
GLS ESG teams.
Lynne Peacock
Chair
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International Distribution Services plc Annual Report 2023-24
The Committee also monitors the health and safety performance of
Royal Mail and GLS. During the year the Committee was pleased to
see a further reduction in GLS’ lost time accident frequency rate
(LTAFR), which has been on a downward trend since the inception of
the business’ Occupational Health and Safety awareness programme.
Within the Royal Mail business, after a discouraging start to the year,
the Committee is pleased that the business’ LTAFR has stabilised
under new safety leadership, which has also brought an intensified
focus on preventing dog attacks and road traffic collisions. Under
guidance from the Committee, Royal Mail’s safety dashboard was
also updated to increase the weighting of leading indicators.
During the year, the Committee reviewed the employee benefits and
wellbeing support Royal Mail provides to ensure that the business
offering was competitive and provided support to employees during
the cost-of-living crisis. As part of this review the Committee was
updated about the launch of a new wellbeing proposition – Your
Wellbeing – and additional employee benefits, including financial
support (see page 33).
The Committee also received a teach-in on the Rowland Hill Fund
and its relationship with Royal Mail.
→ See pages 32 to 37 for further information.
Culture
The Committee assists the Board in monitoring Royal Mail’s and
GLS’ cultures. The engagement channels and data which the
Committee and the Board used to monitor culture throughout
the year, as well as the key insights and outcomes, are included
on page 89.
DEI
The Committee reviewed progress against Royal Mail’s and GLS’
DEI strategies during the year and regularly reviewed progress
against Royal Mail’s diversity targets. Whilst the Committee notes
the progress made against each business’ overall DEI strategy,
in the coming year the Committee will increase its focus on this
important area to ensure that momentum is maintained/accelerates.
See pages 34 to 36 for further information.
Community engagement
The Committee discussed the Group’s societal and community
investment, including how Royal Mail’s charity partnership with the
British Heart Foundation was progressing and the various activities
in place across GLS. The Committee commends GLS colleagues
for the funds they have raised (€42,500, which was doubled by
GLS Italy) for colleagues who suffered heavy flood damage to
their homes in May 2023.
The Committee also discussed Royal Mail’s ongoing projects to
protect vulnerable customers, including awareness of scams and the
launch of a new product which allows customers to register standing
preferences related to their accessibility needs for all parcels being
collected or delivered.
→ See pages 36 and 37 for further information.
Supply chain
During the year the Committee reviewed Royal Mail’s early plans
to develop a Scope 3 emissions reduction strategy. This strategy is
currently in development and will be considered by the Committee
in 2024-25.
The Committee also reviewed, and recommended to the Board, the
approval of the Group’s 2022-23 Modern Slavery Statement, which
sets out the measures taken to detect, prevent and remedy the risk
of modern slavery within our businesses and supply chains.
Governance – operating responsibly
Alongside the activities highlighted above, at each of its meetings
the Committee also reviews KPI dashboards for both Royal Mail and
GLS. Royal Mail’s dashboard metrics cover safety, environment,
joiners and leavers, diversity and absence, and GLS’ dashboard
metrics cover health and safety, environment and gender diversity.
During the year the Committee reviewed, and either approved
or recommended to the Board, several ESG-related policies and
reports, including the Group ESG Policy Statement, the Royal Mail
and GLS ESG Reports and the Royal Mail Environment Policy,
People Policy, Health and Safety Policy and Business Standards.
The Committee ensures its own effective governance through
application of its terms of reference, which were reviewed during
the year, with only minor changes made.
Stakeholder engagement and reporting
The Committee received its annual update on the Group’s participation
in key ESG benchmarks and noted that the Group had improved
or maintained its ratings in several benchmarks.
The Committee also received regular updates on the Company’s
engagement with investors, customers and other stakeholders
on ESG issues from the Group Director of Investor Relations and the
ESG teams, who are standing attendees of Committee meetings.
Committee evaluation
The Committee’s annual evaluation of its performance was undertaken
as part of the Board effectiveness evaluation (see page 91).
Lynne Peacock
Chair of the ESG Committee
24 May 2024
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Directors’ Remuneration
Report
Dear Shareholder,
On behalf of the Board, I am pleased to present the 2023-24
Directors’ Remuneration Report.
This report covers my second year as Remuneration Committee
Chair and sets out details of remuneration paid to Directors in
2023-24 and our intended approach for 2024-25.
I am pleased that 97.88% of shareholders supported our
Remuneration Policy at our 2023 AGM. We are proposing one
change to the Remuneration Policy this year, and therefore this
report also includes a revised Policy, for which we are seeking
approval at the upcoming AGM. More information is provided below.
Executive Director and Executive Board changes
This year we made some important changes to the Group’s
structure, with the introduction of a Group CEO role to whom the
CEOs of both our operating divisions will report. Martin Seidenberg,
formerly CEO of GLS, became Group CEO in August 2023. Michael
Snape joined us as Group CFO in January 2024 after Mick Jeavons
stepped down from the role. Below Executive Director level, Karl Pfaff
became CEO of GLS in August 2023 and we also welcomed Emma
Gilthorpe as CEO of Royal Mail in May 2024.
The packages for Martin Seidenberg and Michael Snape were
disclosed in the stock exchange announcements at the time of
their respective appointments. Further details are set out below.
As disclosed on page 127, the Committee determined that Mick
Jeavons would continue to be eligible for any 2023-24 Short-Term
Incentive Plan (STIP), to reflect his ongoing role through the year end
process and would retain his unvested Deferred Share Bonus Plan
awards. He also retained his Long-Term Incentive Plan (LTIP) awards
which will vest in accordance with normal timescales, subject to time
pro-rating for length of service. Simon Thompson, the former CEO of
Royal Mail, also stepped down in the year; details of his remuneration
on departure were disclosed in last year’s Directors’ Remuneration
Report.
Context within which remuneration decisions have been made
Despite a challenging macroeconomic backdrop, the Group has
good momentum. The business delivered a robust performance in
2023-24 and both GLS and Royal Mail made good progress against
key strategic objectives.
At Royal Mail, prompt action to stabilise the business following the
industrial action of last year resulted in an improved cash position
and better quality of service, which is now on a positive trajectory,
and enabled the business to achieve its best peak operational
performance for four years over the important Christmas period.
We were also successful in winning back customers lost during
2024-25 priorities
— Ensure the pay and reward structure supports the
Group’s strategy.
— Ensure remuneration arrangements are attractive and
competitive and aligned with our strategy and performance.
Committee membership and attendance
The table below contains information about the Committee’s
membership and the number of scheduled meetings each
Director attended and was entitled to attend during the year
ended 31 March 2024.
Director Joined
Attendance
(scheduled
meetings)
Maria da Cunha 25 September 2019 5/5
Lynne Peacock 1 November 2019 5/5
Michael Findlay 25 September 2019 5/5
Keith Williams 4 February 2021 5/5
Maria da Cunha
Chair
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International Distribution Services plc Annual Report 2023-24
the industrial action of last year, and delivered productivity
improvements in both processing and delivery.
Following on from the agreement reached with the CWU, approved
by CWU members in July 2023, we have made good progress on
the delivery of the agreed initiatives. The revised ways of working are
already leading to positive benefits in both financial and operational
performance, including:
— A revised attendance and sickness policy, introduced in Autumn
2023, has already delivered a c. 1% reduction in frontline sick absence.
— Seasonal working, allowing us to flex up resource in the busy peak
period and down in the quieter Summer period.
— Introduction of the ‘My Performance’ app in October 2023,
to provide direct feedback to our posties on operational KPIs,
which is improving first time delivery rates and safety metrics.
More remains to be done to transform the Royal Mail business, but
initial progress is pleasing, and positions us with a good platform for
2024-25. Our posties and managers should be proud of their efforts
and contributions.
GLS has continued to deliver a strong performance, with revenue
growth across almost all markets, outperforming versus peers.
We continued to invest and upgrade the GLS network, and the new
hub in Madrid has provided additional capacity and contributed to
double digit volume and revenue growth in Spain. GLS also made
good progress in transforming the last mile and developing its digital
proposition, providing customers with more out-of-home solutions
and doubling the size of its locker network. GLS also continued to build
a global service offering, GLS is taking action to mitigate the impact
of inflationary pressures through increased automation, productivity
improvements and fixed cost containment. We continue to invest to
position the business for long-term growth, margin expansion and
good cash generation, and are confident we have the right model
and strategy for the future to enable us to deliver for all stakeholders.
Group performance
I am pleased to report that the Group delivered a robust financial
performance in 2023-24. Key financial highlights include:
— Group revenue increased to £12.7 billion, from £12.0 billion,
with growth in both Royal Mail and GLS.
— Group reported operating profit was £26 million (2002-23: loss of
£742 million), and adjusted operating loss improved year-on-year
to £28 million, from a loss of £71 million.
— GLS revenue increased by 4.6% (4.7% in Euro terms) to
£4.9 billion, driven by good parcel volume growth, partly mitigated
by lower freight revenue and mix. Continued inflationary wage
pressures and the impact of strategic investments resulted in
a decline in adjusted operating profit year on year, as expected,
to £320 million, down 8.0% (7.9% lower in Euro terms).
— Royal Mail revenue increased to £7.8 billion, from £7.4 billion.
This was driven by 6% growth in parcel volumes and letter revenue
growth of 4.4%. Adjusted operating loss reduced to £348 million
(2022-23: £419 million loss), a result of the increase in revenue.
2023-24 remuneration outcomes
Salaries
Martin Seidenberg’s salary was set at £700,000, taking into
consideration the size and responsibilities of the new Group CEO
role and the strength of his skills and expertise. Michael Snape’s
salary was set at £487,000, determined taking into account the
market benchmarks and his prior experience as a group CFO.
Short-term incentive plan (STIP)
The Committee considered a wide range of factors when assessing
the performance of the STIP measures against the targets set for
the Executive Directors, including the outcomes for customers and
shareholders. Separate scorecards were applied for each of Royal
Mail, GLS and the Group. Martin Seidenberg’s STIP award was
measured against the GLS scorecard from 1 April until his promotion
to the Group CEO role, from which time his performance was measured
against the Group scorecard. A summary of performance under each
scorecard is below, followed by the corresponding STIP payouts.
— The Group STIP scorecard combines GLS and Royal Mail financial
measures (amounting to 75% of the scorecard). Non-financial
measures (ESG and strategic priorities) make up the balance of
the scorecard. Based upon the performance of both businesses,
the overall outcome of the Group STIP is 75.9% of maximum.
— 75% of the scorecard for GLS is based on financial measures
and performance against these (revenue and cashflow) continued
to be positive. The remaining 25% of the scorecard is based on
non-financial measures (health and safety, sustainability and
strategic priorities). The Committee was pleased with the excellent
progress made against these. As a result of the performance
delivered, the overall outcome of the GLS STIP is 81.7% of
maximum.
— For the Royal Mail STIP scorecard, 75% of the potential payout
is based on financial measures (trading cashflow and operating
loss) with 25% based on non-financial measures (environmental
and strategic priorities). The Committee were pleased with
progress made during the year, in particular against the financial
measures, which resulted in an overall Royal Mail STIP outcome
of 60.2% of maximum.
After assessment, the Committee concluded that the overall
performance of the Group and each business against the STIP
targets, considering the wider experience of our stakeholders,
including customers, shareholders and employees, did not require
any discretionary adjustments and concluded the formulaic outcome
for STIP fairly and appropriately reflects the performance of the
business over the period and should be adhered to. Full details
of the performance and targets set are on page 126.
For the current and former Executive Directors, the respective
STIP awards for 2023-24 are:
Executive Director Scorecard
STIP payout
(as a % of
maximum)
Martin Seidenberg – Group CEO
(August 2023 to March 2024) Group 75.9%
Martin Seidenberg – CEO GLS
(April 2023 to July 2023) GLS 81.7%
Michael Snape – Group CFO
(January 2024 to March 2024) Group 75.9%
Former Executive Directors
Mick Jeavons – Group CFO
(April 2023 to January 2024) Group 75.9%
Simon Thompson – Royal Mail CEO
(April 2023 to May 2023) Royal Mail 60.2%
In accordance with the Policy, one third of the bonus for current
Executive Directors will be deferred into shares for three years.
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Total remuneration
Group CEO: Martin Seidenberg
£'
000s
L
TIP
S
TIP
P
ension/
B
enefits
0
762
117
T
otal
1,534
S
alary
655
Group CFO: Michael Snape
£'
000s
L
TIP
S
TIP
P
ension/
B
enefits
0
111
17
T
otal
227
S
alary
99
Directors’ Remuneration Report continued
Long-term incentive plan (LTIP)
Awards under the 2021 Royal Mail LTIP were granted to Martin
Seidenberg (as CEO GLS), Simon Thompson and Mick Jeavons on
12 August 2021. The performance period ended at the end of March
2024. As disclosed on page 128 Simon Thompson’s unvested LTIP
awards lapsed when he stepped down from the Board.
Following an assessment of the performance conditions, the
LTIP awards held by Martin Seidenberg and Mick Jeavons
have a vesting outcome of 0% and therefore will lapse in full.
Full details of the performance and targets set are on page 127.
Total remuneration
Based on the above STIP and LTIP outcomes, each Executive
Director’s 2023-24 remuneration is set out on page 125.
The Committee believes the respective single figures of
total remuneration are appropriate in the context of the
wider stakeholder experience.
2023 LTIP grants
The Committee granted awards in July 2023 to Martin Seidenberg
and Mick Jeavons, and Michael Snape in February 2024.
Mick Jeavons received an award of 150% of salary and, as noted
above, he retained this award on termination of his employment
(subject to the original performance conditions and time pro-rating).
Martin Seidenberg received an award of 300% of salary, which
included an additional award above the usual policy maximum,
in accordance with our recruitment policy.
Michael Snape received an award of 150% salary pro rated for time in
role during the performance period.
The performance targets for all awards were set out in the stock
exchange announcement at the time of grant. Group scorecard
metrics apply to the LTIP award granted to Martin Seidenberg up to
200% of salary and to all of the LTIP awards granted to Michael
Snape and Mick Jeavons. These are relative total shareholder return
(TSR) (40%), UK Operating Profit (20%), UK Trading Cash Flow (10%),
GLS EBITA (20%) and GLS Free Cash Flow (10%). The additional
100% of salary award for Martin Seidenberg is subject to very stretching
relative TSR performance versus FTSE companies ranked 51-150
(excluding mining and financial services companies), assessed after
three years. 0% of this part of the award will vest for 75th percentile
performance, and 100% will vest for 90th percentile performance.
In addition, a financial performance underpin will apply to
this stretch TSR element. Royal Mail must record a profit
on an adjusted operating profit basis (excluding voluntary
redundancies) in 2025-26, the final year of the performance
period, for this element to be eligible to vest.
This approach recognised that a larger upside opportunity
was necessary to recruit talent of sufficient calibre for the Group
CEO role in the business circumstances at the time. However,
the link to very stretching TSR performance ensures that Martin
is incentivised to deliver outstanding returns for shareholders
over the three years to 2026.
The terms of these awards also provide the Committee with the
ability to review the outcome at vesting, considering the underlying
performance of the Group.
Wider employee context
— GLS employees were awarded pay rises ranging between
5.9% (Spain and Canada) and 25.7% (Hungary), reflecting varying
levels of local pay inflation in the countries that GLS operates in.
— Following the two-year pay deal agreement with Unite, Royal Mail
managers were awarded a 3.5% pay award from 1 September
2023 with a further pay award of 2.0% from 1 September 2024
(an additional 1% being available if UK RPI inflation is at or above
4.0%). A biennial health screening programme was made available
to management which has seen high take-up levels and has
delivered some positive health interventions to date.
— CWU grade employees were awarded a multi-year pay award
equivalent to 10% over three years plus a £500 lump sum.
In addition, a lump sum payment was paid to CWU grade
employees and Unite represented management at £1,007
(pro-rata for part-timers); funded from a refund of cash held in
escrow by the Trustee of the Royal Mail Pension Plan (‘RMPP’).
As part of the Business Recovery, Transformation and Growth
Agreement a 2% pay award was awarded in April 2024.
— The simplified new starter employment contract for frontline
employees, which was launched in December 2022, has
continued to deliver positive results with the number of new
recruits increasing and the changes to the contract, flexible
location, increase to weekly working hours and monthly payroll,
delivering positive results for the business.
— The Royal Mail wellbeing programme continues to expand and
during the year additional help and support was made available
for mental health, financial wellbeing, and physical wellbeing.
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2024-25 executive remuneration
Remuneration Policy review
During the Group CEO recruitment process we recognised that the
existing variable remuneration opportunities for Executive Directors
were not consistent with the scale of the new Group CEO role, which
includes the turnaround of Royal Mail and the continued growth of
GLS. Under Martin’s leadership we have seen improved performance
at Royal Mail and significant strategic progress at GLS, making both
businesses well positioned for the future.
In this context, at the 2024 AGM we intend to seek shareholder
approval to increase our maximum normal LTIP award from 150%
to 200% of salary. The current intention is that this increased
opportunity would only apply to the Group CEO. No other changes
are proposed to the Policy, which, as noted above, was approved
by c.98% of shareholders last year.
We believe that this change to the LTIP opportunity will provide a
more appropriate incentive to successfully lead the Group through
the current challenges and deliver on the opportunities available
to both GLS and Royal Mail. The proposed increased LTIP award
opportunity also reflects the scale of the Group CEO role. Royal Mail
is a large business with c.130,000 permanent employees which
is transforming and modernising to meet the expectations of
customers and deliver returns for shareholders. GLS has grown
to a £4.9 billion revenue business and has a proven track record
of solid margins and cash generation, and with opportunities to
continue to invest for long-term growth. The Group CEO role is
a complex role and it is appropriate that the LTIP opportunity,
which is subject to delivering performance across the portfolio
and returns to shareholders, reflects this.
The proposed increase would move our maximum LTIP opportunity
for the Group CEO in line with the median for other companies in
the top 50 of the FTSE 250 and would result in a total remuneration
opportunity of between median and lower quartile versus this group.
Our proposed incentive opportunities of a 150% of salary STIP and a
200% of salary LTIP would also be consistent with median levels for
CEOs across FTSE 250 companies as a whole. The proposed Policy
change would therefore not result in an excessive remuneration
opportunity, especially given the complexities of the role.
Following Martin’s appointment we engaged with our largest
shareholders to discuss the proposed increase to the LTIP award
opportunity for the Group CEO role. No concerns were identified
as part of that engagement. I would like to thank shareholders for
considering our proposals and look forward to ongoing future
engagement on executive remuneration.
Further details on implementation of the policy for 2024-25
Executive Director salary changes
The Committee reviewed the salaries of its Executive Directors
in the context of the 2024 increases for the wider workforce.
The Committee decided to apply an increase of 2.0% for Martin
Seidenberg, effective 1 April 2024, which is aligned to the 2024
salary uplift for CWU grades and less than the salary uplift for Unite
represented management grades. Given his recent appointment,
Michael Snape was not eligible for a salary increase for 2024-25.
Pension arrangements
The Executive Directors receive a pension allowance of 13.6% of
salary, which is aligned with the benefit that will be provided to all
eligible employees under the proposed Royal Mail Collective Pension
Plan, which is expected to launch in FY 2024-25. The 13.6% is less
than the 15.6% of salary benefit currently received by the majority of
Royal Mail colleagues in the UK.
Design of the 2024-25 STIP
Across the Group the key focus for 2024-25 remains profitable
growth, improved quality of service at Royal Mail and prudent
management of cash flow.
ESG remains a key part of the strategy of IDS and the delivery of
a low-carbon letter and parcel delivery service. We will therefore
continue to include the environmental metric as an STIP metric.
The measures and weightings are set out on page 135.
2024 LTIP awards
The measures and targets that will apply to the 2024 LTIP awards are
set out on page 135. These measures, broadly replicate the previous
structure that applied prior to 2023 and are designed to ensure that
the Executive Directors are incentivised to deliver the key long-term
priorities relevant to their role, with 40% of the award based on Group
TSR to ensure alignment with overall Group performance.
At market close on Thursday 28 March 2024, the Company’s share
price was 229.3 pence, which is a minor decrease compared with
the 2023 LTIP grant price of 230.4 pence.
Consideration of the wider workforce views
The Committee and the wider Board continue to meet and spend
time with employees at all levels across the Group. This invaluable
engagement provides vital insights into the culture and workings of
the Group and helps inform all aspects of remuneration decisions,
including the alignment between executive compensation and the
wider workforce. Further information on our workforce engagement
is included on pages 22, 34 and 90.
As in previous years, the Committee reviewed the gender pay gap
reporting and remuneration practices and governance across the
Group. In 2023-24 the Audit and Risk Committee discussed the
continuing challenges of recruiting, retaining and engaging key
talent, which has framed many of the remuneration decisions
made by the Committee.
Summary
2023-24 has seen both businesses in the Group move forward.
Our key focus remains the successful delivery of outcomes to our
customers, which have improved over the past year. The Committee
has continued to ensure that any remuneration outcomes are
balanced and fair and that the relative performance of both
businesses are reflected in these decisions.
I trust that you find the Remuneration Report clear and informative.
We hope that you will support our Remuneration Report and
Remuneration Policy at the forthcoming AGM.
Maria da Cunha
Chair of the Remuneration Committee
24 May 2024
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Directors’ Remuneration Report continued
2024-25 Executive Directors’ remuneration structure
The table below summarises the implementation of the Policy for Executive Directors in 2024-25.
Financial
year 2024-25 2025-26 2026-27 2027-28 2028-29 Implementation for 2024–25
Salary
— Martin Seidenberg – £714,000 (2% increase).
— Michael Snape – £487,000 (no increase).
— Martin’s salary increase for 2024-25 aligned
with the 2024 increase for CWU grades
Benefits
— No change in how the Remuneration Policy
is intended to operate.
— Pension contribution and/or allowance of
13.6% in line with the wider workforce.
— Other benefits may include healthcare
and car allowance (or car).
STIP
Performance
period
Deferral period
Malus and clawback provisions apply
— Maximum STIP award of 150% of salary
— One third of award is deferred into shares
for three years.
— The target award is 75%.
— Performance has 75% financial and 25% ESG
measures or other organisational priorities.
LTIP
Performance period
Malus provisions apply
Holding period
Clawback provisions apply
— Maximum LTIP award of 200% of salary
(subject to shareholder approval) for
Group CEO.
— Maximum LTIP award of 150% of salary
for Group CFO.
— Shares vest after three years subject
to performance, with a further two-year
holding period.
— Relative TSR 40% and financial
measures 60%.
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Aligning our remuneration approach to business strategy and stakeholder interests
To generate value for stakeholders, we are focused on building a more balanced and diverse international business. Recognising that
Royal Mail and GLS have different market positions, strengths and opportunities, we have developed separate strategies to drive
sustainable growth in each business and at all times meet changing customer needs.
Our remuneration approach is aligned to our strategy, thereby incentivising, as appropriate, great customer service and the creation of
long-term value for all of our stakeholders.
The following table provides a summary of how our incentive framework in 2024-25 is aligned with our business strategy and the results
that it delivers. Many of the incentive measures are key performance indicators (KPIs) (see pages 20 and 21).
Summary of incentive framework
Financial measure ESG measure Other measure
RM Operating
profit (loss)/
GLS EBITA
RM
free cash
flow
GLS
free cash
flow Environmental
Relative
TSR
Individual
priorities
Short-Term Incentive Plan
Long-Term Incentive Plan
The Committee believes that its executive remuneration policies and practices support the respective strategies in Royal Mail and GLS and
promote long-term sustainable success, with reward linked to the successful delivery of such long-term strategy. The remuneration, including
incentive arrangements for the respective executive teams, is aligned to our purpose and values (see page 1), with a focus on customers and
other stakeholders an integral part of our executive remuneration approach.
Executive Directors’ variable remuneration in 2023-24
As a result of the Company’s 2023-24 performance (against financial, ESG and strategic measures), STIP awards are payable to some of
the Executive Directors as shown below. The Committee considered that these outcomes were appropriate in the context of the Group’s,
GLS’ and Royal Mail’s overall performance and that of the Executive Directors and former Executive Directors during the year.
The performance period for the 2021 Royal Mail (RM) LTIP concluded at the end of March 2024. The outcome is shown below and more
details on the progress against individual measures is shown on page 127.
M Seidenberg M Snape M Jeavons S Thompson
2023-24 RM STIP (% of salary) 112% 113% 113% 90%
2021 RM LTIP vesting (% of maximum) 0% n/a 0% n/a
Executive Directors’ total single figure of remuneration M Seidenberg M Snape M Jeavons S Thompson
2023-24 total remuneration (£’000s) 1,534 227 804 127
Additional information Percentage/Ratio
Group CEO and CFO shareholding requirement (% of salary) 200%
Median gender pay gap (RMUK) 2.6%
Median gender bonus pay gap (RMUK) 1.6%
CEO pay ratio 42:1
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Directors’ Remuneration Report continued
How does our Directors’ Remuneration Policy address the key features set out in the UK Corporate Governance Code?
The table below details how the Committee addressed Provision 40 of the Code in respect of Directors’ remuneration:
Provision Approach
Clarity — The Committee consults annually with shareholders to seek their views on the operation of the Policy in the year.
— Information on how remuneration is structured for all employees and how it is aligned to Directors’ remuneration
is included in the Directors’ Remuneration Report.
Simplicity — The Policy consists of a) fixed remuneration and b) variable remuneration comprising one short-term incentive and
one long-term incentive only. Included in the Policy are the objective of each element, as well as how they operate.
Risk — The combination of reward for short-term business performance, paid partly in cash and partly in deferred shares, and
long-term performance, with incentive measures covering shareholder returns, financial and non-financial elements,
ensures that the incentives drive the right behaviours for the Group, its shareholders, employees, and customers.
— Incentive plans include non-financial risks such as health and safety and environmental protection and are
subject to malus and clawback provisions.
Predictability — Threshold, target and maximum pay scenarios are set out in the Remuneration Report section.
— Maximum variable remuneration award levels are capped, with overall vesting levels driven by performance
outcomes.
— The only source of variation in final payouts is the fact that part of the variable remuneration is awarded in shares
and so is linked to the share price.
Proportionality — There is a clear and direct link between business performance and individual rewards through our incentive plans.
— The Committee retains the discretion to adjust formulaic outcomes of incentive plans if they do not reflect the
underlying performance of the Group.
Alignment
with culture
— The Committee has worked hard to design a Remuneration Policy which directly supports our strategic priorities
and aligns our Directors and wider management to these outcomes.
— Our incentive plans include both financial measures and ESG measures. These ESG measures focus on our
customers, health and safety, and environmental protection.
— All Royal Mail managers’ individual performance is considered against Royal Mail’s values: be positive, be brilliant,
be part of it. Therefore, we assess our managers against not only what they have achieved, but also how they
do things.
In accordance with Code Provision 41, the Directors’ Remuneration Report describes the work of the Committee, including the following matters:
Provision Approach
Operation
of Policy
— The Committee believes that the Remuneration Policy operates as intended in terms of Company performance
and the quantum of remuneration delivered.
Shareholder
engagement
— We engaged with our shareholders as part of the development of the new Remuneration Policy in 2023, and
again this year to discuss the proposed changes to our Policy being presented at the 2024 AGM. We are grateful
for the feedback and input they provided, which has shaped our thinking and decision making.
Workforce
engagement
— An outline of our approach to workforce engagement in set out on pages 22, 34 and 90.
— The Committee will continue to explore in the coming years how such engagement can be further strengthened
in relation to the development of executive remuneration policy.
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Directors’ Remuneration Policy
The Company’s existing Directors’ Remuneration Policy was approved by 97.88% of shareholders at the AGM on 20 July 2023. Following the
appointment of a Group CEO in August 2023, the Remuneration Committee conducted a review of the Remuneration Policy and considered
what change was necessary in order to provide an appropriate and competitive incentive opportunity that reflected the scale and complexity
of the Group CEO role. As part of this process ahead of the 2024 AGM, the Chair of the Remuneration Committee consulted with the
Company’s largest shareholders and proxy agencies to discuss the proposed changes to the Remuneration Policy.
As a result of this process, it is proposed that the LTIP opportunity is increased from 150% to 200% of salary. This will provide a more
appropriate incentive to successfully lead the Group through the current challenges and deliver on the opportunities available to both
GLS and Royal Mail. No other changes are proposed.
Subject to shareholder approval at the AGM to be held on 25 September 2024, this Remuneration Policy will take effect from the date
of the 2024 AGM and will apply for up to three years.
Executive Director fixed remuneration
At a glance –
maximum opportunity Operation
Base salary
Purpose and link to strategy
Reflects the scope and responsibility of the role, while taking account of the skills and experience of the individual. Used to attract and retain
talented executives to deliver the business strategy.
Salaries for 2024-25
will be as follows:
M Seidenberg (Group
CEO) – £714,00
M Snape (Group CFO)
– £487,000
Salary levels for the Executive Directors are normally reviewed annually. The Committee considers factors such as
the performance of the Company, the performance of the Executive Director, any changes in role and responsibility,
assessment against relevant comparator groups, internal relativities and the level of increase being offered to our
frontline employees.
Increases will normally be in line with the broader employee population. Increases may be made above this level
to take account of changing circumstances, such as a change in responsibility, progression in the role, individual
performance or a significant increase in the scale or size of the role.
Benefits
Purpose and link to strategy
To support the attraction and retention of talented executives by providing a competitive offering.
The value of the
benefits stated is
the maximum cost
to the Company of
providing them
Benefits currently include the provision of a company car or the cash equivalent and health insurance.
Life assurance and health screening are also provided. Additional benefits may be offered such as financial advice
and relocation allowances.
UK-based Executive Directors are entitled to participate in any Share Incentive Plan (SIP) or Save As You Earn
(SAYE) schemes currently available to employees.
Where an Executive Director is based outside the UK but is required to travel to the UK to fulfil the responsibilities
of their role and to attend Board meetings, they may be subject to tax on their business travel expenses to and from
the UK and on the provision of any accommodation in the UK. Although it represents a business expense, the tax
treatment requires that their travel and accommodation expenses are then included as benefits. Because of the
business context, the tax liabilities will be covered by the Company on a grossed-up basis.
Pension
Purpose and link to strategy
To provide a competitive post-retirement income.
Executive Directors currently receive a pension of 13.6% of salary, which is aligned with
the majority of the workforce.
For newly appointed Executive Directors, the pension allowance will be in line with employer
contribution for the majority of the workforce.
Company contribution to a
defined contribution pension
scheme and/or a cash
supplement (in lieu of pension).
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Directors’ Remuneration Policy continued
Executive Director variable remuneration
At a glance – maximum opportunity Operation Performance measures
Short-Term Incentive Plan (or annual bonus)
Purpose and link to strategy
Designed to reward achievement of key strategic, financial and operational priorities for the year to deliver strong performance in service of
longer-term strategic goals and creation of long-term shareholder value. Part of the total annual incentive opportunity is a deferred share
award encouraging a long-term view, providing alignment with shareholders’ interests.
Maximum total annual incentive opportunity
of 150% of salary, with a target opportunity
of 75% of salary.
Normally at least one third of any bonus
earned is deferred into shares in the
Company which are normally released
after three years.
Deferred share awards will be granted
to Executive Directors in the form of a
conditional share award. The Committee
will normally award dividend equivalents
on deferred shares to the extent that
they vest.
Malus and clawback provisions will apply
to both elements of the award.
Annual performance measures and
weightings will be selected at the start
of each financial year to align with the
key strategic, financial, and operational
priorities of the business. The measures
themselves may change on an annual
basis as financial and operational priorities
of the business change.
In addition, the Committee may select an
underpin or underpins that must be achieved
(which may be at a Group or an appropriate
business unit level) before any bonus
is payable to an Executive Director.
Financial and/or non-financial measures
can be used as underpin measures.
The Committee may use its discretion to:
— Change the performance measures and targets, and the weighting attached to these partway through a performance year if there is a
significant and material event which causes the Committee to believe that the original measures, weightings and targets are no longer
appropriate.
— Make downward or upward movements to the amount of bonus earned resulting from the application of the performance measures, if the
Committee believes that the bonus outcomes are not a fair and accurate reflection of business performance.
Long-Term Incentive Plan
Purpose and link to strategy
Supports executive recruitment and retention, with an appropriate balance between short-term performance and the creation of long-term,
sustainable shareholder value.
Maximum award level of 200% of salary
For 2024 awards:
Group CEO: 200% of salary
Group CFO: 150% of salary
Awards are granted annually to Executive
Directors in the form of a conditional
share award.
These will vest at the end of a three-year
period subject to:
— The Executive Director’s continued
employment at the date of vesting.
— The satisfaction of the performance
conditions.
The Committee will normally award dividend
equivalents on shares to the extent that they
vest. There is a two-year holding period after
vesting when Executive Directors cannot sell
the vested shares other than to pay tax.
Malus provisions apply over the
performance period. Clawback
will apply over the holding period.
Performance measures and/or weightings
reflect the business strategy at the time
and are measured over or at the end of
three years. The Committee may change
the balance of the measures, or use
different measures for subsequent
awards, as appropriate.
The underlying performance of the business
will also be considered when determining
the vesting.
In exceptional circumstances the Committee retains the discretion to vary or waive the performance conditions applying to LTIP awards, if
the Board considers it appropriate and the new performance conditions are deemed reasonable and are not materially more or less difficult
to satisfy than the original conditions.
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Application of malus and clawback
At a glance –
maximum opportunity Operation
Malus and clawback
may be applied by
the Committee in
the event of:
i. Discovery of a material misstatement resulting in an adjustment in the Company’s accounts.
ii. Discovery that the grant or vesting of an award was based on error or inaccurate or misleading information.
iii. Conduct by an Executive Director that amounts to fraud or gross misconduct.
iv. Conduct by an Executive Director that results, or could result, in serious reputational damage to the Group.
v. Conduct by an Executive Director that has caused a material failure of risk management.
vi. The Company enters involuntary administration or insolvency process.
vii. An Executive Director breaching any restrictive covenants or confidentiality obligations that apply after the
termination of their employment.
Events iv) to vii) only apply to awards granted after 1 April 2019.
Shareholding guidelines – during employment
Purpose and link to strategy
To ensure alignment between remuneration and long-term shareholder value creation.
Shareholding
guideline of
200% of salary
Executive Directors are expected to retain any shares they already own and any shares released under the LTIP and
the Deferred Share Bonus Plan (DSBP) (except for those sold to cover any tax and social security obligations) until
this is achieved.
Shareholding guidelines – post cessation
Purpose and link to strategy
To ensure continued alignment of Executive Directors with shareholders as they transition out of the business.
200% of salary to
be held in vested
shares for two years
after leaving.
On cessation, Executive Directors are required to maintain their shareholding guideline for two years. The number
of shares to be held will be based on the shares vested under executive share schemes only (including the shares
from any DSBP award that are yet to vest, based on a net calculation) and will be determined by the share price on
the date of cessation. If an Executive Director has not yet reached the 200% of salary guideline at the point of
departure, they will be required to hold any shares granted under executive share schemes for two years. The
post-cessation shareholding requirement will be included in Settlement Agreements for Executive Directors
on leaving the business.
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Directors’ Remuneration Policy continued
Approach to recruitment remuneration
Element Policy
Salary Salaries for new Executive Directors appointed to the Board will be set in accordance with the terms of the approved
Remuneration Policy in force at the time of appointment. In particular, they will take account of the appointee’s skills
and experience as well as the scope and market rate for the role.
Benefits Benefits consistent with those offered to other Executive Directors under the approved Remuneration Policy in
force at the time of appointment will be offered, including the discretion to offer additional benefits including but
not limited to a) relocation allowance on recruitment and b) covering additional tax incurred by a non UK-based
Executive Director when performing their duties outside their home country (such as visiting the UK for Board
or other meetings) to ensure that they are not subject to a greater tax burden as a result.
Pension allowance The pension allowance paid to any newly appointed Executive Director will be aligned to the wider workforce
pension arrangements as outlined in the Remuneration Policy.
Incentives Incentive arrangements will be in accordance with the approved Remuneration Policy in force at the time of
appointment to the role. Under the Remuneration Policy:
— Maximum total annual incentive opportunity award in any year would be 150% of salary.
— Maximum LTIP award would be 200% of salary (with the ability to offer up to 300% of salary for the year of
starting the role).
For an externally appointed Executive Director, the Company may offer additional cash or share-based payments
that it considers necessary to buy out current entitlements from the former employer that will be forfeited on
recruitment. Any such arrangements would reflect the type of award (for example, cash or shares), time horizons,
and levels of conditionality of the remuneration foregone. In order to facilitate buy-out arrangements, existing
incentive schemes will be used to the extent possible, and the Committee will retain discretion on the application
of holding periods, performance conditions and performance periods.
For an internally appointed Executive Director, any outstanding variable pay element, such as an LTIP awarded in
respect of the prior role, will continue on its original terms.
Other The Committee always seeks to use its judgement to ensure that any remuneration package is set such that the
Company is able to attract the right calibre of individual required, whilst maintaining a responsible attitude to
executive compensation.
The terms and conditions for any new Executive Director contract, as outlined in this Policy, shall always be subject to
local laws in any applicable jurisdiction and be amended to ensure compliance with such local laws where necessary.
Policy on payment for loss of office
The Committee reserves the right to make any other payments
in connection with an Executive Director’s cessation of office or
employment where the payments are made in good faith in discharge
of an existing legal obligation (or by way of damages for breach of
such an obligation) or by way of compromise or settlement of any
claim arising in connection with the cessation of a Director’s office
or employment. Any such payments may include but are not limited
to paying any fees for outplacement assistance and/or the Director’s
legal and/or professional advice fees in connection with cessation
of office or employment.
The Company may meet ancillary costs, such as outplacement
consultancy and/or reasonable legal costs, if the Company
terminates the Executive Director’s service contract.
Element Policy
Payment in lieu
of notice
The Company may terminate the contract by making a payment in lieu of any unexpired notice period (unless
dictated by applicable law). The payment in lieu of notice is limited to a maximum of 12 months’ base salary (unless
dictated by applicable law). Service contracts for Executive Directors will expressly provide for the use of monthly
phased payments (unless dictated by applicable law) in the event of a payment in lieu of notice with a reduction in
amounts paid if the executive obtains alternative paid employment.
Other payments Payment in lieu of accrued holiday, incidental expenses, outplacement services and payments relating to post-
termination restrictions may be paid/provided for as appropriate. Any statutory entitlements or sums to settle or
compromise claims in connection with a termination (including, at the discretion of the Committee, reimbursement
for legal advice) would be paid as the Committee considers necessary.
Post-cessation
shareholding
Executive Directors will be required to maintain their shareholding guideline for two years. The number of shares to
be held will be based on the shares granted under executive share schemes only and will be determined by the
share price on the date of cessation. If an Executive Director has not yet reached the 200% of salary guideline at the
point of departure, they will be required to hold any shares, granted under executive shares schemes, for two years.
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The following table sets out the position under the incentive plans on cessation of employment:
Element Good leaver reason
1
Other reason
2
Committee discretion
Annual bonus
(cash)
Performance conditions will be
measured at the bonus
measurement date. Bonus will
normally be pro-rated.
No bonus payable for
year of cessation.
— To determine that an executive is a good leaver.
— To determine whether to pro-rate the bonus
to time.
The normal approach is that bonus will be pro-rated
provided that where any discretion is exercised
there is an appropriate business case which will
be explained to shareholders.
Annual bonus
(deferred)
All subsisting deferred share
awards will normally vest on the
normal vesting date.
Lapse of any unvested
deferred share awards.
— To determine that an executive is a good leaver.
— To vest deferred shares at the date of cessation
of employment.
— To determine whether to pro-rate the award
to time.
The normal approach for existing awards is that
they will not be pro-rated provided that where any
discretion is exercised there is an appropriate
business case which will be explained in full to
shareholders. In respect of the year of cessation,
discretion may be exercised to provide a pro-rated
deferred share award based on achievement of
performance conditions as measured at the bonus
measurement date.
LTIP Pro-rated to time and
performance in respect of each
LTIP award. Awards will vest on
the normal vesting date and the
holding period will apply, except
in the case of death when
awards will vest on date of
cessation of employment (and
no holding period will apply).
Lapse of any unvested
LTIP awards.
— To determine that an executive is a good leaver.
— To measure performance over the original
performance period or at the date of cessation
of employment.
— To vest the shares on date of cessation
of employment.
— To determine whether to pro-rate the award
to time.
The normal approach is that awards will be
pro-rated and to disapply the holding period
provided that where any discretion is exercised
there is an appropriate business case which
will be explained in full to shareholders.
1. A good leaver reason is defined as cessation in the following circumstances: death; injury, ill health or disability, as established to the satisfaction of the Committee; redundancy with the agreement of the
Committee; retirement with the agreement of the Committee; the company employing the executive ceasing to be a member of the Group; the business or part of the business to which the executive’s
office or employment relates being transferred to a person who is not a member of the Group; or any other reason where the Committee in its discretion so permits.
2. Cessation of employment in circumstances other than those set out above is cessation for other reasons.
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Directors’ Remuneration Policy continued
Policy on a takeover or other corporate events
The Committee’s policy on the vesting of incentives on a change of control is summarised below.
Element Take over Committee discretion
Annual bonus (cash) Pro-rated to time and performance
to the date of the takeover.
The Committee’s normal approach is that it will pro-rate
the bonus for time. It is the Committee’s intention to use
its discretion to not pro-rate in circumstances only where
there is an appropriate business case, which will be
explained in full to shareholders.
Annual bonus
(deferred)
Subsisting deferred share awards
may vest on a takeover.
The Committee has discretion regarding whether to
pro-rate the award to time. The Committee’s normal
approach is that it will not pro-rate awards for time.
The Committee will make this determination depending
on the circumstances of the takeover.
LTIP Subsisting LTIP awards may vest on a
takeover, pro-rated to time and performance.
The Committee will determine the proportion of the LTIP
award which vests taking into account, among other
factors, the period of time the LTIP award has been held
by the participant and the extent to which any applicable
performance conditions have been satisfied at that time.
In the event of a demerger, the Committee has wide flexibility as to what should happen to awards, including whether all or part of an award
should vest and on what terms, or whether an award should continue on amended terms.
Legacy commitments
The Committee reserves the right to make any remuneration payments and payments for loss of office (including exercising any discretions
available to it in connection with such payments) notwithstanding that they are not in line with the Policy set out in this report where the terms
of the payment were agreed (i) before the 20 July 2023 AGM (the date the previous shareholder-approved Directors’ Remuneration Policy
came into effect); (ii) before this Policy came into effect, provided that the terms of the payment were consistent with the shareholder-approved
Directors’ Remuneration Policy in force at the time they were agreed, or at a time when the relevant individual was not an Executive Director
of the Company and, in the opinion of the Committee, the payment was not in consideration for the individual becoming an Executive Director
of the Company. For these purposes, ‘payments’ includes the Committee satisfying awards of variable remuneration and, in relation to an
award over shares, the terms of the payment are ‘agreed’ at the time the award is granted.
This policy applies equally to any individual who is required to be treated as an Executive Director under the applicable regulations.
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Fixed On Target Maximum Max (with
share price
growth)
3,500
100%
£798
44%
28% 23%
100%
£504
40%
30%
£1,234
30%
26%
37% 31%
£1,965
37% 31%
15%
£2,330
23%
28%
36% 31%
15%
£3,423
36% 31%
£2,898
£1,848
28%
3,000
2,500
2,000
1,500
500
1,000
0
Martin Seidenberg
Fixed On Target Maximum Max (with
share price
growth)
Michael Snape
STIP
Fixed LTIP Share price growth
Illustrative remuneration scenarios (£'000s)
Executive Directors’ remuneration opportunity under the Policy
The following charts set out the remuneration scenarios under the Policy for the Executive Directors in 2024-25.
It should be noted that there is a change to the maximum LTIP incentive opportunities receivable for the Group CEO, compared with the
previous Policy scenarios.
Assumptions
Fixed remuneration: Includes current salary, pension allowance at 13.6% and, in the case of the Group CFO, a benefits value of c.£13,160
and, in the case of the Group CEO, a benefits value of c.£17,000 (including company car and grossed-up taxes).
On target: STIP is 75% of salary (including the deferred element) and LTIP is 100% of salary for the Group CEO, and 75% of salary for the
Group CFO.
Maximum: STIP is 150% of salary (including the deferred element) and LTIP is 200% of salary for the Group CEO, and 150% of salary for
the Group CFO.
Maximum with 50% share price appreciation: The share price embedded in the LTIP calculation for the ‘maximum with share price growth’
bar chart is assumed to increase by 50% over the performance period.
No dividend equivalents on share-based incentives have been applied in any of the above scenarios.
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Directors’ Remuneration Policy continued
Remuneration policy for Non-Executive Directors (including the Chair of the Board)
At a glance Operation
Purpose and link to strategy
Provides a level of fees to support recruitment and retention of Non-Executive Directors and a Chair of the Board with the necessary
experience to fulfil the leadership role required of them.
Non-Executive
Directors are paid
an annual fee and
additional fees for
being Chair of a
Committee or
a member of a
Committee and, if
appropriate, other
additional time
commitments.
The Chair of the Board
does not receive any
additional fees for
membership of
Committees.
The Board is responsible for setting the remuneration of the Non-Executive Directors. The Remuneration
Committee is responsible for setting the Chair of the Board’s fees.
The fees for Non-Executive Directors and the Chair of the Board are set at broadly the median of the comparator
group. Fees are reviewed annually based on equivalent roles in the comparator group. In general, the level of fee
increase for the Non-Executive Directors and the Chair of the Board will be set taking account of any change in
responsibility and will consider the general rise in salaries across the UK workforce.
The Company will pay reasonable expenses incurred by the Non-Executive Directors and the Chair of the Board
and may settle any tax incurred in relation to these. Non-Executive Directors and the Chair of the Board do not
participate in any variable remuneration or benefits arrangements.
Service contracts and letters of appointment
The Company’s policy is that the Executive Directors are employed
under service contracts. The contracts have an indefinite term and
are normally terminated by the Executive Director with six months’
written notice and by the Company with 12 months’ notice. Copies
of the Executive Directors’ service contracts will be available for
inspection at our forthcoming AGM.
Subject to Board approval, it is the Company’s policy to allow each
Executive Director to accept one Non-Executive Director position on
the board of another listed company. The fees for such appointments
are retained by the Executive Directors and, as appropriate, are
disclosed in the Remuneration Report.
The Non-Executive Directors (including the Non-Executive Chair
of the Board) are appointed by rolling letters of appointment.
The Non-Executive Directors are appointed for up to three years,
subject to annual review and re-appointment. The fees for new
Non-Executive Directors appointed will be set in accordance with
the terms of the approved Remuneration Policy in force at the time
of appointment. One month’s notice is required by either party (four
months’ notice in the case of the Chair of the Board).
Consideration of employment conditions elsewhere in the Group
In developing the 2024 Remuneration Policy, the Committee
carefully considered the remuneration arrangements across the
Group. The Committee receives information on wider workforce
demographics and remuneration on a regular basis, to ensure that
the Committee has a good understanding of the structure and
application of reward policies throughout the Group.
The Committee has agreed a set of Guiding People Principles for IDS
plc, against which it can assess the Company’s reward arrangements.
Across the Group, we are working towards reward arrangements that:
— Deliver both value for our people and a return on investment for
the business.
— Incentivise and recognise high performance.
— Are aligned with the markets in which we operate and compete.
— Drive efficiencies by taking a consistent cross-business approach.
— Are well communicated, holistic and understood by our people.
When making decisions about executive remuneration, the
Committee ensures, for example, that pay review budgets for
Royal Mail executives are typically set at levels which mirror those
being applied for managerial populations, which in turn are set in
the context of pay levels agreed with our trade unions for employees
whose pay is collectively bargained. In addition, the different
incentive and commission plans in operation across Royal Mail
support the delivery of the Company-wide priorities which are part
of the STIP, through which the Executive Directors are incentivised.
The broader workforce did not have direct input into the Policy, but
its application is heavily influenced by remuneration arrangements
for all employees. Ingrid Ebner is the Designated Non-Executive
Director for engagement with the workforce, which allows any key
themes from employee engagement activity to be fed into Committee
discussions. Further information about our workforce engagement
activities is set out on pages 22, 34 and 90.
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The Committee is directly responsible for the remuneration of the Executive Directors and the respective Royal Mail and GLS Executive
Boards. The Committee is also given regular updates and, as required, takes key decisions on incentive plans that cascade through the
organisation. The Committee takes changes in workforce remuneration into account when making decisions on executive remuneration.
A summary of remuneration across the Royal Mail business is set out below.
Operational Managers Senior managers Senior leaders
Salary Based on role, location
and service, progression
typically based on service.
Salary increases
negotiated with the CWU
and applied to the pay
scales. No personal or
performance-related
element.
Middle and junior
managers typically have a
similar fixed pay structure
to operational colleagues,
with pay scales that they
progress through based
on service.
Pay based on the role and
an individual’s experience
and skills, within broad
bands.
Pay based on the role and
an individual’s experience
and skills, and external
market positioning.
Allowances and overtime Eligible for allowances
(including functional, shift
and legacy allowances),
overtime and scheduled
attendance (a form of
planned overtime).
Some roles at this level
are also eligible for shift
pay, overtime and
allowances.
Not eligible. Not eligible.
Pension The majority of employees are members of the Royal Mail Defined Benefit Cash
Balance Scheme (DBCBS), with a Royal Mail contribution at 15.6% of salary, into
which participants transferred after the closure of the final salary pension plan.
New hires are eligible for the Royal Mail Defined Contribution Plan (DCP), with
Company contributions up to 10% of salary.
However, on the launch of the new Royal Mail Collective Pension Plan, all eligible
colleagues will participate in this plan (rather than the current DBCBS and DCP).
Company contributions will be up to 13.6% of salary.
Option of cash allowance
in lieu of Company
contributions.
Benefits Employee paid-for flexible benefits (e.g.
childcare vouchers, cycle to work scheme, car leasing,
insurances, season ticket loans) and all employee
share plans.
Car allowance and healthcare, in addition to employee
paid-for flexible benefits and all employee share plans.
Short-term incentive
(STIP)/bonuses
Eligible for a ‘Christmas
Supplement’ reflecting
their huge effort and
impact during our busiest
period. Not linked to
personal performance.
Managers are eligible for a management STIP based
on corporate and personal performance.
Eligible for management
STIP with a deferred share
element for some roles.
LTIP Not eligible. Not eligible. Not eligible. Eligible.
The chart shows an indicative summary of the relationship between fixed and variable pay across Royal Mail. There is no discretionary performance-
related pay for operational roles. Colleagues at this level influence their remuneration through working additional or anti-social hours.
All our managers have an element of performance-related pay – with Executive Directors having the highest proportion of their pay at risk.
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Directors’ Remuneration Policy continued
99%
86%
53%
1%
Fixed
Variable
100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Level 3 & 4
Level 5 & 6
Senior
Manager
47%
62% 38%
14%
92% 8%
Manager
Op
erational
Illustration of typical split of fixed and variable remuneration
Transforming company car provision
In July 2021 Royal Mail announced its 2025 roadmap to decarbonise
its company car and business mileage allowances policies. This is
part of the business’ commitment to reduce its environmental
impact and achieve Net-Zero by 2040 and should ensure that its
company car fleet is all-electric by 2030.
The roadmap consists of three key dates:
— 1 October 2021: from this date, the 1,500 senior managers have
only been able to order EVs through MyDrive.
— 1 January 2023: from this date, the 1,500 senior managers have
only been reimbursed for business travel (in private company cars)
at an EV rate.
— 1 April 2025: from this date, only EVs will be available to order
through MyDrive. Business mileage reimbursed for all employees
(in a private or company car) will only be available at appropriate
EV rates.
Colleagues are able to acquire a company car (leased with our
third-party supplier) through our salary sacrifice arrangement. As at
March 2024, there were 2,622 company cars in the fleet, of which
1,643, were EV. Of the orders placed between October 2023 and
March 2024, 69% were EV.
Gender pay gap reporting
The Royal Mail 2023 Gender Pay Gap Report, published during 2023-
24, continues to show that average pay for men and women is broadly
the same. On a median basis, our gender pay gap is 2.6% (a decrease
of 0.5 percentage points on the prior year). This compares with a
national average gender pay gap on a median basis of 14.3% across
all industries, calculated by the Office of National Statistics (ONS)
in 2023. On a mean basis, the pay gap has increased minimally to
1.5% (an increase of 0.1 percentage points on the prior year). Female
representation in the upper pay quartile has regressed by 2 percentage
points. The small movements in the pay gap data year on year were
due to operational headcount reduction and introduction of new
frontline terms and conditions.
Gender pay gap multi-year view
Royal Mail and national average (ONS survey)
2021
2022 2023
1
8%
1
6%
1
4%
1
2%
1
0%
8%
6%
4%
2%
0%
National average pay gap (ONS) Royal Mail median pay gap Royal Mail mean pay gap
15.4%
15.0%
14.3%
3.0%
1.4%
3.1%
1.4%
2.6%
1.5%
In 2023, 98% of men and 97% of women received bonuses (in 2022,
this was 97% for men and 96% for women). Those who are not
eligible to receive a bonus typically have not reached the minimum
service requirement or obtained a minimum personal performance
threshold, in the relevant year. In 2023, the median bonus gap was
1.6% (1.9% in favour of women in the prior year) with the mean being
in favour of woman at 16.9% (8.96% in the prior year) due to the
higher proportion of women in our management population. In 2023
a performance-driven bonus was paid for the first time in four years
compared to a general recognition award in 2022. Typically, there is
a higher ratio of women in managerial roles who historically have
achieved higher performance ratings.
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International Distribution Services plc Annual Report 2023-24
While we are pleased that our gender pay gap continues to compare
favourably to the UK average, we remain focused on improving the
representation of women across the Group. Our gender strategy
focuses on attracting, retaining and developing female talent across
the organisation. We have female representation and recruitment
targets for operational roles, as well as a wide range of initiatives in
place to achieve them.
CEO pay ratio
The CEO pay ratio is set out below, as required under the Large
and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (Regulations), with the required explanation,
and further contextual information in relation to methodology and
assumptions used. The CEO pay ratio for 2020 is based on the
remuneration of the former Group CEO. Between 2021 and 2023
it was based on the remuneration of the CEO Royal Mail. The CEO
pay ratio for 2024 is again based on the remuneration of the Group
CEO.
Year Method
25th percentile
pay ratio
50th percentile
pay ratio
75th percentile
pay ratio
2024 Option A 48:1 42:1 36:1
2023 Option A 21:1 19:1 16:1
2022 Option A 26:1 23:1 20:1
2021 Option A 22:1 20:1 17:1
2020 Option A 31:1 28:1 24:1
The table below sets out the salary, full pay and benefits value
received by UK employees identified at the 25th, 50th and 75th
percentiles, during 2023-24. There are more than 73,150 operational
colleagues on the salary of £25,823 on a full-time equivalent basis
across the business. The difference in total pay and benefits is due
to the different allowances, overtime, shift payments and pension
arrangements received by these employees during 2023-24.
2023-24 25th percentile 50th percentile 75th percentile
Salary £25,823 £25,823 £26,830
Total pay and benefits £32,165 £36,268 £42,630
The material increase in the pay ratio between 2023-24 and 2022-23
is due to a number of factors, predominantly that the CEO received an
STIP payment in respect of 2023-24.
The Committee is satisfied that the individuals identified within each
relevant percentile appropriately reflect the employee pay profiles
at those quartiles and that the overall picture presented by the
ratios is consistent with our pay, reward and progression policies.
Pay relativities are just one of many factors that we take into
consideration in developing a fair remuneration framework in
Royal Mail.
We have also detailed the potential ratios based on the Group CEO of
IDS's theoretical fixed, target and maximum pay as set out in the
Policy. It is important to note that a high proportion of the Group CEO
pay is based on performance against the short- and long-term
incentive plans, and that payouts can significantly vary year on year,
affecting the ratio going forward.
0% 10% 20% 30% 40% 50% 60% 70% 80%
90%
Median employee pay
versus Group CEO’s 2023-24
maximum remuneration
Median employee pay
versus Group CEO’s 2023-24
target remuneration
Median employee pay
versus Group CEO’s actual
2023-24 remuneration
80%
66%
42%
22%
Median employee pay
versus Group CEO 2023-24
fixed remuneration
Illustrative pay ratios based on different remuneration outcomes for the Group CEO
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Directors’ Remuneration Policy continued
How we have calculated our pay ratios
Under the Regulations, companies are required to identify the employees with pay and benefits at the 25th, 50th and 75th percentiles of
all UK employees for the relevant financial year and compare these with the total remuneration of the CEO as set out in the single figure of
total remuneration table.
The Company has chosen to use Option A to identify the employees at the 25th, 50th and 75th percentiles and their respective pay and
benefits, as it is recognised that this is the most accurate approach. All UK employees as at year end have been included in the reporting,
with employees ranked based on their 2023-24 remuneration. The data assumptions included in our reporting are set out below:
Element Description
Base salary The Regulations require that full-time equivalent salaries are used to identify the 25th, 50th and 75th percentiles in
order to ensure comparability across Royal Mail. At Royal Mail, more than 41,000 colleagues work part-time,
primarily in operational roles, and may have working hour changes through the year. We have, therefore, used the
full-time equivalent salary, as at year end, as the salary figure to rank our employees.
Allowances and
overtime
This includes a range of functional, shift, location, role-based allowances, and overtime, included on an actual basis
(not pro-rated for part-time colleagues, or annualised for new starters).
Taxable benefits Taxable benefits included are car allowance and healthcare.
Employer pension
contributions
Actual employer pension contributions have been included (not pro-rated for part-time colleagues or annualised for
new starters).
Incentives The Regulations require that incentives relating to the relevant financial year are included. In some cases, the
decision on the level of bonuses and LTIP vesting is not made until after the publication of this report.
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International Distribution Services plc Annual Report 2023-24
Annual Report on Directors’ Remuneration
This part of the Directors’ Remuneration Report sets out how the Policy has been applied for 2023-24. This detailed information, set out
below, has been audited by the Company’s independent auditor, KPMG LLP.
Single figure table – Executive Directors and former Executive Directors (audited)
Salary Benefits
3
Pension
4
Total fixed
Short-term
incentive
5
Long-term
incentive
Total
variable Total
£’000 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023
Martin
Seidenberg
1, 2
655 528 35 17 82 72 772 617 762 678 – 189 762 867 1,534 1,484
Michael Snape 99 – 3 – 14 – 116 – 110 – n/a – 111 – 227 –
Mick Jeavons
6
347 435 12 16 47 59 406 510 398 251 – 175 398 426 804 936
Simon
Thompson
7
63 544 – 16 7 74 70 634 57 – – – 57 – 127 634
1. Martin Seidenberg’s remuneration for his previous role as CEO GLS was set in Euros. Relevant values have been converted to British Pounds using the following exchange rate £1: €1.1583.
2. As disclosed in last year’s report, the Committee reviewed the Executive Directors’ salaries for 2023-24 and decided to apply a 6.6% increase to the Group CEO, effective 1 April 2023. This increase was
less than the rate applied to the wider workforce or the local Netherlands market rate during the period of April 2023 to July 2023.
3. Benefits in the case of Executive Directors include healthcare provision with notional annual premium of up to £2,309 and a cash allowance of £13,160 which can be used to fund (under a salary sacrifice
arrangement) the lease of an electric company car. In Q1 Martin Seidenberg was based in the Netherlands and elected to take a company car, which had a cost of €4,873 for this period only. The benefits
figure for Martin Seidenberg also includes immigration fees of £10,073 in relation to his relocation to the UK.
4. For 2023-24, the pension amount shown for Martin Seidenberg was paid as a cash allowance in lieu of pension.
5. For current Executive Directors one third of the STIP is deferred into shares subject to continued employment for three years. For leavers the equivalent value will be paid in cash. No further performance
conditions are attached. Details of the 2023-24 STIP outturn are set out on pages 126 to 127.
6. On 18 January 2024 it was announced that Mick Jeavons was stepping down as CFO Royal Mail. The above table shows remuneration in respect of his services as a Director to 18 January 2024. Details of his
remuneration arrangements on departure are provided on page 133.
7. On 12 May 2023 it was announced that Simon Thompson was stepping down as CEO Royal Mail. Details of his remuneration arrangements on departure were disclosed in last year’s Annual Report.
An update on actual values received is provided on page 133.
2023-24 short-term incentive outcome
The Committee followed a four-step process for determining
STIP awards.
1. Assess the earnings (financial) gateway: The Committee
concluded that a minimum level of financial performance had been
attained at GLS and Royal Mail, and that the STIP was affordable.
2. Consider eligibility: The Committee considered whether each
Executive Director had exhibited an appropriate level of personal
performance and conduct and was deemed to have met the
gateway requirement to be eligible for an incentive.
3. Evaluate performance against the relevant business scorecard
for the Executive Director: Details of the scorecard outcomes can
be seen below. These measures were a continuation of the prior year
design, which focuses on a vital few key metrics, profitability, quality
of service and a basket of non-financial metrics.
4. Review broader business performance and finalise awards:
The Committee can make an upwards or downwards adjustment
to the scorecard outcome for broader performance. In line with the
provisions of the Code, the Committee carefully considered whether
the respective formulaic outcome could be justified in the context of
Royal Mail’s and GLS’ overall performance. In so doing the
Committee reviewed the following:
— Business performance during 2023-24, including progress
against operational and strategic goals.
— The quality of underlying earnings and whether any significant
one-off factors influenced the results.
— The experience of our shareholders and customers over the year.
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International Distribution Services plc Annual Report 2023-24
Annual Report on Directors’ Remuneration continued
2023-24 STIP scorecards
Measure Weighting Targets Assessment Outcome
Group Scorecard – Martin Seidenberg (August 2023 to March 2024) , Michael Snape (January 2024 to March 2024) and Mick Jeavons
(April 2023 to March 2024)
GLS Operating Cash
Flow (€m)
12.5% Threshold – €135
Target – €145
Maximum – €155
€197 100%
Royal Mail Trading
Cash Flow (£m)
12.5% Threshold – -£366
Target – -£333
Maximum – -£300
£-262 100%
GLS EBITA (€m) 25% Threshold – €338
Target – €363
Maximum – €388
€371 67.8%
Royal Mail Operating
Loss (£m)
25% Threshold – -£394
Target – -£328
Maximum – -£262
£-348 42.4%
Royal Mail
Environmental
(CO
2
emissions
’000 tonnes)
5% Threshold – 408.4
Target – 398.1
Maximum – 387.9
394.5 67.6%
GLS Environmental
Percentage of
low-emission and
zero emission
vehicles for transport
fleet.
5% Threshold - 9.0%
Maximum - 11.0%
11.3% 100%
Strategic Priorities
2
15% (spread
across two
measures)
1. Stabilise Royal Mail and realign business activities to
appropriate priorities.
2. Ensure strong focus on improvement in quality of service.
Met in full
Met in full
100%
100%
GLS Scorecard – Martin Seidenberg (April to July 2023)
GLS Group EBITA
(€m)
1
75% Threshold – €338
Target – €363
Maximum – €388
€371 78.6%
Health and Safety –
Lost time accident
frequency rate
(LTAFR)
7.5% Threshold – 2.0%
Maximum – 6.0%
4.8% 70%
Sustainability
Initiatives –
Percentage of low-
and zero-emission
vehicles for the
transport fleet
7.5% Threshold – 9.0%
Maximum – 11.0%
11.3% 100%
Strategic Priorities 10% Assessment by the Committee of progress
against the main pillars of the GLS strategy:
— Digitalisation and last-mile offering
— Geographic expansion in Europe
— Moving into adjacent segments
Met in full 100%
1. Awards were subject to a Health and Safety underpin, with the condition that 90% of level 5 findings in Corporate Health and Safety Audits executed in 2023-24 were closed to time. A level 5 finding is
defined as a deviation with a very high risk of an occupational accident resulting in a serious injury or a very high legal risk. The Committee determined that the underpin was met prior to confirming
performance outcomes.
2. In assessing performance against the strategic priorities, the Committee considered in detail a number of relevant data points. They were comfortable that significant progress had been made in all areas,
and that the level of payout shown in the table above was an appropriate reflection of this.
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International Distribution Services plc Annual Report 2023-24
It was announced on 12 May 2023 that Simon Thompson had stepped down as Chief Executive of Royal Mail. As outlined in the Remuneration
Report last year, Simon remained eligible for any bonus under the Short-Term Incentive Plan for 2023-24 based on performance achieved
against the Royal Mail STIP scorecard, time pro-rated for active service. The scorecard was based on 37.5% Royal Mail trading cash flow,
37.5% on Royal Mail Operating Loss, 10% on Royal Mail Co2 Emissions, and 15% on Group Strategic Priorities. The Remuneration Committee
awarded a bonus based on its assessment of UK performance at the end of the financial year. applying a zero outcome to the Strategic
Priorities element.
It was announced on 18 January 2024 that Mick Jeavons had stepped down as Group Chief Financial Officer. As outlined in the stock
exchange announcement on the same date, Mick Jeavons remained eligible for any bonus under the Short-Term Incentive Plan for 2023-24,
to reflect his continued availability through the year end. His bonus was based on performance against the Group STIP scorecard. In respect
of the period as a Director to 18 January 2024 Mick received a bonus of £398,365. His award in respect of his continued employment to
31 March 2024 was £97,208.
Michael Snape was appointed as Group CFO on 18 January 2024 and was eligible for a pro-rated bonus in respect of the period to 31 March
2024 based on the Group STIP scorecard.
Based on performance under the scorecards detailed above, the STIP outcomes for all Executive Directors during the year are set out below.
M Seidenberg
Group CEO
M Seidenberg
CEO GLS M Snape M Jeavons S Thompson
Maximum award (% of salary) 150% 150% 150% 150% 150%
Salary on which bonus is based £466,666 €217,836 £99,462 £435,000 £62,740
Committee assessment on performance under the relevant
scorecard 75.9% 81.7% 75.9% 75.9% 60.2%
Discretion applied (+/- % pts) 0.0% 0.0% 0.0% 0.0% 0.0%
Final outcome for 2023-24
– as a % of maximum 75.9% 81.7% 75.9% 75.9% 60.2%
– as a % of salary 113% 122% 113% 113% 90%
– as an amount £531,650 €266,959 £110,963 £495,573 £56,655
Royal Mail LTIP
2021 LTIP outcomes
The 2021 LTIP was based on performance against a relative TSR measure, with a performance period from 1 April 2021 to 31 March 2024, and
financial performance, as set out below.
Only Martin Seidenberg and Mick Jeavons remained active participants in the 2021 LTIP. Michael Snape joined the Company in 2024 and
Simon Thompson’s awards lapsed on termination of his employment.
Measure
Weighting (Martin
Seidenberg’s
award)
Weighting (Mick
Jeavons’s award) Threshold Maximum Achievement
Relative Total Shareholder Return (TSR) 40% 40% Median Top Quartile 0%
UK Operating Profit (in 2023-24) (£m) 20% 656.1 801.9 0%
UK Parcels Revenue (in 2023-24) (£m) 10% 5,344.7 5,907.3 0%
GLS EBITA (in 2023-24) (€m) 40% 20% 410.0 449.9 0%
GLS Free Cash Flow (in 2023-24) (€m) 20% 10% 281.2 310.8 0%
Total vesting 0%
The Committee agreed that the level of vesting, 0%, is a reasonable outcome against the associated performance measures, having
reviewed Group’s wider performance and the share price performance over the three-year period.
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International Distribution Services plc Annual Report 2023-24
Annual Report on Directors’ Remuneration continued
Other outstanding LTIP awards
The following grants under the 2022 and 2023 LTIP remain outstanding at 31 March 2024. The performance conditions are set out below.
Threshold Maximum
Measure Weighting Performance
Vesting
(% of element) Performance
Vesting
(% of element)
2022 RM LTIP
TSR vs FTSE 51-150 (excluding mining
and financials) comparator group
Martin Seidenberg 40%
Median
25%
Top Quartile
100%
Mick Jeavons 70%
GLS EBITDA Martin Seidenberg 40%
€420
25%
€500m
100%
Mick Jeavons 20%
GLS cash flow Martin Seidenberg 20%
€283
25%
€343
100%
Mick Jeavons 10%
Total 100% 25% 100%
2023 Group LTIP
TSR vs FTSE 51-150 (excluding mining
and financials) comparator group
Martin Seidenberg 26.7%
Mick Jeavons
40% Median 25% Top Quartile 75%
Michael Snape
Stretch TSR element – TSR vs FTSE
51-150 (excluding mining and financials)
comparator group
Martin Seidenberg 33.3% Top Quartile 0% Top Decile 100%
UK Operating Profit (in 2025-26) (£m) Martin Seidenberg 13.3%
Mick Jeavons
20% 83 25% 93 100%
Michael Snape
UK Trading Cash Flow (in 2025-26) (£m) Martin Seidenberg 6.7%
Mick Jeavons
10% 140 25% 158 100%
Michael Snape
GLS EBITA (in 2025-26) (€m) Martin Seidenberg 13.3% 13.3
Mick Jeavons
20% 391 25% 450 100%
Michael Snape
GLS Free Cash Flow (in 2025-26) (€m) Martin Seidenberg 6.7%
Mick Jeavons
10% 256 25% 294 100%
Michael Snape
Total 100%
Simon Thompson, upon termination of employment, was not considered an ‘eligible leaver’ for the purposes of LTIP. This means that any
unvested awards lapsed when he stepped down from the Board on 12 May 2023.
Mick Jeavons, upon termination of employment, was determined as an ‘eligible leaver’ and any awards will be pro-rated according to the
number of months of service completed during the applicable performance/award period.
The LTIP awards outstanding for each of the Executive Directors and former Executive Directors is shown in the following table, as at 31 March
2024.
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International Distribution Services plc Annual Report 2023-24
The Committee retains the discretion to review vesting outcomes to ensure that these are reflective of the underlying performance during the period.
Award
Max value
of award
at grant
(% of salary)
Max value
of award
at grant
(£’000)
% vesting at
threshold
performance
(% of salary)
Final year of
performance
period
Number
of shares
at grant
Martin Seidenberg
2021 LTIP
1
150% 736 37.5% 2023-24 147,098
2022 LTIP
2
150% 788 37.5% 2024-25 288,888
2023 LTIP
3
300% 2,100 50% 2025-26 778,440
Michael Snape
2023 LTIP
4
150% 547 37.5% 2025-26 199,808
Mick Jeavons
2021 LTIP
1
150% 630 37.5% 2023-24 125,831
2022 LTIP
2
150% 652 37.5% 2024-25 239,361
2023 LTIP
3
150% 652 37.5% 2025-26 241,872
1. The 2021 LTIP award was granted on 12 August 2021 at a price of £5.0067 (three-day average closing price prior to grant) per share.
2. The 2022 LTIP was granted on 1 September 2022 at a price of £2.726 (three-day average closing price prior to grant) per share.
3. The 2023 LTIP was granted on 31 July 2023 at a share price of £2.69 (three-day average closing price prior to grant) per share.
4. The 2023 LTIP was granted on 9 February 2024 at a share price of £2.74 (three-day average closing price prior to grant) per share. The award granted to Michael Snape was pro rated for time in role during
the performance period.
Shareholder dilution
All awards vesting under the Group’s share plans are satisfied by the transfer of existing shares or, where appropriate, the issuance of new
shares. The Group’s share plans contain limits that govern the amount of shares that may be issued to satisfy any subsequent exercise of
awards. These limits are in line with those stated in the Investment Association’s Principles of Remuneration. The Group operates employee
benefit trusts that are administered by independent trustees, and which hold shares to meet various obligations under the Group’s share
plans. As each Executive Director is within the class of beneficiary of these trusts, they are deemed, for the purposes of the Companies Act
2006, to have an interest in the trusts’ shares.
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Annual Report on Directors’ Remuneration continued
Shareholding levels
Directors’ shareholdings
The table below sets out details of the shareholdings of the Directors as at 31 March 2024 (except where noted below). There was no change
in the Directors’ interests in the Company’s ordinary share capital between 31 March 2024 and 24 May 2024 (being the latest practicable
date prior to the publication of this Annual Report). Executive Directors are required to retain any share-based awards until they achieve a
holding of 200% of salary.
Number
of shares
owned on
29/03/2024
Number
of shares
owned on
26/03/23
Policy
shareholding
requirement
Current
shareholding
(as a % of salary)
2
Share awards not
subject to
performance
Share awards
subject to
performance
(LTIP 2021,
2022, 2023)
3
Chair of the Board
Keith Williams 56,800 56,800 – – – –
Executive Directors
Martin Seidenberg 71,437 9,800 200% 27% 163,202 1,214,426
Michael Snape – n/a 200% – – 199,808
Non-Executive Directors
Maria da Cunha 15,000 15,000 – – – –
Michael Findlay 16,690 16,690 – – – –
Sarah Hogg 12,000 12,000 – – – –
Lynne Peacock 11,309 11,309 – – – –
Shashi Verma – – – – – –
Jourik Hooghe – – – – – –
Ingrid Ebner – – – – – –
Former Executive Directors –
Mick Jeavons 195,541 149,605 200% 137% 66,163 607,064
Simon Thompson 20,982 20,982 200% 82% 16,254 –
1. For Directors who have stepped down from the Board, the number of shares owned is shown as at the date they stepped down. The number of shares is based on beneficial shareholdings, excludes any
unvested share awards and includes (if appropriate) any shares held by persons closely associated with the Directors.
2. Value of beneficial shareholding based on the average share price during 2023-24 (245.4 pence) and where required converted using an illustrative FX rate of £1:€ 1.1583. Values include any vested LTIP
shares subject to a holding period but exclude any unvested DSBP awards. Martin Seidenberg and Michael Snape are expected to build their shareholding over time. As at 31 March 2024, they had not met
their shareholding requirement.
3. A two-year holding period will apply after vesting. Shares may be retained in a nominee account after this period if a participant has not yet satisfied their shareholding guideline requirement of 200% of
salary for an Executive Director.
Executive Director fees from external positions
The Executive Directors are entitled to receive fees from
external appointments.
Martin Seidenberg and Michael Snape did not hold any external
appointments at other listed companies in the period they were
appointed to the Board during 2023-24.
Executive Director terms of employment
The Executive Directors are employed under service contracts
with an indefinite term.
Date of contract
Notice
period from
IDS
(months)
Notice
period from
employee
(months)
Martin Seidenberg 25 June 2020 12 6
Michael Snape 18 January 2024 12 6
Copies of the Executive Directors’ service contracts are available
for inspection by appointment at the Company’s registered office
during normal office hours and will be available for inspection at
our forthcoming AGM.
Relative importance of spend on pay
With no dividend payable in 2023-24, the table below shows overall
expenditure on people compared with the previous financial year.
The Company considers overall expenditure on colleague
remuneration in the context of its general finances. Revenue has
been included because this measure represents the income the
Company received during the year and provides a clear illustration
of the ratio of people costs to income.
2023-24 2022-23 % change
Ordinary dividend per
share (DPS) – paid in
the year – – –
People costs (£m) 6,793 6,440 5.5%
Group revenue (£m) 12,679 12,044 5.3%
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International Distribution Services plc Annual Report 2023-24
Comparison of change in Directors’ remuneration versus employee remuneration
We monitor year-on-year changes between the movement in remuneration for executives between performance years compared with
the wider workforce. The relevant disclosure requirement is for this comparison to be made against the employees of the Parent Company.
On the basis that International Distribution Services plc (the Parent Company) does not employee any staff, we have voluntarily disclosed
the comparisons against a UK managerial population (internal grades level 2 to 9) as the Committee considers this provides a representative
comparison (with remuneration that is structured similarly, e.g. all managers are eligible for annual bonuses and are eligible for employee
benefits). The table below sets out the year-on-year percentage change in salary, benefits and annual incentives for the Directors of the
Board against an average full-time equivalent UK manager.
Salary/fee % change Benefits % change STIP % change
23-24 vs
22-23
22-23 vs
21-22
21-22 vs
20-21
20-21 vs
19-20
23-24 vs
22-23
22-23 vs
21-22
21-22 vs
20-21
20-21 vs
19-20
23-24 vs
22-23
22-23 vs
21-22
21-22 vs
20-21
20-21 vs
19-20
Executive Directors
Martin Seidenberg 24.1 7.1 n/a – 105.9 8.5 n/a – 12.4 -3.6 n/a –
Michael Snape n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Former Executive Directors
Mick Jeavons -20.2 3.6 346.8 n/a -25.0 – 351.0 n/a 57.4 -18.0 n/a n/a
Simon Thompson -88.0 3.6 348.7 n/a -100.0 6.5 359.1 n/a -59.9 -100.0 n/a n/a
Chair and Non-Executive
Directors
Keith Williams 0.3 3.7 – 11.9 – – – – – – – –
Maria da Cunha 15.8 – 16.9 27.5 – – – – – – – –
Michael Findlay 4.0 – – 33.9 – – – – – – – –
Ingrid Ebner n/a n/a n/a n/a – – – – – – – –
Sarah Hogg 3.9 – 6.9 87.1 – – – – – – – –
Jourik Hooghe 19.2 n/a – – – – – – – – – –
Lynne Peacock 1.2 10.7 1.3 141.9 – – – – – – – –
Shashi Verma 0.0 106.7 n/a n/a – – – n/a – – – –
Royal Mail managers 3.8 5.9 4.6 -0.1 -1.0 0.7 -6.2 4.2 200.4 8.8 -22.9 0.2
Executive and Non-Executive Directors
Percentage change figures are calculated using the respective
figures in the single total figure of remuneration.
Non-Executive Directors
With effect from 1 January 2024 all Non-Executive Director fees
(including fees for the Senior Independent Director, Committee
Chair, Committee members and the Designated Non-Executive
Director for engagement with the workforce) increased by 2%, this
being aligned to the effective increases for the majority of the
workforce. This means the base NED fee increased from £51,800 to
£52,836 with all other NED and committee fees increasing by the
same percentage (2%). A review of NED fees will be undertaken
annually with the intention that fees are increased by the level of
latest salary increase for the broader workforce (subject to an
underlying market rationale).
Royal Mail managers
Employee data is based on full-time equivalent Royal Mail managers
as at the relevant March year end, with calculations on a mean basis.
As the manager population will change yearly and the mean average
(as opposed to median) considers the full range of data, it is expected
that this will provide a more consistent year-on-year comparison.
The salary percentage change calculation considers the full-time
equivalent mean employee annual salary at March year end plus
allowances, such as for temporary promotions, paid during the
respective years.
Employee benefits are calculated on a per capita basis covering the
car allowance or a cash equivalent and value of the medical cover.
Changes in the percentage will primarily be caused by two factors:
changes in population and changes in employee benefit choices
(including more electric company cars being selected which have
a lower taxable benefit value). The increase in the average benefit
value in 2023-24 also reflects changes in the operation of benefits
including the removal of the cash alternative allowance, a move
which was introduced to promote take-up of medical cover.
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International Distribution Services plc Annual Report 2023-24
Annual Report on Directors’ Remuneration continued
CEO pay over the last ten years
The total remuneration figure for the Group CEO and/or CEO Royal Mail over the last ten years is shown in the table below. The STIP payout
and the LTIP vesting level as a percentage of the maximum opportunity are also shown.
Chief Executive Officer Financial year
Single figure of
total remuneration
(£’000)
STIP awarded as %
of maximum
Royal Mail LTIP
vesting as % of
maximum
Martin Seidenberg 2023-24 1,534 76% 0%
Simon Thompson 2022-23 634 0% n/a
2021-22 753 18% n/a
Rico Back 2020-21 94 n/a n/a
Stuart Simpson 462 0% 0%
Simon Thompson 136 n/a n/a
Rico Back 2019-20 868 0% n/a
Moya Greene 2018-19 647 n/a 0%
Rico Back 235 0% 0%
Moya Greene 2017-18 1,790 71% 43%
2016-17 1,901 80% 46%
2015-16 1,529 82% 59%
2014-15 1,522 85% 69%
TSR comparison
TSR is the measure of the returns that a company has generated for its shareholders, reflecting both movement in the share price and
dividends, which are assumed to be reinvested over a period of time. The graph shows the Company’s TSR, since the date of the first day
of trading. During the performance period, the Company has been a constituent of both the FTSE 100 Index and the FTSE 250 Index,
therefore both indices are shown for comparison.
Total Shareholder Return Comparison
30 Mar 14 29 Mar 15 27 Mar 16 26 Mar 17 25 Mar 18 31 Mar 19 29 Mar 20 28 Mar 21 27 Mar 22 26 Mar 23
31 Mar 24
200
150
100
50
0
100
100
100
82
92
98
66 66
85
54
34
113
132
109 109
107
99
154
158
176
124
127
133
135
108
159 159
144
161
134
106
122
134
IDS
FTSE 100 FTSE 250
132
International Distribution Services plc Annual Report 2023-24
Termination arrangements
It was announced on 18 January 2024 that Mick Jeavons had
stepped down as Group Chief Financial Officer. As outlined in
the stock exchange announcement on the same date, Mick will
remain an employee of the business until 31 May 2024 as part
of the agreed transition.
The Committee determined that the following termination arrangements
were fair and reasonable, consistent with the Directors’ Remuneration
Policy and in line with Mick’s contractual entitlements:
— Mick will continue to receive his normal salary and benefits
until 31 May 2024. Following this, he will receive eight monthly
payments, which, in aggregate, equate to the sum which
represents a base salary of £435,000 pro-rated over seven
months and 18 days’ pay in lieu of notice. These payments will
be reduced by any pay he may receive from alternative
employment.
— He remained eligible for a bonus under the STIP for 2023-24 given
his continued availability through the year end. For 2023-24 he
received a bonus of £398,365 in respect of the period as a
Director to 18 January 2024 and a bonus of £97,208 in respect of
his continued employment to 31 March 2024. Further details of the
bonus earned are on page 126.
— Mick will be conferred eligible leaver status in relation to two
unvested DSBP awards, the first awarded in July 2022 (16,254
shares), relating to performance year 2021-22 and due to vest in
July 2025, and the second awarded in July 2023 (31,067 shares)
relating to performance year 2022-23 and due to vest in July 2026.
— Mick will be conferred eligible leaver status in relation to unvested
LTIP awards, awarded in 2021 (125,831 shares) and which will lapse
in full due to performance in August 2024, awarded in 2022
(239,361 shares) and due to vest in September 2025, and awarded
in 2023 (241,872 shares) and due to vest in July 2026. All awards
will be pro-rated according to the number of months of service
completed during the applicable performance period and will
remain subject to performance
— Consistent with the Directors’ Remuneration Policy, there will
be a requirement to hold shares (worth up to two times salary) for
two years following termination. The holding requirement will apply
to shares that subsequently vest under the DSBP and LTIP awards.
— Mick received a contribution of £10,250 (plus VAT) towards legal
fees incurred in connection with his departure and may receive
a contribution of up to £50,000 (plus VAT) towards outplacement
support.
There are no further payments in connection with Mick's cessation
as a director or payments for loss of office.
Simon Thompson’s termination payments were disclosed in the
2022-23 Remuneration Report. Where amounts were disclosed
in the 2002-23 Report as estimates or limits, the final values paid
are set out below:
— Simon received £56,654 under the 2023-24 Short- Term
Incentive Plan, based on performance achieved and applying time
pro-rating. Simon received a contribution of £12,500 (plus VAT)
towards legal fees incurred in connection with his departure and a
contribution of £50,000 (plus VAT) towards outplacement support.
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International Distribution Services plc Annual Report 2023-24
Annual Report on Directors’ Remuneration continued
Policy implementation in 2024-25
The following table sets out how the Committee proposes to operate the Policy for Executive Directors next year:
Element Implementation of Policy in 2024-25
Base salary No change in approach. We will continue to review the salary of each Executive Director annually and will do the
same in 2024-25. Salaries effective from 1 April 2024 are as follows:
Group CEO (Martin Seidenberg) £714,000, an increase of 2%.
Group CFO (Michael Snape) £487,000, no increase.
Martin’s salary increase for 2024-25 is aligned to the 2024 salary uplift for CWU grades and less than the salary
uplift for Unite represented management grades.
Benefits No change in approach to benefit provision for 2024-25.
Pension allowance No change in approach and pension allowance remains 13.6% of salary. This is lower than the current employer
contribution rate for the majority of the UK workforce (which is 15.6% of salary). However, it is in line with the
anticipated contribution rate under the new proposed Collective Pension Plan.
Short-Term Incentive
Plan
No change in maximum STIP opportunity of 150% of salary, with a minimum of one third of any award being
deferred into shares. Target opportunity remains 75% of salary.
A minimum of 75% of the targets shall be financial, based on the performance of the business for which the
executive is responsible, with the remainder including robust operational KPIs and strategic objectives.
The measures are set out below. Targets for these measures will be disclosed retrospectively in next year’s Annual
Report.
Long-Term Incentive
Plan
At the 2024 AGM we intend to seek shareholder approval to increase our maximum normal LTIP award from 150%
to 200% of salary. The current intention is that this increased opportunity would only apply to the Group CEO.
We believe that this change to the LTIP opportunity will provide a more appropriate incentive to successfully lead
IDS through the current challenges and deliver on the opportunities available to both GLS and Royal Mail.
There is no change in the maximum award of 150% of salary for the Group CFO.
Awards are granted annually to Executive Directors in the form of a conditional share award. These will vest at the
end of a three-year period subject to:
— The Executive Director’s continued employment at the date of vesting.
— The satisfaction of the performance conditions.
Threshold performance will equate to no more than 25% of the award vesting. The Committee has reviewed the
performance measures for the LTIP award and is comfortable with returning to a balance of relative TSR and
long-term financial performance. The measures (and approach to targets) are set out below.
The Committee will evaluate the positioning of the share price when it comes to grant the 2024 LTIP awards. In the event
that the share price is significantly below the 2023 LTIP grant price, the Committee will consider the appropriate course of
action (such as scaling back the 2024 LTIP awards or an adjustment on vesting). As appropriate, details will be included in
a stock exchange announcement at the time of grant. As in previous years, the Committee will retain the discretion to
review vesting outcomes to ensure that these are reflective of the underlying performance during the period.
Shareholding
guideline
200% of salary for Executive Directors.
Post-cessation requirement: 200% of salary (or holding at the point of departure) to be held in granted shares for
two years after leaving.
Incentive measures 2024-25
Since 2020-21, the Committee has set separate incentive
scorecards for each of the Executive Directors, reflecting their
areas of responsibility (i.e. Group, Royal Mail or GLS). Details of
the measures and targets for the 2024-25 awards (where not
considered commercially sensitive) are provided below.
2024-25 Short-Term Incentive Plan: measures and weightings
The 2024-25 scorecard reflects our strategic priorities. The targets
are set annually by the Committee considering the relevant business’
annual financial plan, strategy and priorities for the next few years,
within the context of the economic environment. The Committee
considers financial and operational targets to be commercially
sensitive and that it would be detrimental to the Group’s interests to
disclose them before the end of the financial year. Financial measures
make up 75% of each Executive Director’s scorecard. Non-financial
and strategic measures are assessed by the Committee using a
combination of quantitative and qualitative assessment.
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International Distribution Services plc Annual Report 2023-24
As in previous years, the Committee will, prior to reviewing scorecard performance, assess whether an earnings gateway has been met
and whether the payment of STIP awards is affordable.
All STIP awards will be subject to a health and safety (H&S) underpin, whereby the Committee will assess whether or not there has been
demonstrable progress on the overall H&S agenda.
Measure Weighting Measure type Targets
Group CEO – Martin Seidenberg
GLS Operating Cash Flow 12.5% Financial Disclosed retrospectively.
RM Trading Cash Flow 12.5% Financial Disclosed retrospectively.
GLS EBITA 25.0% Financial Disclosed retrospectively.
RM Operating Profit / Loss 25.0% Financial Disclosed retrospectively.
RM & GLS Environmental 10.0% ESG Committee assessment of demonstrable
year-on-year progress of the environmental
agenda.
Strategic Priorities 15.0% Strategic priority Committee assessment of:
— Deployment of the RMUK Network Plan
— Deployment of the out-of-home strategy
Group CFO – Michael Snape
GLS Operating Cash Flow 12.5% Financial Disclosed retrospectively.
RM Trading Cash Flow 12.5% Financial Disclosed retrospectively.
GLS EBITA 25.0% Financial Disclosed retrospectively.
RM Operating Profit / Loss 25.0% Financial Disclosed retrospectively.
RM & GLS Environmental 10.0% ESG Committee assessment of demonstrable
year-on-year progress of the environmental
agenda.
Strategic Priorities 15.0% Strategic priority Committee assessment of:
— Deployment of the RMUK Property strategy
— Deployment of strategy in respect of the
RMUK Pension
2024 Long-Term Incentive Plan (unaudited)
The measures that will apply to the Executive Directors' 2024 LTIP awards are set out below.
Threshold Maximum
2024 LTIP measure Weighting Performance
Vesting (% of
award) Performance
Vesting (% of
award)
TSR vs FTSE 51-150 (excluding mining and financials)
comparator group
1
40% Median 10% Upper quartile 40%
Adjusted Royal Mail UK Operating Profit 20% £184m 5% £216m 20%
UK Cash Flow 10% £288m 2.5% £338m 10%
Adjusted GLS EBITA 20% £324m 5% £373m 20%
GLS Cash Flow 10% £187m 2.5% £215m 10%
Total 100%
1. TSR will be measured using a three-month averaging (at the start and end) over a three-year measurement period.
135
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Annual Report on Directors’ Remuneration continued
Single figure table – Non-Executive Directors (audited)
Fees Other Total
£’000 2024 2023 2024 2023 2024 2023
Keith Williams 312 311 0 0 312 311
Maria da Cunha 88 85 0 0 88 85
Michael Findlay 78 78 0 0 78 78
Sarah Hogg 79 79 0 0 79 79
Jourik Hooghe 62 52 0 0 62 52
Lynne Peacock 84 84 0 0 84 84
Shashi Verma 62 62 0 0 62 62
Ingrid Ebner
1
43 n/a 0 n/a 43 n/a
1. Ingrid Ebner was appointed a Non-Executive Director from 28 June 2023 and the figure in the table above for 2024 reflects fees paid from that date.
Non-Executive Director fee levels (unaudited)
Non-Executive Directors are paid an annual fee and additional fees for being Chair or a member of Board Committees and, if appropriate,
other additional time commitments. During 2023-24, the Chair of the Board did not receive any additional fees for membership of Board
Committees. With effect from 1 January 2024 all Non-Executive Director fees (including fees for the Senior Independent Director, Committee
Chair, Committee members and the Designated Non-Executive Director for engagement with the workforce) increased by 2%, this being
aligned to the effective increases for the majority of the workforce. Fees were last increased with effect from 1 April 2022. The fees are set out
below and will remain at this level from 1 April 2024.
Non-Executive Director fees
Effective 1
January 2024
Effective since
1 April 2022
Chair of the Board £317,016 £310,800
Base fee £52,836 £51,800
Senior Independent Director £10,567 £10,360
Designated Non-Executive Director for engagement with the workforce £10,567 £10,360
Committee fees
Audit and Risk Committee Chair £15,851 £15,540
Membership £6,340 £6,216
Remuneration Committee Chair £15,851 £15,540
Membership £6,340 £6,216
Nomination Committee Chair £0 £0
Membership £4,227 £4,144
Environmental, Social and
Governance Committee
Chair £15,851 £15,540
Membership £6,340 £6,216
Non-Executive Chair of the Board and Non-Executive Director
terms of appointment
The Non-Executive Directors are appointed by rolling letters of
appointment. The Non-Executive Directors are appointed for up to
three years, subject to annual review and re-appointment. The fees
for new Non-Executive Directors appointed will be set in accordance
with the terms of the approved Remuneration Policy in force at the
time of appointment.
Copies of the Non-Executive Directors’ letters of appointment are
available for inspection by appointment at the Company’s registered
office during normal office hours and will be available for inspection
at our forthcoming AGM.
One month’s notice to terminate the appointment is required by
either party, with the exception of the Non-Executive Chair for whom
the notice period is four months. The dates of the Non-Executive
Chair of the Board’s and Non-Executive Directors’ letters of
appointment are set out in the adjacent table.
Date of contract
Unexpired term at 29
March 2024 (months)
Keith Williams 18 November 2022 18
Maria da Cunha 23 November 2022 18
Michael Findlay 23 November 2022 18
Sarah Hogg 4 July 2023 30
Jourik Hooghe 18 May 2022 18
Lynne Peacock 4 July 2023 30
Shashi Verma 13 October 2021 6
1
Ingrid Ebner 17 May 2023 30
1. Shashi Verma was due to be re-appointed at the AGM in July 2024, but as the AGMs are now in
September of each year, his re-appointment will now be renewed at the AGM in September 2024
(he was appointed in September 2021).
136
International Distribution Services plc Annual Report 2023-24
Remuneration Committee members and meetings
The members of the Committee and their attendance at meetings during 2023-24 is shown on page 106.
Role and focus of the Remuneration Committee
The Committee is responsible for recommending to the Board the Remuneration Policy for Executive Directors and senior management,
and for setting the remuneration packages for Executive Directors and members of the respective GLS and Royal Mail Executive Boards.
Committee activities in the year May July Oct Jan Mar
Directors’ remuneration
Review of the Directors’ Remuneration Policy and implementation
Review of fixed and variable remuneration
Senior management remuneration
Contractual terms, recruitment and termination
Review of fixed and variable remuneration
All employee remuneration
Group-wide discretionary incentives
Annual salary review approach
Incentive performance measures, targets and outcomes
Frontline reward (including recognition) in Royal Mail
Deep dives: European remuneration, Share Incentive Plan, manager remuneration
Reward policies and rules review
Reward governance
Review regulatory, investor and market developments
Remuneration disclosures (such as DRR and gender pay gap)
Review shareholder feedback
Terms of Reference, Committee evaluation, advisers
Advice to the Remuneration Committee
The Committee takes information and advice from inside and
outside the Group. Internal support was provided by the Chief
People Officer, the Director of Reward and Performance, the Group
General Counsel and Company Secretary, and other senior leaders
as appropriate. No individual was present when matters relating
to their own remuneration were discussed.
The Committee seeks advice from independent external advisers
as appropriate. Deloitte provided information to the Committee
regarding external market trends and other Committee matters
during 2023-24. The total fees paid to Deloitte in respect of this
advice were £58,200 (2022-23: £53,125). Deloitte also provided tax,
technology, internal audit, strategy and business consulting services
to the Group during the financial year.
Deloitte is a signatory to the Remuneration Consultants Group Code
of Conduct, was appointed by the Committee and reports directly to
the Committee Chair. The Committee Chair can meet with advisers
without management present. The Committee is satisfied that
the advice it receives is objective and independent. There are no
connections between Deloitte and individual Directors to be disclosed.
Committee evaluation
The Committee’s annual evaluation of its performance was undertaken
as part of the Board effectiveness evaluation (see page 91).
Shareholder voting and consideration of shareholder views
We remain committed to ongoing dialogue with our shareholders
and have engaged with shareholders during 2023-24 to gather
their views on the proposed changes to the Policy and our intended
implementation of remuneration in 2024-25. In the meantime, the
Committee Chair and Chair of the Board will continue to maintain
contact as required with the Company’s key shareholders about
relevant remuneration issues.
At the 2023 AGM on Thursday 20 July 2023, shareholders
approved the Directors’ Remuneration Policy and the Directors’
Remuneration Report published in the 2022-23 Annual Report
and Financial Statements.
137
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International Distribution Services plc Annual Report 2023-24
Recent votes on the Directors’ Remuneration Report
For Against
2023 AGM (see below) 99.18% 0.82%
Directors’ Remuneration Report (2023 AGM)
Number of votes % of votes
Votes for 686,045,756 99.18%
Votes against 5,676,750 0.82%
Votes withheld 172,294
Recent votes on the Directors’ Remuneration Policy
For Against
2023 AGM (see below) 97.88% 2.12%
Directors’ Remuneration Policy (2023 AGM)
Number of votes % of votes
Votes for 677,021,037 97.88%
Votes against 14,688,205 2.12%
Votes withheld 182,588
Maria da Cunha
Chair of the Remuneration Committee
24 May 2024
Annual Report on Directors’ Remuneration continued
138
International Distribution Services plc Annual Report 2023-24
Directors’ Report
The Directors present their Report, together with audited
Financial Statements, for the year ended 31 March 2024.
This Directors’ Report, together with the Strategic Report on
pages 1 to 78, form the Management Report for the purpose
of Disclosure Guidance and Transparency Rule (DTR) 4.1.5R
and DTR 4.1.8R.
Information incorporated by reference
The following information is incorporated in the Directors’
Report by reference and can be found on the pages of this
Annual Report as indicated in the table below:
Page
Business model 14 and 15
Strategy for delivering objectives 16 to 19
Results 62 to 75
Financial assets and liabilities 215 to 225
Principal risks and uncertainties 52 to 58
Environmental, Social and Governance 28 to 40
Greenhouse gas emissions and energy reporting 26 to 31
41 to 48
Disabled employees 35
Our people 33 to 36
Diversity 34 to 36
Going concern and viability statements 59 to 61
Dividend 3
Corporate Governance Report 79 to 138
Future developments 16 to 19
Statement of Directors’ Responsibilities 143
Employee share schemes 210 and 211
Research and development 11 to 13
The location of information required to be disclosed in this
Annual Report under Listing Rule 9.8.4R is as follows:
Listing Rule 9.8.4R disclosures
Page
Statement of the amount of interest capitalised 190, 206
and 209
Dividend waivers 139
Dividend waivers
The Trustee of the Royal Mail Share Incentive Plan (Plan) will not
receive any dividends on Free Shares which it has not been possible
to award to, or which have been forfeited by, participants in the Plan.
Capital
Purchase of own shares by the Company
At the 2023 AGM, the Company was authorised by its shareholders
to purchase up to a maximum of 10% of its ordinary shares. This
authority was valid at the end of the Company’s financial year and
will remain in place until the 2024 AGM, when the Directors will
seek a similar authority. During 2023-24 the Company did not
utilise this authority to purchase any of its own shares.
Share capital
As at 31 March 2024, the Company’s issued share capital comprised
958,293,475 ordinary shares of one penny each as set out in Note
26 to the Financial Statements on page 227.
Ordinary shareholders have the right to receive notice of, attend,
vote and speak at general meetings (whether in person or by
proxy). A holder of ordinary shares is entitled to one vote per
ordinary share held when a vote is taken on a poll. Shareholders
also have the right to receive a dividend, if recommended and
declared. Shareholders may transfer all or any of their certificated
or uncertificated shares in the Company. All such rights are subject
to certain exceptions and restrictions provided in the Company’s
Articles of Association (the Articles) and in any applicable legislation.
These include where rights are suspended for non-disclosure of an
interest in shares, where share transfers do not comply with specific
requirements, and where any amounts on shares owing by a
shareholder to the Company are overdue.
The rights and obligations of members, and restrictions on transfer,
are set out in full in the Articles, which can be found on the Company’s
website. The Company is not aware of any agreements between
shareholders that may result in restrictions on the transfer of
securities and/or voting rights.
Mark Amsden
Group General Counsel and Company Secretary
139
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International Distribution Services plc Annual Report 2023-24
Directors’ Report continued
Employees allocated Free Shares under the Free Shares Offer, or
who participate in the Partnership and Matching Plan, whose shares
are held in trust by the Trustee of the Royal Mail Share Incentive Plan,
are entitled to exercise any voting rights in respect of such shares by
instructing the Trustee how to vote on their behalf.
Authority of the Directors to allot shares
At the 2023 AGM, the Company obtained shareholder consent to
allot ordinary shares in the Company and to grant rights to subscribe
for, or to convert any security into, shares in the Company up to a
maximum nominal amount of £6,374,623 (representing approximately
two thirds of the Company’s issued share capital at that time), of
which one half may be allotted or made the subject of rights in any
circumstances and the other half may be allotted or made the
subject of rights pursuant to a fully pre-emptive offer. As at the date
of this Directors’ Report, no shares have been allotted during the
year save in respect of 2,100,000 shares allotted in pursuance of
employee share schemes (see page 227). The Directors will be
seeking powers to allot shares at the 2024 AGM, although the
Company has no current plans to allot any new shares except in
connection with employee share schemes.
At the 2023 AGM, the Directors were also empowered to allot
shares for cash (and/or to sell any treasury shares) on a non-pre-
emptive basis in connection with pre-emptive offers and, otherwise
than in connection with such offers, up to a maximum aggregate
nominal amount of £956,193 (representing approximately 10% of
the Company’s issued share capital at that time). The Directors
were further empowered to allot shares for cash (and/or to sell
any treasury shares) on a non-pre-emptive basis representing
approximately 2% of issued ordinary share capital, to be used only
for the purposes of a follow-on offer as prescribed by the most
recent version of the Pre-Emption Group’s Statement of Principles.
As permitted by those Principles, the Directors were also
empowered to allot shares for cash (and/or to sell any treasury
shares) on a non-pre-emptive basis up to the same amounts for use
only in connection with an acquisition or specified capital investment.
The Directors will be seeking similar powers to allot shares for cash
(and/or to sell any treasury shares) on a non-pre-emptive basis at
the 2024 AGM.
Directors
Details of the current Directors are included on pages 82 and 83 and
information about changes to the membership of the Board during
the year is included on page 80.
During the year Simon Thompson served as a Director until 12 May
2023, and Mick Jeavons served as a Director until 18 January 2024.
Appointment and replacement of Directors
The Articles provide that the Company may by ordinary resolution
at a general meeting elect any person to act as a Director, provided
that, if he or she has not been recommended by the Board, written
notice of the proposed appointment is given to the Company in
accordance with the Articles and that the Company receives written
confirmation of that person’s willingness to act as a Director. The
Articles also provide that the Board may at any time appoint as a
Director any person who is willing to act as such. Unless the Company
decides otherwise, the maximum number of Directors permitted is 15.
At every AGM, each person who is a Director on the date of the
notice of that AGM shall retire from office and may offer himself
or herself for re-appointment by the members.
In addition to any power of removal conferred by the Companies Act
2006, the Company may by special resolution remove any Director
before the expiration of his or her period of office and may (subject
to the Articles) by ordinary resolution appoint another person who
is willing to act as a Director in his or her place. The Articles also
set out the circumstances in which a Director shall vacate office.
Directors’ powers
The business of the Company is managed by the Board, which
may exercise all the powers of the Company, subject to the
provisions of the Articles, the Companies Act 2006 and any
resolution of the Company.
Directors’ interests
Details of the Directors’ share interests and, where applicable,
their connected persons are set out in the Directors’ Remuneration
Report on page 130.
Directors’ and officers’ insurance and indemnity provisions
The Company maintains directors’ and officers’ liability insurance
which provides appropriate cover for legal action brought against
its Directors. This is reviewed annually. Qualifying pension scheme
indemnity provisions were in force during the course of the financial
year ended 31 March 2024 for the benefit of the Trustees of Royal
Mail UK’s pension schemes, and such indemnity provisions are in
force at the date of approval of this report.
140
International Distribution Services plc Annual Report 2023-24
Substantial shareholding
As at 31 March 2024, the Company had been notified, in accordance
with DTR 5, of the following interests in the Company’s issued share
capital. The information provided below was correct at the date of
notification; however, the notification may not have been received during
2023-24. It should also be noted that some shareholdings are likely to
have changed since the date of notification but the Company will not
be notified of a change until the next notifiable threshold is crossed.
Shareholder
Number of
voting rights
% voting rights
disclosed at
time of
notification
% of voting
rights as at
31 March 2024
1
Vesa Equity Investment 263,675,507 27.58 n/a
RWC Partners 50,190,714 5.01 5.24
Columbia Threadneedle
Investments 48,164,355 5.04 n/a
BlackRock Inc. 47,826,774 5.0
2
n/a
Schroder Investment
Management 50,982,408 5.1 5.32
Aberdeen Asset Investments 42,965,756 4.3 4.48
Nortrust Noms 38,953,213 3.9
3
4.06
1. As a result of the 2021-22 share buy-back programme and the resulting reduction in the Company’s
share capital, as well as the increase in the Company's share capital in 2023-24, the percentage
figures for some shareholders have been recalculated to provide a more accurate picture. This only
applies to shareholders for whom we have not received any notification in accordance with DTR 5
since completion of the share buy-back programme.
2 Disclosed on 3 March 2023. A further disclosure was received on 16 March 2023 notifying the
Company that BlackRock's holding had decreased below the 5% notifiable threshold, which did
not state the new position.
3. Disclosed on 23 October 2020. A further disclosure was received on 30 November 2020 notifying
the Company that Notrust Noms' holding had decreased below the 3% notifiable threshold, which
did not state the new position.
No further notifications have been received in accordance with DTR
5 as at the date of this report.
Special rights
There are no persons holding securities that carry special rights
with regard to the control of the Group.
Employee Benefit Trust (EBT)
As at 31 March 2024, a total of 1,206,638 shares (2022-23: 263,566
shares) were held by the EBT on behalf of the Company. The EBT
will not receive any dividends payable on shares which it holds at
the relevant time.
Change of control
The following material agreements contain provisions permitting
exercise of termination or other rights in the event of a change of
control of the Company:
— The Mails Distribution Agreement with Post Office Limited provides
for the supply of certain services to the Group and allows for a request
for renegotiation of terms in the event of a change of control of either
party where such change of control is likely to have a material adverse
effect on the party not undergoing the change of control.
— The bank syndicate loan facility with various financial institutions
provides the Group with a revolving credit facility for general
corporate and working capital purposes. The agreement contains
provision on a change of control of the Group for negotiation of
the continuation of the agreement or cancellation by a lender.
— The €500 million bond issued by the Company in July 2014
contains provisions such that, on a change of control that is
combined with a credit rating downgrade in certain circumstances,
the noteholders may require the Company to redeem or, at the
Company’s option, purchase the notes for their principal amount,
together with interest accrued to (but excluding) the date of
redemption or repurchase.
— The €550 million bond issued by the Company in October 2019
contains provisions such that, on a change of control that is
combined with a credit rating downgrade in certain circumstances,
the noteholders may require the Company to redeem or, at the
Company’s option, purchase the notes for their principal amount,
together with interest accrued to (but excluding) the date of
redemption or repurchase.
— The €500 million bond issued by the Company in September
2023 contains provisions such that, on a change of control that is
combined with a credit rating downgrade in certain circumstances,
the noteholders may require the Company to redeem or, at the
Company’s option, purchase the notes for their principal amount,
together with interest accrued to (but excluding) the date of
redemption or repurchase.
— The £250 million bond issued by the Company in September
2023 contains provisions such that, on a change of control that is
combined with a credit rating downgrade in certain circumstances,
the noteholders may require the Company to redeem or, at the
Company’s option, purchase the notes for their principal amount,
together with interest accrued to (but excluding) the date of
redemption or repurchase.
The Company does not have agreements with any Director or
employee that would provide compensation for loss of office or
employment resulting from a takeover except that provisions of
the Company’s share schemes and plans may cause options
and awards granted to employees under such schemes and
plans to vest on a takeover.
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International Distribution Services plc Annual Report 2023-24
Stakeholders
Engagement with UK employees, suppliers and customers
Disclosure on how the Company communicates with its employees,
encourages their involvement and achieves a common awareness on
the part of all employees of the financial and economic factors affecting
the performance of the Company is included on pages 22, 34 and 90.
Information on how the Company engages with its employees, customers
and suppliers, how the Directors have regard to their interests, and the
effect of that regard is set out on pages 22 to 26 and page 90.
Payment practices
Royal Mail’s Sustainable Procurement Code of Conduct sets
out how Royal Mail works with its suppliers and is available at
www.internationaldistributionservices.com/sustainability/governance/
policies. GLS’ Supplier Code of Conduct sets out the standards GLS
expects of its suppliers and is available at www.gls-group.com/GROUP/
en/about-us/compliance. We publish key statistics and other
information on our payment practices in line with the Duty to Report on
Payment Practices and Performance on the Government’s website.
Information is published on a six-monthly basis.
ESG
Greenhouse gas emissions and energy reporting
Information regarding the Group’s greenhouse gas emissions,
energy consumption and energy efficiency action required to be
disclosed in this Directors’ Report can be found on pages 28 to 31.
TCFD disclosures
The Group’s TCFD Statement and associated disclosures are set out
on pages 41 to 48.
Other disclosures
Company’s Articles
Any amendments to the Articles may be made in accordance with
the Companies Act 2006 by way of a special resolution. Our current
Articles are available at www.internationaldistributionservices.com/
about-us/governance.
Branches
As a global group, our interests and activities are held or operated
through subsidiaries, branches, joint arrangements or associates
and are subject to the laws and regulations of the relevant
jurisdictions in which they operate. Further information is included
in Note 31 to the Financial Statements on pages 229 to 232.
Political donations and expenditure
In so far as the Company is aware, no form of political donation,
or expenditure, was made during the year. The Company intends
to continue this policy for the foreseeable future.
Financial instruments
The Group’s financial risk management objectives and policies
in relation to its financial instruments are summarised in Note 24
to the Financial Statements on pages 215 to 225.
Post balance sheet events
Post balance sheet events are summarised in Note 30 on page 228.
Audit information
The Directors confirm that, so far as they are aware, there is
no relevant audit information (as defined in section 418 of the
Companies Act 2006) of which the auditor is unaware and
that each Director has taken all reasonable steps that they
ought to have taken as a director to make themselves aware
of any relevant audit information and to establish that the
auditor is aware of that information.
By Order of the Board
Mark Amsden
Group General Counsel and Company Secretary
24 May 2024
Directors’ Report continued
142
International Distribution Services plc Annual Report 2023-24
Statement of Directors’ Responsibilities in respect
of the Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report and
the Group and Parent Company Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company Financial Statements for each financial year. Under that
law they are required to prepare the Group Financial Statements in
accordance with UK-adopted international accounting standards
and applicable law and have elected to prepare the Parent Company
Financial Statements in accordance with UK accounting standards
and applicable law, including FRS 101 Reduced Disclosure Framework.
Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and
of the Group’s profit or loss for that period. In preparing each of
the Group and Parent Company Financial Statements, the
Directors are required to:
— select suitable accounting policies and then apply them consistently;
— make judgements and estimates that are reasonable, relevant,
and reliable and, in respect of the Parent Company Financial
Statements only, prudent;
— for the Group Financial Statements, state whether they have
been prepared in accordance with UK-adopted international
accounting standards;
— for the Parent Company Financial Statements, state whether
applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the Parent
Company Financial Statements;
— assess the Group and Parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
— use the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Parent Company and enable them to ensure
that its Financial Statements comply with the Companies Act 2006.
They are responsible for such internal control as they determine is
necessary to enable the preparation of Financial Statements that are
free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
In accordance with Disclosure Guidance and Transparency
Rule (DTR) 4.1.16R, the Financial Statements will form part of the
annual financial report prepared under DTR 4.1.17R and 4.1.18R.
The auditor’s report on these Financial Statements provides no
assurance over whether the annual financial report has been
prepared in accordance with those requirements.
Responsibility statement of the Directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
— the Financial Statements, prepared in accordance with
the applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included in
the consolidation taken as a whole; and
— the Strategic Report and Directors’ Report includes a fair review
of the development and performance of the business and the
position of the issuer and the undertakings included in the
consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy.
The responsibility statement was approved by the Board of Directors
on 24 May 2024 and signed on its behalf by:
Martin Seidenberg
Group Chief Executive Officer
Michael Snape
Group Chief Financial Officer
143
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Financial
Statements
Independent auditor’s report 145
Consolidated income statement 164
Consolidated statement
of comprehensive income
165
Consolidated balance sheet 166
Consolidated statement
of changes in equity
168
Consolidated statement
of cash flows
169
Notes to the consolidated
financial statements
171
International Distribution Services plc
– Parent Company financial statements
233
144
International Distribution Services plc Annual Report 2023-24
Independent auditor’s report
KPMG LLP’s Independent Auditor’s Report
To the members of International Distribution Services plc (formerly International Distributions Services plc)
1. OUR OPINION IS UNMODIFIED
In our opinion:
— the financial statements of International Distribution Services plc (formerly International Distributions Services plc) give a true and
fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2024, and of the Group’s loss for the 53 week
period then ended;
— the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
— the Parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 101
Reduced Disclosure Framework; and
— the Group and Parent Company financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
WHAT OUR OPINION COVERS
We have audited the Group and Parent Company financial statements of International Distribution Services plc (“the Company”) for the
53 week period ended 31 March 2024 (FY2023-24) included in the Annual Report, which comprise:
Group (International Distribution Services plc and its subsidiaries) Parent Company (International Distribution Services plc)
The Consolidated Income Statement, the Consolidated Statement
of Comprehensive Income, the Consolidated Balance Sheet, the
Consolidated Statement of Changes in Equity, the Consolidated
Statement of Cash Flows and notes 1 to 31 to the Group’s financial
statements, including the accounting policies in note 1.
Statement of changes in equity, balance sheet and notes 1 to 10 to
the Parent Company’s financial statements, including the accounting
policies in note 1.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion
and matters included in this report are consistent with those discussed and included in our reporting to the Audit and Risk Committee.
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to listed public interest entities.
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Independent auditor’s report continued
2. MATERIAL UNCERTAINTY RELATED TO GOING CONCERN
We draw attention to note 1 to the financial statements which indicates that there are uncertainties arising from the non-binding proposal
received from EP Group to acquire the Group and the impact that a change in control could have on the Group’s borrowings given the
nature of those contractual arrangements and lack of visibility over post acquisition funding. These events and conditions, along with the
other matters explained in note 1, constitute a material uncertainty that may cast significant doubt on the Group’s and the Parent Company’s
ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
The risk Our response
Disclosure quality
The financial statements explain how the Board
has formed a judgement that it is appropriate
to adopt the going concern basis of preparation
for the Group and parent Company.
That judgement is based on an evaluation of
the inherent risks to the Group’s and Company’s
business model and how those risks might affect
the Group’s and Company’s financial resources
or ability to continue operations over a period
of 12 months from the date of approval of the
financial statements (the going concern period).
Following improvements in the UK business as a
consequence of ongoing transformation initiatives,
resolution of industrial action noted in the prior
period and refinancing obtained in the period, the
level of risk relating to ongoing operations in the
going concern period is not considered to be high,
and did not involve significant director judgment
as to the existence of a material uncertainty.
However, on 14 May 2024 the Group received
a non-binding proposal from EP Group to acquire
the entire issued share capital of the company.
The directors are currently minded to recommend
the offer to shareholders.
The Group and Company’s bond agreements
contain provisions that could result in required
repayment or repurchase of the bond following
a change in control, in certain circumstances.
The directors have identified uncertainties as
to whether repayment would be required, and ,
if so, whether funds to enable repayment would
be available.
The risk for our audit is whether or not those risks
related to a possible change in control are such
that they amounted to a material uncertainty that
may cast significant doubt about the ability to
continue as a going concern. If so, that fact is
required to be disclosed (as has been done) and,
along with a description of the circumstances,
is a key financial statement disclosure.
Our procedures to address the risk in relation to the uncertainties relating to change
in control included:
Funding assessment:
— Inspecting the finance agreements to assess the relevant clauses that would be
triggered in the event of a potential change in control.
Evaluating directors’ control and intent:
— Evaluating the ability of the Directors to influence the impact that a potential change
of control could have on the Group’s financing and other contractual arrangements,
which included assessing the statements of intention issued by the bidding party,
enquiry with management on the expected operation of change of control clauses
and enquiries with the Directors as to the discussions held to date with EP Group.
Assessing transparency:
— Considering whether the going concern disclosure in note 1 to the financial statements
gives a full and accurate description of the Directors’ assessment of going concern,
including the identified risks, dependencies, and related sensitivities.
Other procedures that evaluate management’s going concern assessment included:
Funding assessment:
— Inspecting the confirmation from the lender of the level of committed financing and
the associated covenants requirements.
Historical comparisons:
— Comparing past budgets to actual results to assess the Directors’ historical accuracy of
budgeting
Key dependency assessment:
— Critically assessing assumptions in the Directors’ base case and severe but plausible
downside scenarios relevant to liquidity and covenant metrics, considering the
forecasted operating levels and how these relate to historic performance
Sensitivity analysis:
— Considering sensitivities over the level of available financial resources indicated
by the Group’s financial forecasts taking account of plausible (but not unrealistic)
adverse effects that could arise from these risks individually and collectively.
— Performed stress testing over the going concern forecast, modelling significant
decline over the expected returns from Royal Mail’s transformation initiatives and
significantly declining market conditions across Europe.
Benchmarking assumptions:
— Using our own economic specialists, we evaluated the revenue and volume
growth assumptions in the Royal Mail business, against externally derived
publicly available data.
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Communications with the International Distribution Services Plc’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
— Our considerations of the implications of the receipt of a non-binding offer from EP Group to acquire the Group
— Our assessment of the appropriateness of management’s base case and downside scenarios
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
— Whether the risks arising from the potential change in control following the receipt of a non-binding offer from EP Group to acquire the
Group are such that they amount to a material uncertainty
Our results
We found the going concern disclosure in note 1 with a material uncertainty to be acceptable (2023 result: going concern disclosure
without a material uncertainty: acceptable).
3. OVERVIEW OF OUR AUDIT
FACTORS DRIVING
OUR VIEW OF RISKS
Our audit plan for FY2023-24 has been predominantly
driven by the performance seen in the UK business
within the current and prior periods, including the
resolution of the disputes with the Communication
Workers Union (CWU) earlier in the financial period.
This has resulted in a reduction to the level of losses in
the UK operations. Consequently, we have maintained
the recoverability of the carrying amount of the Royal
Mail (excluding Parcelforce worldwide) CGU as a Key
Audit Matter. Following the impairment in the prior
period, there is a need to consider both further
impairment and impairment reversal, as a
consequence the risk has increased.
The risk of going concern arising from the core trading
of the UK business no longer features as a KAM
following the resolution of industrial action and the
associated ongoing transformation initiatives, along
with refinancing obtained in the period. However, there
is a material uncertainty arising from the non-binding
proposal from EP Group to acquire the Group.
Key Audit Matters Vs FY2022-23 Item
Going concern New Risk 2
Recoverability of
the carrying amount
of the Royal Mail
(excluding Parcelforce
worldwide) CGU
5.1
Deferred revenue
associated with advance
customer payments
arising from stamps sold
5.2
Valuation of pension
scheme obligations
5.3
Valuation of certain
unquoted pensions assets
5.4
Recoverability of the
Parent Company’s
investment in subsidiaries
5.5
AUDIT COMMITTEE
INTERACTION
During the period, the Audit and Risk Committee met 7 times. KPMG are invited to attend all scheduled Audit
and Risk Committee meetings and are provided with an opportunity to meet with the Audit and Risk Committee
in private sessions without the Executive Directors being present. For each Key Audit Matter, we have set out
communications with the Audit and Risk Committee in section 4, including matters that required particular
judgement for each.
The matters included in the Audit and Risk Committee’s report on page 96 are materially consistent with our
observations of those meetings.
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OUR
INDEPENDENCE
We have fulfilled our ethical responsibilities under, and
we remain independent of the Group in accordance
with, UK ethical requirements including the FRC Ethical
Standard as applied to listed public interest entities.
We have not performed any non-audit services during
FY2023-24 or subsequently which are prohibited by
the FRC Ethical Standard.
We were first appointed as auditor by the shareholders for
the 52 week period ended 27 March 2016. The period of
total uninterrupted engagement is for the nine financial
periods ended 31 March 2024.
The Group Engagement Partner is required to rotate
every five years. As these are the second set of the
Group’s financial statements signed by Andrew
Bradshaw, he will be required to rotate off after the
FY2026-27 audit.
The average tenure of partners responsible for
component audits as set out in section 7 below
is two years, with the shortest being two and
the longest being two.
Total audit fee £3.88m
Audit related fees (including interim review) £0.65m
Other services £0.15m
Non-audit fee as a % of total
audit and audit related fee %
21%
Date first appointed 52 week
period
ended 27
March 2016
Uninterrupted audit tenure 9 years
Next financial period which
requires a tender
2026
Tenure of Group Engagement Partner 2 years
Average tenure of component
signing partners
2 years
MATERIALITY
(ITEM 6 BELOW)
The scope of our work is influenced by our view of materiality
and our assessed risk of material misstatement.
We have determined overall materiality for the Group’s
financial statements as a whole at £25m (FY23: £25m)
and for the Parent Company financial statements as a
whole at £12.6m (FY23: £4.2m).
A key judgement in determining materiality was the most relevant
metric to select as the benchmark, by considering which metrics
have the greatest bearing on shareholder decisions.
Consistent with FY23, we determined that total revenue
remains the most appropriate benchmark for the Group as
it remains relatively consistent period on period and does
not suffer from the volatility seen at a profit before tax level.
As such, we based our group materiality on total revenue,
of which it represents 0.2% (FY23: 0.2%).
Materiality for the Parent Company’s financial statements was
determined with reference to a benchmark of Parent Company
net assets, of which it represents 0.49% (FY23: 0.21%).
Materiality levels used in our audit
Group
25.0
25.0
18.7
18.7
20.0
20.0
1.25
1.25
12.4
4.2
12.4
4.2
GPM
HCM
PLC
LCM
AMPT
FY24 £m
FY23 £m
Group Group Materiality
GPM Group Performance Materiality
HCM Highest Component Materiality
PLC Parent Company Materiality
LCM Lowest Component Materiality
AMPT Audit Misstatement
Posting Threshold
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GROUP SCOPE
(ITEM 7 BELOW)
We have performed risk assessment and planning procedures to
determine which of the Group’s components are likely to include
risks of material misstatement to the Group’s financial statements,
the type of procedures to be performed at these components and
the extent of involvement required from our component auditors
around the world.
Of the Group’s 21 (FY23: 21) reporting components, we subjected
three (FY23: 3) to full scope audits for group purposes. We have not
performed additional procedures over the remaining components
as we have obtained sufficient coverage from the three full scope
audits performed.
The components within the scope of our work accounted
for the percentages illustrated opposite.
In addition, we have performed group level analysis on the
remaining components to determine whether further risks
of material misstatement exist in those components.
We consider the scope of our audit, as communicated to the Audit
Committee, to be an appropriate basis for our audit opinion.
Full scope audits
Remaining components
Coverage of Group financial statements
Profit before tax
91%
9%
Total assets
85%
15%
Revenue
99%
1%
THE IMPACT OF
CLIMATE CHANGE
ON OUR AUDIT
In planning our audit, we have considered the potential impact of climate change on the Group’s business and its
Financial Statements. The Group has set out to reduce its emissions to zero by 2045. The majority of the Group’s
carbon emissions are in the domestic and international transport network, and the Group continues to develop
its assessment of climate change. Climate change initiatives impact the Group in a variety of ways including
opportunities and risks relating to operational and supply chain decarbonisation and the emerging regulatory
requirements such as carbon taxes.
During the period, the Group has prepared quantitative scenario analysis of these emerging carbon taxes on road
transport and the impact this would have on future fuel spend. Further information is provided on pages 41 to 48.
The Group considered the impact of climate change and the Group’s targets in the preparation of the
Financial Statements, in particular on the forecast cash flow assumptions as part of the impairment test
of the recoverability of the Royal Mail (excluding Parcelforce Worldwide) CGU. The Group has concluded
that the impact of climate change, and the Group’s internal climate related targets, did not have a material
effect on the consolidated Financial Statements.
As part of our audit, we have performed a risk assessment to determine if the potential impacts of climate change
may materially affect the financial statements and our audit. We did this by making enquiries of management in
order to independently assess the climate-related risks and their potential impact. We held discussions with our
own climate change professionals to challenge our risk assessment.
The most likely potential impact of climate risk on these financial statements would be on the useful economic
lives of property, plant and equipment and on forward looking assessments of cash flows including fuel. Taking
into account the expected remaining useful lives of property, plant and equipment and the extent of potential fuel
costs variations in the context of overall forward looking cash flow related to the Royal Mail (excluding Parcelforce
Worldwide) CGU, we assessed that there is not a significant impact on our audit for this financial period. There was
no significant impact of climate on our key audit matters.
We have also read the Group’s disclosure of climate related information in the front half of the annual report as
set out on pages 41 to 48 and considered consistency with the Financial Statements and our audit knowledge.
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Independent auditor’s report continued
4. GOING CONCERN BASIS OF PREPARATION, VIABILITY AND PRINCIPAL RISKS AND UNCERTAINTIES
GOING CONCERN
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company
or to cease their operations, and as they have concluded that the Group’s and the Company’s financial position means that this is realistic for
at least a year from the date of approval of the financial statements (“the going concern period”). As stated in section 2 of our report, they have
also concluded that there is a material uncertainty related to going concern.
An explanation of how we evaluated management’s assessment of going concern is set out in section 2 of our report.
Our conclusions based on this work:
— We consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
— We have nothing material to add or draw attention to in relation to the directors’ statement in note 1 to the financial statements on the use of
the going concern basis of accounting, and their identification therein of a material uncertainty over the Group and Company’s ability to
continue to use that basis for the going concern period; and
— The related statement under the Listing Rules set out on page 61 is materially consistent with the financial statements and our audit knowledge.
DISCLOSURES OF EMERGING AND PRINCIPAL RISKS AND LONGER-TERM VIABILITY
We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures in respect of
emerging and principal risks and the viability statement, and the financial statements and our audit knowledge.
Based on those procedures, other than the material uncertainty related to going concern referred to above we have nothing further material
to add or draw attention to in relation to:
— the Directors’ confirmation within the viability statement that they have carried out a robust assessment of the emerging and principal risks
facing the Group, including those that would threaten its business model, future performance, solvency and liquidity;
— the ‘Our Principal Risks and Uncertainties’ disclosures describing these risks and how emerging risks are identified and explaining how
they are being managed and mitigated; and
— the Directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what period they have done
so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the viability statement set out on pages 59 to 61 under the Listing Rules.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit. As we
cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s and
Parent Company’s longer-term viability.
5. KEY AUDIT MATTERS
WHAT WE MEAN
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on:
— the overall audit strategy;
— the allocation of resources in the audit; and
— directing the efforts of the engagement team.
Going concern is a key audit matter and is described in section 2 of our report.
We include below the other Key Audit Matters in decreasing order of audit significance together with our key audit procedures to address
those matters and our results from those procedures. These matters were addressed, and our results are based on procedures undertaken,
for the purpose of our audit of the financial statements as a whole. We do not provide a separate opinion on these matters.
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5.1 RECOVERABILITY OF THE CARRYING AMOUNT OF THE ROYAL MAIL (EXCLUDING PARCELFORCE WORLDWIDE) CGU (GROUP)
Financial Statement Elements Our assessment of risk vs FY23 Our results
FY24 FY23
Our assessment is that the
level of risk has increased from
FY2022-23. Following the impairment
in the prior period, there is a need
to consider both further impairment
and impairment reversal, as a
consequence the risk has increased.
FY2023-24: Acceptable
FY2022-23: Acceptable
Carrying amount of the Royal Mail
Excluding Parcelforce worldwide
CGU (Group)
£1,925m £900m
Impairment charge/(reversal) £48m £539m
Description of the Key Audit Matter Our response to the risk
Forecast-based assessment
The carrying amount of the CGU is significant with
respect to the total assets of the Group and its sensitivity
to key assumptions, particularly as the CGU was impaired
in the prior period, meaning that there was no headroom
at the start of the period, and that the CGU could be
subject to further impairment or reversal of impairment
The estimated recoverable amount is subjective due to
the inherent uncertainty of forecasting fair value less
costs of disposal from a market participant perspective.
The key assumptions underlying the recoverable amount
of the CGU included the following:
— revenue and volume growth assumptions;
— operating costs assumptions;
— property disposals assumptions; and
— the discount rate
The effect of these matters is that, as part of our risk
assessment, we determined that the recoverable amount
of the CGU has a high degree of estimation uncertainty,
with a potential range of reasonable outcomes greater
than our materiality for the financial statements as a
whole and possibly many times that amount.
We also identified a fraud risk related to the estimation
of the recoverable amount of the CGU in response to
possible pressures on the Group to demonstrate an
increase in carrying value.
Our procedures to address the risk included:
— Valuation expertise: Using our own valuation specialists, we challenged
the appropriateness of the discount rate. We also benchmarked the
recoverable amount of the CGU using implied earnings multiples to
comparative companies and historic transactions within the industry,
as well as considering the latest market conditions.
— Benchmarking assumptions: Using our own economic specialists we
evaluated the revenue and volume growth assumptions, against externally
derived publicly available data.
— Benchmarking assumptions: We used external data to evaluate the
assumptions used in respect of property disposals.
— Test of detail: We tested the principles and integrity of the Group’s discounted
cash flow model. We compared the cash flows used in the impairment model to
the output of the Group’s budgeting process and against the understanding we
obtained about the business through our audit and assessed if these cash flows
were reasonable
— Historical Comparisons: We performed a retrospective review, comparing
historical budgets and volumes to actual performance to assess historical
forecasting accuracy.
— Sensitivity analysis: We considered the sensitivity of the carrying value to
reasonably possible changes in assumptions and focused our attention to
those assumptions which we considered the most critical to the valuation.
— Assessing transparency: We assessed whether the Group’s disclosures
in note 1 of the sensitivity of the outcome of the recoverable amount
assessment to changes in key assumptions reflected the risks inherent
in the fair value less costs of disposal of the CGU. We also assessed whether
the disclosure of key assumptions was complete and consistent with the
assumptions used.
We performed the tests above rather than seeking to rely on any of the Group’s
controls because the nature of the balance is such that we would expect to
obtain audit evidence primarily through the detailed procedures described.
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Communications with the International Distribution Services plc’s Audit and Risk Committee
Our discussions with and reporting to the Audit Committee included:
— Our approach to the audit of the recoverable amount of the CGU, including details of our planned substantive procedures,
use of our own specialists and the extent of our controls reliance.
— For the recoverable amount of the CGU, where the Group’s estimate lay versus our acceptable range.
— The adequacy of the disclosures, particularly as they relate to the sensitivity of the recoverable amount of the CGU to key assumptions.
Areas of particular auditor judgement
We identified an area of particular auditor judgement to be the assessment of whether the Directors’ overall estimate of the recoverable
amount of the CGU, considering key assumptions including revenue and volume growth, operating costs assumptions, property disposal
assumptions and the discount rate fell within our acceptable range.
Our results
We found the carrying value of the CGU and the related impairment charge to be acceptable (FY23: acceptable).
Further information in the Annual Report and Accounts: See the Audit and Risk Committee Report on page 96 for details on how the Audit
and Risk Committee considered the Recoverability of the carrying amount of the Royal Mail (excluding Parcelforce) CGU as an area of
significant attention, page 175 for the accounting policy on Recoverability of the carrying amount of the Royal Mail (excluding Parcelforce)
CGU and note 1 for the financial disclosures.
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5.2 DEFERRED REVENUE ASSOCIATED WITH ADVANCE CUSTOMER PAYMENTS ARISING FROM STAMPS SOLD (GROUP)
Financial Statement Elements Our assessment of risk vs FY23 Our results
FY24 FY23
The level of risk relating to deferred
revenue associated with advance
customer payments has remained
flat period on period. This is as a
consequence of an increase in risk due
to the revised model being offset by a
reduction in risk due to increased data
inputs being utilised in the process.
FY2023-24: Acceptable
FY2022-23: Acceptable
Stamps in the hands of the public
(SITHOP) – Deferred revenue
£138m £147m
Description of the Key Audit Matter Our response to the risk
Subjective estimate
Revenue is recognised on delivery of letters, not at the
point stamps are sold to customers, as the performance
obligation with the customer is only settled upon delivery
of the letter. There can be a considerable delay because
stamps held by customers remain valid indefinitely.
Therefore, the Group estimates the value of advance
customer payments and defers revenue to reflect the
value of services still to be performed.
Following the introduction of barcoded stamps in FY22,
the Group is now able to track stamp usage at a more
granular level. Following collation of a substantial dataset
the Group have developed a new methodology to estimate
the deferred revenue, which is being applied for the first
time in the current period. The calculation is derived from
sales data and scan data, rather than the previous use of
historic ratios.
There are still limitations in the process due to:
— barcodes not being scanned at the point of sale.
The Group has addressed this by applying a bucketing
approach in the methodology to estimate the month of
sale for batches of stamps;
— not all stamps are scanned in the delivery phase.
Therefore, a non-scan assumption has been applied by
management to incorporate the stamps which are sorted
manually or unable to be scanned by sorting machines.
Assumptions are applied to the data to create usage
curves. The usage curves determine which stamps sold
have been used and therefore calculates deferred revenue.
As a part of our risk assessment, we determined that
the stamps in the hands of the public balance has a high
degree of estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for the
financial statements as a whole due to the assumptions
made by management. As a result, we have also identified
a fraud risk related to estimation uncertainty noted on the
deferred revenue associated with advance customer
payments arising from stamps sold.
Our procedures to address the risk included:
— Methodology choice: We challenged the Group on the appropriateness of
the methodology in place for performing the calculation, including benchmarking
the approach against that taken by other global postal service providers.
An alternative method considered, was the previous methodology used in
FY23, which was based on a historical statistical method.
— Methodology implementation: We assessed whether the methodology
had been correctly applied and we challenged the need for any adjustments
through consideration of possible alternatives, such as the inclusion of a
buy forward adjustment on the estimated deferral.
— Test of details: We tested the integrity of the model by testing the individual
data points and assumptions input to the model used in the Group’s calculation
to check the accuracy of the balance. Further, we independently circulated a
sample of letters and large letters through the network ahead of period end
and traced these through to the scan database.
— Data and Analytics expertise – We engaged our Data & Analytics
specialists to assess whether the design of the usage curve calculator was
consistent with the methodology as described, by assessing the underlying
code written and implemented for the calculation of the usage curves.
— Challenge of the outcome: We challenged the Group’s estimate by
considering a range of plausible outcomes using alternative assumptions,
and alternative methods of calculating the estimate.
— Sensitivity analysis: We considered the sensitivity of the deferred revenue
balance to reasonably possible changes in assumptions and focused our
attention to those assumptions which we considered the most critical to
the estimate.
— Assessing transparency: We considered the adequacy of the Group’s
disclosures in respect of deferred revenue associated with advance
customer payments arising from stamps sold, particularly in relation
to the degree of estimation uncertainty.
We performed the tests above rather than seeking to rely on any of the Group’s
controls because the nature of the balance is such that we would expect to
obtain audit evidence primarily through the detailed procedures described.
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Communications with the International Distribution Services plc’s Audit and Risk Committee
Our discussions with and reporting to the Audit and Risk Committee included:
— Our approach to the audit of the stamps in the hands of the public estimate, including our planned audit response and substantive
procedures and the extent of our control reliance;
— Our conclusions on the appropriateness of the methodology and key assumptions used; and
— The adequacy of the disclosures, particularly as they relate to the sensitivity of the key assumptions.
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
— the appropriateness of the methodology; and
— the key assumptions used to calculate the deferral.
Our results
We found the estimate of deferred revenue to be acceptable (FY23: acceptable)
Further information in the Annual Report and Accounts: See the Audit and Risk Committee Report on page 99 for details on how the Audit
Committee considered Deferred revenue associated with advance customer payments arising from stamps sold as an area of significant
attention, page 174 for the accounting policy on Deferred revenue associated with advance customer payments arising from stamps sold,
and note 1 for the financial disclosures.
5.3 VALUATION OF PENSION SCHEME OBLIGATIONS (GROUP)
Financial Statement Elements Our assessment of risk vs FY23 Our results
FY24 FY23
We have not identified any significant
changes to our assessment of the
level of risk relating to the valuation of
pension scheme obligations.
FY2023-24: Acceptable
FY2022-23: Acceptable
Royal Mail Pension Plan
Defined Benefit Obligation
£4,521m £4,601m
Cash Balance Scheme
Defined Benefit Obligation
£1,963m £1,797m
Description of the Key Audit Matter Our response to the risk
Subjective valuation:
Significant estimates are made in valuing the Group’s
post-retirement defined benefit plan obligations including
in particular, the discount rate, the inflation rate, pre-
retirement pension increases and mortality assumptions.
Small changes in the assumptions and estimates used to
value the Group’s pension obligations would have a
significant effect on the financial position of the Group.
As part of our risk assessment, we determined that the
valuation of the Group’s pension scheme obligations
include a high degree of estimation uncertainty, with a
potential range of reasonable outcomes greater than our
materiality for the financial statements as a whole, and
possibly many times that amount. The financial
statements (Note 11) disclose the sensitivity of the
liabilities to key assumptions estimated by the Group.
Our procedures to address the risk included:
— Benchmarking assumptions: We challenged the key assumptions applied
in the calculation of the obligation, including the discount rate, inflation rate,
pre-retirement pension increases and mortality with the support of our
own actuarial specialists to compare key assumptions against market data.
— Actuary’s credentials: We assessed the competence, independence and
integrity of the Group’s actuarial expert.
— Assessing transparency: We considered the adequacy of the Group’s
disclosures in respect of the sensitivity of the obligation to key assumptions.
We performed the tests above rather than seeking to rely on any of the Group’s
controls because the nature of the balance is such that we would expect to
obtain audit evidence primarily through the detailed procedures described.
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Communications with the International Distribution Services plc’s Audit and Risk Committee
Our discussions with and reporting to the Audit and Risk Committee included:
— Our approach to the audit of the defined benefit obligations, including the use of specialist actuaries.
— Our assessment of the competency of the Group’s actuaries and management’s oversight of their calculation.
— Our conclusions on the valuation of the defined benefit obligations and the adequacy of the disclosures.
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
— The actuarial assumptions included with management’s IAS 19 model, specifically the discount rate, inflationary adjustments, pre-
retirement pension increases, and mortality rate used.
Our results
We found the valuation of defined benefit obligations to be acceptable (FY23: acceptable)
Further information in the Annual Report and Accounts: See the Audit and Risk Committee Report on page 96 for details on how the Audit
Committee considered the Valuation of Pension Scheme Obligations as an area of significant attention, page 173 for the accounting policy
on the Valuation of Pension Scheme Obligations and note 11 for the financial disclosures.
5.4 VALUATION OF CERTAIN UNQUOTED PENSION SCHEME ASSETS (GROUP)
Financial Statement Elements Our assessment of risk vs FY23 Our results
FY24 FY23
We have not identified any significant
changes to our assessment of the
level of risk relating to value the
unquoted pension scheme assets.
FY2023-24: Acceptable
FY2022-23: Acceptable
Unquoted pension assets* £1,778m £1,975m
Description of the Key Audit Matter Our response to the risk
Subjective valuation:
Significant estimates are made in valuing certain
unquoted pension schemes assets (which comprise
properties, equity funds, mutual funds and private fixed
income bonds), which are hard to value and make up a
significant portion of unquoted pension scheme assets.
Small changes in the estimates used to value these
assets would have a significant effect on the financial
position of the Group.
As part of our risk assessment, we determined that the
valuation of certain unquoted pension scheme assets
include a high degree of estimation uncertainty, with a
potential range of reasonable outcomes greater than our
materiality for the financial statements as a whole, and
possibly many times that amount.
* As reported on page 199. Included within the unquoted pension assets balance
(FY2023-24: £1,778m FY2022-23: £1,975m) are a portion that are considered as
hard to value for purposes of testing.
Our procedures to address the risk included:
— Tests of details: We obtained third party valuation confirmations directly
from fund managers. We compared those confirmations with unaudited net
asset value statements and tested the ability of fund managers to prepare
accurate valuations by performing a retrospective review comparing a
sample of the net asset value statements to historical audited financial
statements.
— Our property valuation expertise: We obtained third party valuations and
used our internal valuation specialists to assess the valuation methodology
and challenge key assumptions.
— Assessing transparency: We considered the adequacy of the Group’s
unquoted plan assets disclosures in respect of valuation techniques and
accuracy of the asset split by category.
We performed the tests above rather than seeking to rely on any of the Group’s
controls because the nature of the balance is such that we would expect to
obtain audit evidence primarily through the detailed procedures described.
Communications with the International Distribution Services plc’s Audit and Risk Committee
Our discussions with and reporting to the Audit and Risk Committee included:
— Our approach to the audit of the unquoted assets, including the use of valuation specialists.
— Our conclusions on the valuation of the assets and the adequacy of the disclosures.
Areas of particular auditor judgement
We identified the following as the area of particular auditor judgement:
— The appropriateness of methodology used for calculating fair value of plan assets;
Our results
We found the valuation of the unquoted pensions scheme assets to be acceptable (FY23: acceptable)
Further information in the Annual Report and Accounts: See the Audit and Risk Committee Report on page 100 for details on how the Audit
Committee considered Valuation of certain unquoted pension scheme assets as an area of significant attention, page 173 for the accounting
policy on Valuation of certain unquoted pension scheme assets and note 11 for the financial disclosures.
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Independent auditor’s report continued
5.5 RECOVERABILITY OF PARENT COMPANY’S INVESTMENT IN SUBSIDIARY (PARENT COMPANY)
Financial Statement Elements Our assessment of risk vs FY23 Our results
FY24 FY23
We have not identified any significant
changes to our assessment of the
level of risk relating to the recoverability
of the Parent Company’s investment
in the subsidiary, RMGLS Holdco
Limited. However, our assessment
of the risk of recoverability of debt
due from group entities has reduced
resulting in this item being removed
from the key audit matter.
FY2023-24: Acceptable
FY2022-23: Acceptable
Investments £2,919m £2,914m
Description of the Key Audit Matter Our response to the risk
Low risk, high value: The carrying amount of the Parent
Company’s investments in subsidiaries represent 72%
(FY23: 83%) of the Company’s total assets, with the
remainder being intergroup receivables.
The recoverability of the investment in subsidiary is
not at a high risk of significant misstatement. However,
due to its materiality in the context of the Parent
Company’s financial statements, this is considered to
be the area that had the greatest effect on our overall
parent company audit.
Our procedures to address the risk included:
— Comparing valuations: For the investments where the carrying amount
exceed the net asset value, comparing the carrying amount of the investment
with the expected value of business, based on the recoverable amounts
determined by management for the Royal Mail (excluding Parcelforce
Worldwide) CGU and GLS CGUs.
— Recoverable amount assessment: We noted that the relevant subsidiary’s
balance sheet position was only marginally above the underlying investment
held by the entity. We performed an assessment of the recoverable amounts
determined by management on the underlying investment as described in 5.1.
— Comparing valuations: We compared the carrying amount of the Parent
Company’s investments to the Group’s market capitalisation.
We performed the tests above rather than seeking to rely on any of the
Company’s controls because the nature of the balance is such that we
would expect to obtain audit evidence primarily through the detailed
procedures described.
Communications with the International Distribution Services plc’s Audit and Risk Committee
Our discussions with and reporting to the Audit and Risk Committee included:
— Our approach to the audit of the investment in subsidiary; and
— Our conclusions on valuation of investment in subsidiaries and the adequacy of the disclosures, given the cumulative impairment
of the Royal Mail (excluding Parcelforce worldwide) CGU.
Our results
We found the recoverability of the Parent Company’s investment in subsidiary to be acceptable (FY23: acceptable)
Further information in the Annual Report and Accounts: See the Audit and Risk Committee Report on page 101 for details on how the Audit
Committee considered the Recoverability of Parent Company’s investment in Subsidiaries as an area of significant attention, page 234
for the accounting policy on the Recoverability of Parent Company’s investment in Subsidiaries and note 6 for the financial disclosures.
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6. OUR ABILITY TO DETECT IRREGULARITIES, AND OUR RESPONSE
FRAUD – IDENTIFYING AND RESPONDING TO RISKS OF MATERIAL MISSTATEMENT DUE TO FRAUD
FRAUD RISK
ASSESSMENT
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment
procedures included:
— Enquiring of Directors, the Audit and Risk Committee, Internal Audit and Risk Management, and inspection
of policy documentation as to the Group’s policies and procedures to prevent and detect fraud, including
the Group’s ‘whistleblowing’ hotline, as well as whether they have knowledge of any actual, suspected or
alleged fraud.
— Reading Board, Audit and Risk Committee, Nomination Committee, Remuneration Committee and ESG
Committee minutes.
— Considering remuneration incentive schemes and performance targets for management and directors.
— Using analytical procedures to identify any unusual or unexpected accounting relationships.
RISK
COMMUNICATIONS
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud
throughout the audit. This included communication from the group audit team to full scope component audit teams
of relevant fraud risks identified at the group level and request to full scope component audit teams to report to the
group audit team any instances of fraud that could give rise to a material misstatement at the group level.
FRAUD RISKS As required by auditing standards, and taking into account possible pressures to meet profit targets, we perform
procedures to address the risk of management override of controls, in particular the risk that group management
may be in a position to make inappropriate accounting entries and the risk of bias in accounting estimates and
judgements. On this audit we do not believe there is a fraud risk related to revenue recognition because revenue
transactions are all low value, high volume and have a high cash conversion rate.
We determined that these risks would most likely manifest themselves in two key areas being:
— Deferred revenue in relation to advance customer payments; and
— Management bias in the recoverability of the carrying value of the Royal Mail excluding Parcelforce Worldwide
CGU arising from possible external pressures to realise value.
LINK TO KAMS Further detail in respect of the above fraud risks is set out in the key audit matter disclosures in section 4 of this
report. These are KAM 4.1 – Recoverability of the carrying amount of the Royal Mail (excluding Parcelforce
Worldwide) CGU and KAM 4.2. – Deferred revenue associated with advance customer payments arising from
stamps sold
PROCEDURES TO
ADDRESS FRAUD
RISKS
We performed procedures including:
— Identifying journal entries and other adjustments to test for all full scope components, based on risk criteria and
comparing the identified entries to supporting documentation. These included those posted to seldom used
accounts, round sum journals posted in period 12, post close journals and unusual journals posted to revenue,
cash and borrowing accounts.
— Evaluated the business purpose of significant unusual transactions.
— Assessing whether the judgements made in making accounting estimates are indicative of a potential bias.
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Independent auditor’s report continued
LAWS AND REGULATIONS – IDENTIFYING AND RESPONDING TO RISKS OF MATERIAL MISSTATEMENT RELATING TO COMPLIANCE
WITH LAWS AND REGULATIONS
LAWS AND
REGULATIONS RISK
ASSESSMENT
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the
Financial Statements from our general commercial and sector experience. We held discussion with the Directors
and other management (as required by auditing standards), and from inspection of the Group’s regulatory and legal
correspondence and discussed with the Directors and other management the policies and procedures regarding
compliance with laws and regulations.
As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment
including the entity’s procedures for complying with regulatory requirements and inquiry of the UK business’
regulator, Ofcom.
RISK
COMMUNICATIONS
We communicated identified laws and regulations throughout our team and remained alert to any indications
of non-compliance throughout the audit. This included communication from the group audit team to full-scope
component audit teams of relevant laws and regulations identified at the group level, and a request for full scope
component auditors to report to the group audit team any instances of non-compliance with laws and regulations
that could give rise to a material misstatement at the group level.
DIRECT LAWS
CONTEXT AND LINK
TO AUDIT
The potential effect of these laws and regulations on the financial statements varies considerably. Firstly, the
Group is subject to laws and regulations that directly affect the financial statements including financial reporting
legislation (including related companies’ legislation), distributable profits legislation, taxation legislation, and
pensions legislation and we assessed the extent of compliance with these laws and regulations as part of our
procedures on the related financial statement items.
MOST SIGNIFICANT
INDIRECT LAW/
REGULATION
AREAS
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in the financial statements, for instance through the
imposition of fines, litigation or the loss of the Group’s license to operate. We identified the following areas as those
most likely to have such an effect: GDPR compliance, health and safety, anti-bribery and corruption, employment
law, PCI compliance, money laundering, foreign corrupt practices, environmental protection, export control,
consumer rights act, misrepresentation act, contract law, distance selling regulations, competition legislation and
price fixing, and the Postal Services Act as enforced by Ofcom, in recognising the nature of the Group’s activities.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations
to enquiry of the Directors and other management and inspection of regulatory and legal correspondence, if any.
Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence,
an audit will not detect that breach.
KNOWN ACTUAL
OR SUSPECTED
MATTERS
For the Whistl Damages Claim, the Quality of Service Fine for FY23 and the potential fine for FY24 and
tax-related disputes in GLS Italy discussed in note 25, we compared disclosures against our understanding
from legal correspondence.
CONTEXT
CONTEXT OF THE
ABILITY OF THE
AUDIT TO DETECT
FRAUD OR
BREACHES OF LAW
OR REGULATION
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some
material misstatements in the financial statements, even though we have properly planned and performed our
audit in accordance with auditing standards. For example, the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements, the less likely the inherently
limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are
designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and
cannot be expected to detect non-compliance with all laws and regulations.
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7. OUR DETERMINATION OF MATERIALITY
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative considerations
to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating the effect of misstatements,
both individually and in the aggregate, on the financial statements as a whole.
£25M
MATERIALITY
FOR THE GROUP
FINANCIAL
STATEMENTS
AS A WHOLE
(FY23: £25M)
What we mean
A quantitative reference for the purpose of planning and performing our audit.
Basis for determining materiality and judgements applied
Materiality for the Group financial statements as a whole was set at £25m (FY23: £25m). This was determined with
reference to a benchmark of group total revenues.
Consistent with FY23, we determined that group revenue remains the main benchmark for the Group as it provides
a more stable measure period on period than group profit before tax. This is because of the significant fluctuations
noted in profit levels in the current and prior periods, with a return to profits in the current period and a loss seen in
the FY23.
Our Group materiality of £25m was determined by applying a percentage to the group revenue. When using a
benchmark of total revenue to determine overall materiality, KPMG’s approach for listed entities considers a
guideline range 0.5% – 1% of the measure. In setting overall group materiality, we applied a percentage of 0.2%
(FY-23: 0.2%) to the benchmark. This percentage is below the bottom end of the guideline percentage range.
This reflects the importance of the profit before tax metric. KPMG have maintained this percentage of total revenue
to ensure that materiality is reflective of the Group’s normal profit levels noted in more stable prior periods.
Materiality for the Parent Company’s financial statements as a whole was set at £12.6m (FY23: £4.2m), which is the
component materiality for the parent company determined by the group audit engagement team. This is lower than
the materiality we would otherwise have determined with reference to the Parent Company’s total assets, of which
it represents 0.36% (2023: 0.14%).
Materiality for the Parent Company has increased due to a larger allocation of group materiality being allocated to
the Parent Company component. We have increased the materiality allocated to the Parent Company to better
align with KPMG’s assessment of the risk present at the Parent Company.
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Independent auditor’s report continued
PERFORMANCE
MATERIALITY
£18.7M
(FY2022-23: £18.7M)
What we mean
Our procedures on individual account balances and disclosures were performed to a lower threshold, performance
materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual
account balances add up to a material amount across the financial statements as a whole.
Basis for determining performance materiality and judgements applied
We have considered performance materiality at a level of 75% (FY23: 75%) of materiality for the Group’s financial
statements as a whole to be appropriate.
The Parent Company’s performance materiality was set at £9.45m (FY23: £3.20m), which equates to 75%
(FY2022-23: 75%) of materiality for the Parent Company’s financial statements as a whole.
We applied this percentage in our determination of performance materiality because we did not identify any factors
indicating an elevated level of risk.
AUDIT
MISSTATEMENT
POSTING
THRESHOLD
£1.25M
(FY2022-23: £1.25M)
What we mean
This is the amount below which identified misstatements are considered to be clearly trivial from a quantitative
point of view. We may become aware of misstatements below this threshold which could alter the nature, timing
and scope of our audit procedures, for example if we identify smaller misstatements which are indicators of fraud.
This is also the amount above which all misstatements identified are communicated to International Distribution
Services plc’s Audit and Risk Committee.
Basis for determining the audit misstatement posting threshold and judgements applied
We set our audit misstatement posting threshold at 5% (FY23: 5%) of our materiality for the group financial
statements. We also report to the Audit and Risk Committee any other identified misstatements that warrant
reporting on qualitative grounds.
The overall materiality for the group financial statements of £25m (FY23: £25m) compares as follows to the main financial statement
caption amounts:
Revenue Profit before tax Total Assets
FY2023-24 FY2022-23 FY2023-24 FY2022-23 FY2023-24 FY2022-23
Financial statement Caption £12,679m £12,044m £114m £-676m £8,991m £8,816m
Group Materiality as a
percentage of caption 0.20% 0.21% 21.93% 3.70% 0.28% 0.28%
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8. THE SCOPE OF OUR AUDIT
GROUP SCOPE What we mean
How the group audit team determined the procedures to be performed across the Group.
The Group has 21 (FY23: 21) reporting components. In order to determine the work performed at the reporting
component level, we identified those components which we considered to be of individual financial significance,
those which were significant due to risk and those remaining components on which we required procedures to be
performed to provide us with the evidence we required in order to conclude on the Group’s financial statements as
a whole.
We determined individually financially significant components as those contributing at least 10% (FY23: 10%) of
revenue or total assets. We selected revenue or total assets because these are the most representative of the
relative size of the components. We identified 3 (FY23: 3) components as individually financially significant
components and performed full scope audits on these components
The components within the scope of our work accounted for the following percentages of the Group’s results, with
the prior period comparatives indicated in brackets:
Scope
Number of
components
Range of materiality
applied
Percentage of the
Revenue
Percentage of the
profits and losses
that made up PBT
Percentage of the
total assets
Full scope audit 3
(3)
£12.6m – £20m
(£4.2m – £20m)
99.7%
(98.7%)
91.2%
(80.7%)
95.4%
(98.7%)
In addition, we have performed group level analysis on the remaining components to determine whether further
risks of material misstatement exist in those components.
The scope of the audit work performed was fully substantive as we did not rely upon the Group's internal control
over financial reporting
The work on 1 of the 3 components (FY23: 1 of the 3 components) was performed by component auditors and the
rest, including the audit of the Parent Company, was performed by the group audit team. The group audit team
instructed component auditors as to the significant areas to be covered, including the relevant risks detailed
above and the information to be reported back.
GROUP AUDIT
TEAM OVERSIGHT
What we mean
The extent of the group audit team’s involvement in component audits.
The group audit team visited 2 (FY2022-23: 2) component locations in Hungary and Italy relating to the 1 component
audit team to assess the audit risk and strategy. Video and telephone conference meetings were also held with the
component auditors and certain others that were not physically visited. At these visits and meetings, the findings
reported to the group audit team were discussed in more detail, and any further work required by the group audit
team was then performed by the component auditor.
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Independent auditor’s report continued
9. OTHER INFORMATION IN THE ANNUAL REPORT
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on
the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly
stated below, any form of assurance conclusion thereon.
ALL OTHER INFORMATION
Our responsibility
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent with
the financial statements or our audit knowledge.
Our reporting
Based solely on that work we have not identified material
misstatements or inconsistencies in the other information.
STRATEGIC REPORT AND DIRECTORS’ REPORT
Our responsibility and reporting
Based solely on our work on the other information described above we report to you as follows:
— we have not identified material misstatements in the Strategic Report and the Directors’ Report;
— in our opinion the information given in those reports for the financial period is consistent with the financial statements; and
— in our opinion those reports have been prepared in accordance with the Companies Act 2006.
DIRECTORS’ REMUNERATION REPORT
Our responsibility
We are required to form an opinion as to whether the part of the
Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Our reporting
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
CORPORATE GOVERNANCE DISCLOSURES
Our responsibility
We are required to perform procedures to identify whether there is
a material inconsistency between the financial statements and our
audit knowledge, and:
— the Directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information
necessary for shareholders to assess the Group’s position
and performance, business model and strategy;
— the section of the annual report describing the work of the
Audit Committee, including the significant issues that the
Audit Committee considered in relation to the financial
statements, and how these issues were addressed; and
— the section of the annual report that describes the review
of the effectiveness of the Group’s risk management and
internal control systems.
Our reporting
Based on those procedures, we have concluded that each of these
disclosures is materially consistent with the financial statements
and our audit knowledge.
We are also required to review the part of the Corporate
Governance Statement relating to the Group’s compliance with
the provisions of the UK Corporate Governance Code 2018
specified by the Listing Rules for our review.
We have nothing to report in this respect.
OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
Our responsibility
Under the Companies Act 2006, we are required to report to you if,
in our opinion:
— adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
— the Parent Company’s financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
— certain disclosures of Directors’ remuneration specified
by law are not made; or
— we have not received all the information and explanations
we require for our audit.
Our reporting
We have nothing to report in these respects.
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10. RESPECTIVE RESPONSIBILITIES
Directors’ responsibilities
As explained more fully in their statement set out on page 139, the Directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance and
Transparency Rule 4.1.17R and 4.1.18R. This auditor’s report provides no assurance over whether the annual financial report has been
prepared in accordance with those requirements.
11. THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE OWE OUR RESPONSIBILITIES
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Andrew Bradshaw (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
24 May 2024
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Consolidated Income Statement
For the 53 weeks ended 31 March 2024 and 52 weeks ended 26 March 2023
Notes
| Reported | Reported | ||
| 53 weeks 2024 | 52 weeks 2023 | ||
| £m | £m | ||
| Continuing operations | |||
Revenue | 3 | ||
| Operating costs | 4/5 | ( | ( |
People costs | ( | ( | |
Distribution and conveyance costs | ( | ( | |
Infrastructure costs | ( | ( | |
Other operating costs | ( | ( | |
| Profit on disposal of property, plant and equipment | 6 | ||
| Operating profit/(loss) before specific items | 2 | ( | |
| Operating specific items | 6 | ( | ( |
Operating profit/(loss) | 2 | ( | |
Finance costs | 7 | ( | ( |
Finance income | 7 | ||
| Net pension interest (non-operating specific item) | 6/11 | ||
Profit/(loss) before tax | ( | ||
Tax charge | 8 | ( | ( |
Profit/(loss) for the year | ( | ||
| Earnings per share (pence) | |||
Basic | 9 | ( | |
Diluted | 9 | ( |
1,2
2,3
2
2
2
1. Operating costs are stated before operating specific items.
2. For further details on APMs used, see pages 238 to 243.
3. Profit on disposal of property, plant and equipment has been re-presented in the prior year within operating profit/(loss) before specific items, previously presented as a specific item after operating profit/
(loss) (see Note 1 - changes in accounting policy and disclosures).
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Consolidated Statement of Comprehensive Income
For the 53 weeks ended 31 March 2024 and 52 weeks ended 26 March 2023
Notes
| Reported | Reported | ||
| 53 weeks 2024 | 52 weeks 2023 | ||
| £m | £m | ||
Profit/(loss) for the year | ( | ||
| Other comprehensive expense for the year from continuing operations: | |||
| Items that will not be subsequently reclassified to profit or loss: | |||
Amounts relating to retirement benefit plans | ( | ( | |
Decrease in withholding tax payable on distribution of RMPP and RMSEPP surplus | 11 | ||
Remeasurement losses of the defined benefit surplus in RMPP and RMSEPP | 11(c) | ( | ( |
Remeasurement (losses)/gains of the defined benefit deficit in DBCBS | 11(d) | ( | |
Deferred tax associated with DBCBS | 8 | ||
| Items that may be subsequently reclassified to profit or loss: | |||
Foreign exchange translation differences | ( | ||
Exchange differences on translation of foreign operations (GLS) | ( | ||
Net gain/(loss) on hedge of a net investment (€500 million bond) | ( | ||
Net loss on hedge of a net investment (Euro-denominated lease payables) | ( | ||
Designated cash flow hedges | ( | ( | |
Gains/(losses) on cash flow hedges deferred into equity | ( | ||
Gains on cash flow hedges released from equity to income | ( | ( | |
Losses released from equity to the carrying value of non-financial assets | |||
(Loss)/gain on cross-currency swap cash flow hedge deferred into equity | ( | ||
| Loss/(gain) on cross-currency swap cash flow hedge released from equity to income | |||
– interest payable | ( | ||
Gain on cost of hedging deferred into equity | |||
Gain on cost of hedging released from equity to income – interest payable | ( | ( | |
Tax on above items | 8 | ||
Total other comprehensive expense for the year | ( | ( | |
Total comprehensive expense for the year | ( | ( |
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Consolidated Balance Sheet
At 31 March 2024 and 26 March 2023
Notes
| Reported at | Reported at | ||
| 31 March 2024 | 26 March 2023 | ||
| £m | £m | ||
| Non-current assets | |||
Property, plant and equipment | 13 | ||
Goodwill | 15 | ||
Intangible assets | 16 | ||
Investments in associates | 17 | ||
| Financial assets | |||
Pension escrow investments | 24 | ||
Derivatives | 24 | ||
RMPP/RMSEPP retirement benefit surplus – net of withholding tax payable | 11 | ||
Other receivables | |||
Deferred tax assets | 8 | ||
| Current assets | |||
Inventories | |||
Trade and other receivables | 20 | ||
Income tax receivable | |||
| Financial assets | |||
Investments | 24 | ||
Derivatives | 24 | ||
Cash and cash equivalents | 21/24 | ||
Assets held for sale | 19 | ||
Total assets | |||
| Current liabilities | |||
Trade and other payables | 22 | ( | ( |
| Financial liabilities | |||
Interest-bearing loans and borrowings | 23/24 | ( | ( |
Lease liabilities | 14/24 | ( | ( |
Derivatives | 24 | ( | ( |
Income tax payable | ( | ( | |
Provisions | 25 | ( | ( |
Bank overdrafts | 21/24 | ( | ( |
Liabilities held for sale | 19 | ( | |
( | ( |
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Consolidated Balance Sheet continued
At 31 March 2024 and 26 March 2023
Notes
| Reported at | Reported at | ||
| 31 March 2024 | 26 March 2023 | ||
| £m | £m | ||
| Non-current liabilities | |||
| Financial liabilities | |||
Interest-bearing loans and borrowings | 23/24 | ( | ( |
Lease liabilities | 14/24 | ( | ( |
Derivatives | 24 | ( | ( |
DBCBS retirement benefit deficit | 11 | ( | ( |
Provisions | 25 | ( | ( |
Other payables | ( | ( | |
Deferred tax liabilities | 8 | ( | ( |
( | ( | ||
Total liabilities | ( | ( | |
Net assets | |||
| Equity | |||
Share capital | 26 | ||
Retained earnings | |||
Other reserves | ( | ||
Total equity |
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Consolidated Statement of Changes in Equity
For the 53 weeks ended 31 March 2024 and 52 weeks ended 26 March 2023
| Foreign | |||||
| currency | |||||
| Share | Retained | translation | Hedging | Total | |
| capital | earnings | reserve | reserve | equity | |
| £m | £m | £m | £m | £m | |
Reported at 27 March 2022 | |||||
Loss for the year | ( | ( | |||
Other comprehensive (expense)/income for the year | ( | ( | ( | ||
Total comprehensive (expense)/income for the year | ( | ( | ( | ||
| Transactions with owners of the Company, recognised | |||||
| directly in equity | |||||
Dividend paid to equity holders of the Parent Company | ( | ( | |||
| Share-based payments (see Note 18) | |||||
Employee Free Shares issue | |||||
Long Term Incentive Plan (LTIP) | |||||
Tax charge on share-based payments | ( | ( | |||
Reported at 26 March 2023 | ( | ||||
Profit for the year | |||||
Other comprehensive expense for the year | ( | ( | ( | ( | |
Total comprehensive expense for the year | ( | ( | ( | ( | |
| Transactions with owners of the Company, recognised | |||||
| directly in equity | |||||
| Share-based payments (see Note 18) | |||||
Employee Free Shares issue | |||||
Long Term Incentive Plan (LTIP) | |||||
Deferred Share Bonus Plan (DSBP) | |||||
Reported at 31 March 2024 | ( |
A description of the reserves in the above table is included in Note 26.
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Consolidated Statement of Cash Flows
For the 53 weeks ended 31 March 2024 and 52 weeks ended 26 March 2023
Notes
| Reported | Reported | ||
| 53 weeks 2024 | 52 weeks 2023 | ||
| £m | £m | ||
| Cash flow from operating activities | |||
Profit/(loss) before tax | ( | ||
| Adjustment for: | |||
Net pension interest (non-operating specific item) | 6 | ( | ( |
Net finance costs | 7 | ||
Profit on disposal of property, plant and equipment | 6 | ( | ( |
Specific items (operating) | 6 | ||
Operating profit/(loss) before profit on disposal of property, plant and equipment and specific items¹ | ( | ||
| Adjustment for: | |||
Depreciation and amortisation | |||
EBITDA before specific items and profit on disposal of property, plant and equipment¹ | |||
Working capital movements | ( | ( | |
Decrease/(increase) in inventories | ( | ||
(Increase)/decrease in receivables | ( | ||
Decrease in payables | ( | ( | |
Net decrease in derivative assets | |||
(Decrease)/increase in provisions (non-specific items) | ( | ||
| Pension charge adjustment | 6/11 | ( | |
Share-based awards (LTIP and DSBP) charge | |||
Cash cost of operating specific items | 6 | ( | ( |
Cash inflow from operations | |||
Income tax paid | ( | ( | |
Net cash inflow from operating activities | |||
| Cash flow from investing activities | |||
Finance income received | |||
Proceeds from disposal of property (excluding London Development Portfolio), plant and equipment | |||
Cash received on sale and leasebacks – rights of assets transferred | |||
London Development Portfolio net proceeds/(costs) | ( | ||
| Purchase of property, plant and equipment | ( | ( | |
Acquisition of business interests, net of cash acquired | ( | ( | |
| Purchase of intangible assets (software) | ( | ( | |
Sale of pension escrow investments | |||
Purchase of pension escrow investments | ( | ( | |
(Purchase)/sale of financial asset investments (current) | ( | ||
Net cash outflow from investing activities | ( | ( | |
Net cash (outflow)/inflow before financing activities | ( |
2
3
3
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Consolidated Statement of Cash Flows continued
For the 53 weeks ended 31 March 2024 and 52 weeks ended 26 March 2023
Notes
| Reported | Reported | ||
| 53 weeks 2024 | 52 weeks 2023 | ||
| £m | £m | ||
| Cash flow from financing activities | |||
Finance costs paid | 24 | ( | ( |
Payment of capital element of obligations under lease contracts | 24 | ( | ( |
Cash received on sale and leasebacks – rights to assets retained | 24 | ||
Proceeds from loans and borrowings | 24 | ||
Repayment of loans and borrowings | 24 | ( | |
Payment of capital element of asset finance | ( | ||
Dividends paid to equity holders of the Parent Company | 10 | ( | |
Net cash inflow/(outflow) from financing activities | ( | ||
Net increase/(decrease) in cash and cash equivalents | ( | ||
Effect of foreign currency exchange rates on cash and cash equivalents | ( | ||
Cash and cash equivalents at the beginning of the year | |||
Cash and cash equivalents at the end of the year | 21 |
1. For further details on APMs used, see pages 238 to 243.
2. Excludes £13 0 million (2022-23: £nil) adjustment in relation to the release of pension escrow (see Note 4 for further details).
3. Items comprise total gross capital expenditure within ‘in-year trading cash flow’ measure (see Financial Review).
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Notes to the Consolidated Financial Statements
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Notes to the Consolidated Financial Statements continued
1. Basis of preparation and accounting policies continued
Scenario: | Deteriorating economic and market conditions. |
Assumptions: | Revenue growth in the Business Plan is not achieved. |
Scenario: | Increased competition in the UK parcels sector |
| including changes in consumer expectations | |
| and/or market disruption. | |
Assumptions: | Lower parcel revenues and failure to deliver new |
| product offerings. | |
Scenario: | Costs to avoid industrial action in Royal Mail. |
Assumptions: | Lower operating profit as a result of incurring |
| costs to avoid industrial action. | |
Scenario: | Delays in relation to the Royal Mail transformation plan. |
Assumptions: | Delays in budgeted cost efficiencies being realised. |
Scenario: | Cyber attack triggering material service and/or |
| operational interruption. | |
Assumptions: | Cyber breach impacting revenue/costs to rectify. |
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1. Basis of preparation and accounting policies continued
Notes to the Consolidated Financial Statements continued
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1. Basis of preparation and accounting policies continued
Notes to the Consolidated Financial Statements continued
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Other accounting policies
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1. Basis of preparation and accounting policies continued
Notes to the Consolidated Financial Statements continued
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1. Basis of preparation and accounting policies continued
| Land and buildings: | |
Freehold land | Not depreciated |
| Freehold | |
buildings | Up to 50 years |
| Leasehold | The shorter of the period of the lease, |
| buildings | or the estimated remaining useful life |
Plant and machinery | 3 to 15 years |
Motor vehicles | 2 to 12 years |
Fixtures and equipment | 2 to 15 years |
| Customer listings 3 to 10 years | |
Software | 3 to 10 years |
Brands | 1 to 10 years |
Notes to the Consolidated Financial Statements continued
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| 2023-24 | 2022-23 | |
| % | % | |
Not yet overdue | 0.22 | 0.18 |
Past due not more than one month | 1.43 | 1.73 |
Past due more than one month and not more than two months | 8.22 | 10.56 |
Past due more than two months | 40.13 | 52.71 |
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1. Basis of preparation and accounting policies continued
Notes to the Consolidated Financial Statements continued
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1. Basis of preparation and accounting policies continued
Notes to the Consolidated Financial Statements continued
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53 weeks 2024 | Adjusted | Specific items and other adjustments | Reported | ||||
| GLS | GLS | ||||||
| Royal Mail | (Non-UK | Adjusted | Royal Mail | (Non-UK | |||
| (UK operations) | operations) | Eliminations | Group | (UK operations) | operations) | Group | |
| Continuing operations | £m | £m | £m | £m | £m | £m | £m |
Revenue | 7,834 | 4,865 | (20) | 12,679 | – | – | 12,679 |
People costs | (5,683) | (1,110) | – | (6,793) | 41 | – | (6,752) |
Non-people costs | (2,499) | (3,435) | 20 | (5,914) | 121 | – | (5,793) |
| Profit on disposal | |||||||
| of property, plant | |||||||
and equipment | – | – | – | – | 14 | 1 | 15 |
| Operating (loss)/profit | |||||||
before specific items | (348) | 320 | – | (28) | 176 | 1 | 149 |
Operating specific items | – | – | – | – | (82) | (41) | (123) |
Operating (loss)/profit | (348) | 320 | – | (28) | 94 | (40) | 26 |
Finance costs | (81) | (32) | 15 | (98) | – | – | (98) |
Finance income | 57 | 9 | (15) | 51 | – | – | 51 |
| Net pension interest | |||||||
| (non-operating specific | |||||||
item) | – | – | – | – | 135 | – | 135 |
(Loss)/profit before tax | (372) | 297 | – | (75) | 229 | (40) | 114 |
Tax credit/(charge) | 8 | (73) | – | (65) | – | 5 | (60) |
(Loss)/profit after tax | (364) | 224 | – | (140) | 229 | (35) | 54 |
52 weeks 2023 | Adjusted | Specific items and other adjustments | Reported | ||||
| GLS | GLS | ||||||
| Royal Mail | (Non-UK | Adjusted | Royal Mail | (Non-UK | |||
| (UK operations) | operations) | Eliminations | Group | (UK operations) | operations) | Group | |
| Continuing operations | £m | £m | £m | £m | £m | £m | £m |
Revenue | 7,4 11 | 4,650 | (17) | 12,044 | – | – | 12,044 |
People costs | (5,409) | (1,031) | – | (6,440) | (133) | – | (6,573) |
Non-people costs | (2,421) | (3,271) | 17 | (5,675) | – | – | (5,675) |
Profit on disposal of property, plant and equipment | – | – | – | – | 5 | 1 | 6 |
| Operating (loss)/profit | |||||||
| before specific items | (419) | 348 | – | (71) | (128) | 1 | (198) |
Operating specific items | – | – | – | – | (492) | (52) | (544) |
Operating (loss)/profit | (419) | 348 | – | (71) | (620) | (51) | (742) |
Finance costs | (49) | (28) | 17 | (60) | – | – | (60) |
Finance income | 32 | 6 | (17) | 21 | – | – | 21 |
| Net pension interest | |||||||
| (non-operating specific | |||||||
item) | – | – | – | – | 105 | – | 105 |
(Loss)/profit before tax | (436) | 326 | – | (110) | (515) | (51) | (676) |
Tax (charge)/credit | (4) | (82) | – | (86) | (115) | 4 | (197) |
(Loss)/profit after tax | (440) | 244 | – | (196) | (630) | (47) | (873) |
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2. Segment information continued
| GLS | ||||
| Royal Mail | (Non-UK | |||
| (UK operations) | Operations) | Eliminations | Total | |
| £m | £m | £m | £m | |
Depreciation | (246) | (174) | – | (420) |
Amortisation of intangible assets (mainly software) | (50) | (11) | – | (61) |
Non-current assets | 2,058 | 2,027 | – | 4,085 |
Total assets | 5,989 | 3,189 | (187) | 8,991 |
Total liabilities | (3,983) | (1,650) | 187 | (5,446) |
| GLS | ||||
| Royal Mail | (Non-UK | |||
| (UK operations) | Operations) | Eliminations | Total | |
| £m | £m | £m | £m | |
Depreciation | (326) | (159) | – | (485) |
Amortisation of intangible assets (mainly software) | (107) | (10) | – | (117) |
Non-current assets | 2,169 | 1,892 | – | 4,061 |
Total assets | 6,054 | 2,953 | (191) | 8,816 |
Total liabilities | (3,651) | (1,554) | 191 | (5,014) |
| Continental | North | ||||
| UK | Europe | America | Eliminations | Total | |
| £m | £m | £m | £m | £m | |
Revenue | 7,834 | 4,315 | 550 | (20) | 12,679 |
Non-current assets | 2,058 | 1,551 | 476 | – | 4,085 |
| Continental | North | ||||
| UK | Europe | America | Eliminations | Total | |
| £m | £m | £m | £m | £m | |
Revenue | 7,4 1 1 | 4,043 | 607 | (17) | 12,044 |
Non-current assets | 2,169 | 1,379 | 513 | – | 4,061 |
| Intragroup | ||||
| Royal Mail | GLS | revenue 1 | Group | |
| £m | £m | £m | £m | |
Parcels | 4,108 | 4,865 | (20) | 8,953 |
Letters | 3,726 | – | – | 3,726 |
Total | 7,834 | 4,865 | (20) | 12,679 |
| Intragroup | ||||
| Royal Mail | GLS | revenue | Group | |
| £m | £m | £m | £m | |
Parcels | 3,910 | 4,650 | (17) | 8,543 |
Letters | 3,501 | – | – | 3,501 |
Total | 7,41 1 | 4,650 | (17) | 12,044 |
Notes to the Consolidated Financial Statements continued
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International Distribution Services plc Annual Report 2023-24
During the year, around £230 million (2022-23: £250 million) of revenue was recognised which was previously held as a deferred revenue
balance at 26 March 2023 (2022-23: 27 March 2022). This balance largely relates to stamps held and not yet used by customers and is
recognised as ‘advance customer payments’ within ‘current trade and other payables’ (see Note 22).
| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £m | £m | |
People costs (see Note 5) | (6,752) | (6,573) |
| Distribution and conveyance costs | ||
Charges from overseas postal administrations | (242) | (266) |
Fuel costs | (146) | (159) |
| Infrastructure costs | ||
Depreciation, amortisation and impairment | (481) | (602) |
Charge for property, plant and equipment (see Note 13) | (420) | (485) |
| Charge for intangible assets (see Note 16) | (61) | (117) |
| Other operating costs | ||
Post Office Limited charges | (313) | (317) |
Inventory expensed | (40) | (46) |
| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £m | £m | |
Ofcom administrative charge | (5) | (6) |
Citizens Advice/Citizens Advice Scotland/Consumer Council for Northern Ireland | (1) | (1) |
Total | (6) | (7) |
| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £’000 | £’000 | |
Audit of Group statutory Financial Statements | (1,851) | (1,828) |
| Other fees to auditor: | ||
Audit of the accounts of subsidiaries | (2,033) | (1,883) |
Review of the interim financial information | (422) | (394) |
Regulatory audit | (169) | (158) |
Other assurance | (56) | (3) |
Other non-audit services | (150) | (150) |
Total | (4,681) | (4,416) |
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5. People information
| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £m | £m | |
Wages and salaries | (5,770) | (5,359) |
| Royal Mail | (4,785) | (4,437) |
GLS | (985) | (922) |
Pensions (see Note 11) | (416) | (692) |
UK defined benefit plans (including administration costs) | (82) | (385) |
UK defined contribution plan | (135) | (124) |
UK defined benefit and defined contribution plans' Pension Salary Exchange employer contributions | (188) | (174) |
GLS pension costs accounted for on a defined contribution basis | (11) | (9) |
Social security | (566) | (522) |
Royal Mail | (452) | (422) |
GLS | (114) | (100) |
Total people costs | (6,752) | (6,573) |
| 1. People costs include £12 million (2022-23: £47 million) charged in respect of voluntary redundancies in Royal Mail. | ||
| Defined benefit pension plan rates: | ||
Income statement – DBCBS | 14.8% | 22.9% |
Cash flow – DBCBS | 15.6% | 15.6% |
| Defined contribution pension plan average rate: | ||
Income statement and cash flow² | 9.2% | 8.9% |
1
2. Employer contribution rates are 4% for employees in the entry level category and 10% for the majority of those employees in the standard level category.
People numbers
The number of people employed (including Directors), expressed as both full-time equivalents and headcount, during the reporting year was
as follows:
| Full-time equivalents | Headcount | |||||||
Year end | Average | Year end | Average | |||||
| 53 weeks | 52 weeks | 53 weeks | 52 weeks | 53 weeks | 52 weeks | 53 weeks | 52 weeks | |
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
Royal Mail | 138,905 | 143,553 | 143,848 | 147,593 | 130,031 | 130,393 | 128,316 | 136,390 |
GLS | 22,075 | 21,776 | 22,355 | 21,571 | 23,521 | 22,399 | 23,336 | 22,440 |
Total | 160,980 | 165,329 | 166,203 | 169,164 | 153,552 | 152,792 | 151,652 | 158,830 |
3
4
3. These people numbers relate to the total number of paid hours (including part-time, full-time and agency hours) divided by the number of standard full-time working hours in the same year.
4. These people numbers represent permanent employees.
Directors’ remuneration
| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £’000 | £’000 | |
| Directors’ remuneration | (3,500) | (3,463) |
Amounts earned under long-term incentive plans | – | (364) |
Number of Directors accruing benefits under defined contribution plans | – | 1 |
5
5. These amounts include any cash supplements received in lieu of pension. Details of the pension contributions and highest-paid Director are included in the single figure table of the Directors’
Remuneration Report on page 125.
Notes to the Consolidated Financial Statements continued
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6. Adjustments and specific items
The following adjustments and specific items are relevant in explaining the difference between reported and adjusted operating profit/(loss).
Adjustments to reported operating profit/(loss):
| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £m | £m | |
Pension charge adjustment | 41 | (133) |
Depreciation/amortisation adjustment for impaired assets | 121 | – |
Profit on disposal of property, plant and equipment | 15 | 6 |
Total adjustments to operating profit/(loss) | 177 | (127) |
| Operating specific items: | ||
Regulatory and legal charges | (57) | (33) |
GLS amortisation of intangible assets in acquisitions | (21) | (19) |
Impairment of Royal Mail excluding Parcelforce Worldwide CGU | (48) | (539) |
Damages award | – | 35 |
Legacy/other items | 3 | 12 |
Total operating specific items | (123) | (544) |
| Non-operating specific items: | ||
Net pension interest | 135 | 105 |
Total specific items | 12 | (439) |
Tax credit/(charge) on adjustments and specific items | 5 | (111) |
Adjustments to reported operating profit/loss
The pension charge adjustment of £41 million comprises:
— £130 million credit (2022-23: £nil) in relation to a refund of
cash held in escrow by the Trustee of the Royal Mail Pension
Plan ('RMPP'). This was subsequently used to provide a
one-off payment to UK employees following ratification of the
Business Recovery, Transformation and Growth Agreement;
— £1 million credit (2022-23: £133 million credit) relating to the
difference between the IAS 19 income statement pension charge
rate of 14.8% (2022-23: 22.9%) for the Defined Benefit Cash
Balance Section ('DBCBS') and the cash funding contribution
rate agreed with the Trustee of 15.6% (2022-23 15.6%); and
— £172 million charge (2022-23: £nil) relating to a change to the
assumed rate of annual increases applied to the DBCBS
(previously a specific constructive obligation of CPI+2% now
considered to be a non-specific obligation of CPI+1.2%) as
at 31 March 2024. This change has been recognised as a past
service credit in the income statement in line with IAS 19.
In the prior year a £539 million impairment charge was recognised
to write down the value of the Royal Mail excluding Parcelforce
Worldwide CGU. This resulted in a lower depreciation/amortisation
charge in the current year in infrastructure costs. An adjustment
of £121 million has been made to the reported results to reflect the
depreciation/amortisation on a pre-impairment basis in line with how
management reviews the underlying performance of the business.
The profit on disposal of property, plant and equipment mainly
comprises £12 million relating to the sale of the Nine Elms, London site.
Specific items
Regulatory and legal charges of £57 million represent the best
estimate of costs to settle present obligations for Royal Mail and
GLS, in relation to regulated quality of service in the UK, legal
claims and tax-related disputes in GLS Italy. In the prior year
£33 million was in respect of a GLS Italy VAT settlement.
In the year the Royal Mail excluding Parcelforce Worldwide CGU
was impaired by £48 million (2022-23: £539 million). In assessing
whether the CGU was impaired, the carrying value of the CGU
of £1,925 million (2022-23: £1,439 million) was compared to its
recoverable amount, using the higher of a value in use (VIU), or fair
value less cost to dispose (FVLCD) methodology. The VIU methodology
would have resulted in a significant further impairment (consistent
with the prior year), while the FVLCD methodology resulted in an
impairment charge of £48 million. Further details of the
calculations involved are provided in Note 1.
The £35 million damages award in the prior year related to a claim
by Royal Mail against DAF Trucks Ltd ('DAF') in December 2016
in respect of vehicles sold to Royal Mail between 1997 and 2011.
Legacy/other items comprise a £10 million credit (2022-23: £nil) for
court-awarded compensation resulting from the recovery of assets
(£1 million received, £9 million receivable), following an investigation
in 2016 and 2017 into an under declaration of mail fraud (see Note
10), mainly offset by £5 million specific intangible asset write-offs.
The prior year credit of £12 million largely comprised a £10 million
release of the industrial diseases provision.
The cash cost of operating specific items was an outflow of
£11 million (2022-23: £53 million outflow) consisting mainly of
the Ofcom regulatory fine payment of £6 million and Industrial
Diseases claims of £6 million, offset by a £1 million receipt of court
awarded compensation. The prior year consisted mainly of Ofcom
regulatory fine payment of £52 million, Industrial Diseases claims of
£3 million, £33 million relating to GLS settlement of VAT adjustments
in Italy covering 2016-2021 and a £35 million receipt of damages
awarded following settlement of a court case.
The tax credit of £5 million (2022-23: £111 million charge) consists
mainly of a credit in relation to the GLS amortisation of intangible
assets in acquisitions. The prior year charge consists of £115 million
charge in relation to the derecognition of the UK net deferred tax
asset and a net credit of £4 million in relation to the tax effect of
certain specific items and the pension charge adjustment.
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| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £m | £m | |
Unwinding of discount relating to industrial diseases claims provision | (1) | (1) |
Other interest payable | (97) | (59) |
| Bank syndicate loan facility | ||
Unused facility fees | (2) | (1) |
Arrangement fees | (4) | (1) |
Bond interest | (38) | (17) |
Cross currency swap costs on €550 million bond | (6) | (7) |
Leases | (43) | (32) |
Capitalisation of borrowing costs on specific qualifying assets | 2 | 3 |
Other finance costs | (6) | (4) |
Total finance costs | (98) | (60) |
Total finance income – interest receivable on financial assets | 51 | 21 |
Total net finance costs | (47) | (39) |
| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £m | £m | |
| Tax charged in the income statement | ||
| Current income tax: | ||
Current UK income tax charge | – | – |
Foreign tax | (71) | (81) |
Current income tax charge | (71) | (81) |
Amounts over-provided in previous years | 8 | 8 |
Total current income tax charge | (63) | (73) |
| Deferred income tax: | ||
De-recognition of deferred tax asset | (1) | (115) |
Relating to origination and reversal of temporary differences | 3 | 5 |
Amounts over/(under)-provided in previous years | 1 | (14) |
Total deferred income tax credit/(charge) | 3 | (124) |
Tax charge in the consolidated income statement | (60) | (197) |
| Tax credited to other comprehensive income | ||
| Deferred tax: | ||
Tax credit in relation to remeasurement gains of the defined benefit pension schemes | – | 6 |
Tax credit on revaluation of cash flow hedges | – | 18 |
Total deferred income tax credit | – | 24 |
Total tax credit in the consolidated statement of other comprehensive income | – | 24 |
| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £m | £m | |
| Deferred tax: | ||
Change in estimated excess tax deductions related to share-based payments | – | (1) |
Total deferred income tax charge recognised directly in equity | – | (1) |
Notes to the Consolidated Financial Statements continued
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| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £m | £m | |
Profit/(loss) before tax | 114 | (676) |
At UK statutory rate of corporation tax of 25% (2022-23: 19%) | (29) | 128 |
Effect of different tax rates on non-UK profits and losses | 9 | (7) |
Tax over/(under)-provided in previous years | 9 | (6) |
Non-deductible expenses | (7) | (2) |
Regulatory and legal charges | (11) | (9) |
Tax reliefs and incentives | 9 | 5 |
Tax effect of property disposals | 3 | 1 |
Tax effect of closure of RMPP to future accrual | (2) | (2) |
Net pension interest credit | 36 | 22 |
De-recognition of brought forward deferred tax assets | (1) | (115) |
Net increase in tax charge resulting from non-recognition of certain deferred tax assets and liabilities | (76) | (219) |
Super-deduction enhanced capital allowances | – | 7 |
Tax charge in the consolidated income statement | (60) | (197) |
| Credited/ | ||||||
| At | (charged) | Jurisdictional | At | |||
| 27 March | to income | Acquisition of | Exchange rate | right of | 31 March | |
| Deferred tax by balance sheet category | 2023 | statement | subsidiaries | movement | offset | 2024 |
| 53 weeks 2024 | £m | £m | £m | £m | £m | £m |
| Liabilities | ||||||
Accelerated capital allowances | (29) | 1 | – | – | – | (28) |
Right of use assets | (113) | (22) | – | 4 | – | (131) |
Intangible assets | (55) | 4 | (4) | 2 | – | (53) |
(197) | (17) | (4) | 6 | – | (212) | |
Jurisdictional right of offset | 142 | – | – | – | 19 | 161 |
Deferred tax liabilities | (55) | (17) | (4) | 6 | 19 | (51) |
| Assets | ||||||
Deferred capital allowances | 1 | – | – | – | – | 1 |
Lease liabilities | 116 | 22 | _ | (4) | – | 134 |
Provisions and other Losses available for offset | 15 | 1 | – | – | – | 16 |
against future taxable income | 20 | (3) | – | – | – | 17 |
152 | 20 | – | (4) | – | 168 | |
Jurisdictional right of offset | (142) | – | – | – | (19) | (161) |
Deferred tax assets | 10 | 20 | – | (4) | (19) | 7 |
Net deferred tax (liability)/asset | (45) | 3 | (4) | 2 | – | (44) |
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8. Taxation continued
| Credited/ | Credited | |||||||
| At | (charged) to | to other | Charged | At | ||||
| Deferred tax by balance | 28 March | income | comprehensive | directly | Acquisition of | Exchange rate | Jurisdictional | 26 March |
| sheet category | 2022 | statement | income | in equity | subsidiaries | movement | right of offset | 2023 |
| 52 weeks 2023 | £m | £m | £m | £m | £m | £m | £m | £m |
| Liabilities | ||||||||
| Accelerated capital | ||||||||
allowances | (34) | 5 | – | – | – | – | – | (29) |
Right of use assets | (98) | (9) | – | – | – | (6) | – | (113) |
Intangible assets | (51) | 3 | – | – | (5) | (2) | – | (55) |
| Hedging derivative | ||||||||
temporary differences | (18) | – | 18 | – | – | – | – | – |
(201) | (1) | 18 | – | (5) | (8) | – | (197) | |
| Jurisdictional | ||||||||
right of offset | 147 | – | – | – | – | – | (5) | 142 |
Deferred tax liabilities | (54) | (1) | 18 | – | (5) | (8) | (5) | (55) |
| Assets | ||||||||
| Deferred capital | ||||||||
allowances | 1 | – | – | – | – | – | – | 1 |
Lease liabilities | 100 | 10 | – | – | – | 6 | – | 116 |
| Pensions temporary | ||||||||
differences | 100 | (106) | 6 | – | – | – | – | – |
Provisions and other Employee share | 25 | (11) | – | – | – | 1 | – | 15 |
schemes | 2 | (1) | – | (1) | – | – | – | – |
Losses available for offset against future | ||||||||
taxable income | 34 | (14) | – | – | – | – | – | 20 |
| R&D expenditure | ||||||||
credit | 1 | (1) | – | – | – | – | – | – |
263 | (123) | 6 | (1) | – | 7 | – | 152 | |
| Jurisdictional | ||||||||
right of offset | (147) | – | – | – | – | – | 5 | (142) |
Deferred tax assets | 116 | (123) | 6 | (1) | – | 7 | 5 | 10 |
| Net deferred tax | ||||||||
asset/(liability) | 62 | (124) | 24 | (1) | (5) | (1) | – | (45) |
| At | At | |
| 31 March | 26 March | |
| 2024 | 2023 | |
| £m | £m | |
| Liabilities | ||
GLS group | (51) | (55) |
Deferred tax liabilities | (51) | (55) |
| Assets | ||
GLS group | 7 | 10 |
Deferred tax assets | 7 | 10 |
Net deferred tax liability | (44) | (45) |
Notes to the Consolidated Financial Statements continued
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| At 31 March 2024 | At 26 March 2023 | |||
| £m | £m | |||
| Unused | Unused | |||
| losses and | losses and | |||
| deductible | deductible | |||
| temporary | temporary | |||
differences | Tax value | differences | Tax value | |
| Royal Mail | ||||
Losses available for offset against future taxable income | 1,178 | 294 | 691 | 173 |
Deferred capital allowances | 198 | 49 | 308 | 77 |
Pensions temporary differences | 76 | 19 | 159 | 40 |
Provisions and other GLS | 35 | 9 | 29 | 7 |
Losses available for offset against future taxable income | 238 | 56 | 224 | 54 |
Provisions and other | 65 | 18 | 58 | 16 |
1,790 | 445 | 1,469 | 367 |
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9. Earnings per share
53 weeks 2024 | 52 weeks 2023 | |||||
| Specific items and | Specific items and | |||||
| other | other | |||||
| Reported | adjustments | Adjusted | Reported | adjustments | Adjusted | |
Profit/(loss) for the year (£ million) | 54 | 194 | (140) | (873) | (677) | (196) |
| Weighted average number of shares | ||||||
issued (million) | 957 | n/a | 957 | 956 | n/a | 956 |
Basic earnings per share (pence) | 5.6 | n/a | (14.6) | (91.3) | n/a | (20.5) |
Diluted earnings per share (pence) | 5.6 | n/a | (14.6) | (91.3) | n/a | (20.5) |
1
1
1. Further details of specific items and other adjustments can be seen in Note 6.
The diluted EPS for the year ended 31 March 2024 was based on a weighted average number of shares of 963,094,508 to take account of
the potential issue of 499,573 ordinary shares resulting from the Deferred Share Bonus Plans and 5,508,097 ordinary shares resulting from
the long-term incentive plans. These plans are for certain senior management and are disclosed in more detail in Note 18.
The 1,206,638 (2022-23: 263,566) shares held in an Employee Benefit Trust for the settlement of options and awards to current and former
employees are treated as treasury shares for accounting purposes (see Note 26). The Company, however, does not hold any shares in treasury.
10. Dividends
Dividends on ordinary shares
| 53 weeks | 52 weeks | |||
| 2024 | 2023 | 53 weeks | 52 weeks | |
| pence | pence | 2024 | 2023 | |
| per share | per share | £m | £m | |
Final dividend paid | – | 127 | ||
Total dividends paid | – | 13.3 | – | 127 |
As previously indicated in the Group’s half year results, the Board has proposed a final dividend payment of 2 pence per share in respect of
2023-24, funded by GLS. This final dividend payment is subject to shareholders approval at the Annual General Meeting scheduled to take
place on 25 September 2024. The dividend will be paid on 30 September 2024 to shareholders on the register at 23 August 2024. The Board
is also proposing a special dividend of 8 pence per share, conditional upon completion of the transaction with EP Group.
Some shares are held by the Trustee of the Royal Mail Share Incentive Plan on behalf of the Company to satisfy future share awards. The
Trustee does not receive any dividends on the shares it holds, hence the value of dividends paid being lower than the number of shares
in issue multiplied by the pence per share.
11. Retirement benefit plans
Summary pension information
| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £m | £m | |
| Ongoing UK pension service costs | ||
| UK defined benefit plans (including administration costs) | (254) | (385) |
| Past service credit | 172 | – |
UK defined contribution plan | (135) | (124) |
| UK defined benefit and defined contribution plans’ Pension Salary Exchange employer contributions | (188) | (174) |
Total UK ongoing pension service costs | (405) | (683) |
GLS pension costs accounted for on a defined contribution basis | (11) | (9) |
Total Group ongoing pension service costs | (416) | (692) |
| Cash pension service costs | ||
| UK defined benefit plan’s employer contributions | (212) | (252) |
Defined contribution plans’ employer contributions | (146) | (133) |
UK defined benefit and defined contribution plans’ Pension Salary Exchange employer contributions | (180) | (174) |
Total Group cash flows relating to ongoing pension service costs | (538) | (559) |
| Pension-related accruals/escrow payments (timing difference) | (49) | – |
| Pension charge adjustment excluding pension escrow release | 171 | (133) |
1
2
3
4
5
6
7
Notes to the Consolidated Financial Statements continued
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| At 31 March | At 26 March | |
| 2024 | 2023 | |
| ’000 | ’000 | |
| UK pension plans – active members | ||
UK defined benefit plan | 59 | 65 |
UK defined contribution plan | 57 | 57 |
Total | 116 | 122 |
1. These pension service costs are charged to the income statement. They represent the cost (as a percentage of pensionable payroll – 14.8% (2022-23: 22.9%)) of the increase in the defined benefit
obligation due to members earning one more year worth of pension benefits. They are calculated in accordance with IAS 19 and are based on market yields (high-quality corporate bonds and inflation) at the
beginning of the reporting year. Also included are pensions administration costs for the RMPP of £9 million (2022-23: £11 million) and the DBCBS of £4 million (2022-23: £5 million).
2. During the year the constructive obligation to award annual increases to DBCBS members was revised from CPI plus 2% to CPI plus 1.2%, resulting in the recognition of a past service credit of £172 million
(see Note 1 for more details). The Group adjusted profit/(loss) includes an adjustment to offset the impact of this £172 million credit in reported operating profit/(loss) (see Note 6).
3. Eligible employees who are enrolled into PSE opt out of making employee contributions to their pension and the Group makes additional contributions in return for a reduction in basic pay.
4. These values exclude the impact of any timing differences in pension payments and represent the equivalent cash costs of the amounts charged to the income statement in the period.
5. The employer contribution cash flow rate of 15.6% is paid in respect of the DBCBS (2022-23: 15.6%). These contribution rates are fixed, with actuarial funding valuations carried out every three years to
determine whether additional deficit contributions are required. These actuarial valuations are required to be carried out on assumptions determined by the Trustee and agreed by Royal Mail. The most
recent triennial valuation at 31 March 2021 was completed in May 2022 and no additional contributions were required. Also, the 2023-24 figures do not include £41 million relating to February and March
2024 contributions that were paid to the pensions escrow account (see footnote 6 for further details).
6. This relates to contributions of £19 million that were made into the pensions escrow account for February 2024 and a timing difference of a further £22 million into the escrow account for March 2024 and
£8 million employer PSE contributions which were both paid in April 2024.
7. Excludes £130 million (2022-23: £nil) adjustment in relation to the release of pension escrow (see Note 4 for further details).
In the year, the Group operated the following plans:
Section A | Section B | Section C | |
| Joining date for | Before 1 December 1971 | On or after 1 December 1971 | On or after 1 April 1987 |
| members (or | and before 1 April 1987 | and before 1 April 2008 | |
| beneficiaries | or | ||
| of members) | for members of Section A who chose | ||
| to receive Section B benefits. | |||
| Terms | Pension of 1/60th of pensionable | ||
| Pension of 1/80th of pensionable salary plus a tax-free lump sum of 3/80ths | salary for each year of pensionable | ||
| of pensionable salary for each year of pensionable service, until 31 March | service, until 31 March 2018. | ||
| 2018. | Members wishing to take a tax-free | ||
| lump sum on retirement do so in | |||
| exchange for a reduced pension. | |||
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11. Retirement benefit plans continued
| Monitoring the covenant of | To help protect benefits, the Trustee Board monitors the financial strength of the participating employers. |
| the participating employers | |
Investing contributions | The Trustee Board invests the member and employer contributions in a mix of equities, bonds, |
| property and other investments including derivatives. It holds the contributions and investments | |
| on behalf of the members. | |
Keeping members informed | The Trustee Board sends active members an annual benefit illustration together with a summary |
| of the RMPP’s annual report and accounts. | |
| Acting in the best interests | The Trustee Board must pay all benefits as they fall due under the Trust Deed and Rules. |
| of all RMPP beneficiaries |
Notes to the Consolidated Financial Statements continued
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RMPP | DBCBS | |
| Date of | 31 March 2021 (agreed on 17 May 2022) | The first full valuation was performed as at 31 March 2021 |
| valuation | and was agreed on 17 May 2022. | |
Valuation | The triennial valuation was calculated on a self sufficiency | An estimated funding position at 31 March 2024 has been |
| basis. The surplus calculated for the purposes of the March | calculated based on the assumption that the funding | |
| 2021 triennial valuation was £661 million. Based on a set | surplus is equal to the amount held in respect of the risk | |
| of assumptions which form the basis for the March 2021 | reserve. Under this method, the DBCBS actuarial surplus | |
| valuation and then rolled forward, the actuarial surplus at | was estimated to be around £47 million at 31 March 2024. | |
| 31 March 2024 was estimated to be around £1,025 million. |
DBCBS | RMPP | RMSEPP | ||||
| At | At | At | At | At | At | |
| 31 March | 26 March | 31 March | 26 March | 31 March | 26 March | |
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| £m | £m | £m | £m | £m | £m | |
Fair value of plans’ assets (11(b) below) | 1,903 | 1,652 | 6,983 | 7,604 | 7 | 8 |
| Present value of plans’ liabilities | (1,963) | (1,797) | (4,521) | (4,601) | – | – |
| (Deficit)/surplus in plans | ||||||
(pre-withholding tax payable) | (60) | (145) | 2,462 | 3,003 | 7 | 8 |
| Withholding tax payable | n/a | n/a | (616) | (1,051) | (2) | (3) |
(Deficit)/surplus in plans | (60) | (145) | 1,846 | 1,952 | 5 | 5 |
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11. Retirement benefit plans continued
| At | At | |
| 31 March | 26 March | |
| 2024 | 2023 | |
| Retail Price Index (RPI) – RMPP | 3.2% | 3.2% |
| Retail Price Index (RPI) – DBCBS | 3.3% | 3.2% |
| Consumer Price Index (CPI) – RMPP | 2.9% | 2.9% |
| Consumer Price Index (CPI) – DBCBS | 2.9% | 2.8% |
| Discount rate – RMPP | ||
– nominal | 4.9% | 4.7% |
– real (nominal less RPI) | 1.7% | 1.5% |
| Discount rate – DBCBS | ||
– nominal | 4.8% | 4.7% |
– real (nominal less RPI) | 1.5% | 1.5% |
| Rate of increase in pensionable salaries | RPI – 0.1% | RPI – 0.1% |
Rate of increase for deferred pensions – RMPP | CPI | CPI |
Rate of pension increases – RMPP Sections A/B | CPI | CPI |
| Rate of pension increases – RMPP Section C | RPI – 0.1% | RPI – 0.1% |
Rate of pension increases – DBCBS benefits | CPI + 1.2% | CPI + 2.0% |
Life expectancy from age 60 – for a current 40/60 year old male RMPP member | 27/25 years | 27/25 years |
Life expectancy from age 60 – for a current 40/60 year old female RMPP member | 29/27 years | 29/27 years |
Notes to the Consolidated Financial Statements continued
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At 31 March 2024 | At 26 March 2023 | |||
| Potential | Potential | Potential | ||
| Potential | increase in | increase in | increase in | |
| increase in DBCBS | RMPP | DBCBS | RMPP | |
| liabilities | liabilities | liabilities | liabilities | |
| Key assumption change | £m | £m | £m | £m |
Additional one year of life expectancy | – | 150 | – | 140 |
| Increase in inflation rate (both RPI and CPI simultaneously) | ||||
of 0.1% per annum | 20 | 90 | 20 | 90 |
Decrease in discount rate of 0.1% per annum | 20 | 90 | 20 | 90 |
| Increase in CPI assumption (assuming RPI remains constant) | ||||
of 0.1% per annum | 20 | 20 | 20 | 20 |
Increase in constructive obligation of 0.1% per annum | 20 | – | 20 | – |
| Increase in inflation rate (both RPI and CPI simultaneously) | ||||
of 0.5% per annum | 100 | 470 | 110 | 480 |
Decrease in discount rate of 0.5% per annum | 100 | 470 | 100 | 420 |
| Increase in CPI assumption (assuming RPI remains constant) | ||||
of 0.5% per annum | 100 | 110 | 110 | 110 |
Increase in constructive obligation of 0.5% per annum | 100 | – | 110 | – |
At 31 March 2024 | At 26 March 2023 | |||||
| Quoted | Unquoted | Total | Quoted | Unquoted | Total | |
| £m | £m | £m | £m | £m | £m | |
| Equities | ||||||
UK | 9 | 1 | 10 | 1 | – | 1 |
Overseas | 60 | 8 | 68 | 17 | 10 | 27 |
| Bonds | ||||||
Fixed interest – UK | 107 | 49 | 156 | 130 | 51 | 181 |
– Overseas | 581 | 141 | 722 | 485 | 163 | 648 |
| Pooled investments | ||||||
Absolute return | – | 233 | 233 | – | 382 | 382 |
| Equity | 60 | – | 60 | 85 | – | 85 |
| Private equity | – | 261 | 261 | – | 227 | 227 |
Fixed interest | – | 35 | 35 | 172 | 106 | 278 |
Private debt | – | 443 | 443 | – | 504 | 504 |
Property | – | 79 | 79 | – | 51 | 51 |
| Liability-driven investments | 5,561 | 21 | 5,582 | 5,977 | (42) | 5,935 |
Property (UK) | – | 468 | 468 | – | 533 | 533 |
Cash and cash equivalents | 737 | 124 | 861 | 422 | – | 422 |
| Other | – | 93 | 93 | – | (5) | (5) |
Derivatives | – | (178) | (178) | – | (5) | (5) |
Total plans’ assets | 7,115 | 1,778 | 8,893 | 7,289 | 1,975 | 9,264 |
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11. Retirement benefit plans continued
| Investment market | The risks inherent in the investment markets are partially mitigated by pursuing a widely diversified approach across |
| movements | asset classes and investment managers. The RMPP uses derivatives (such as swaps, forwards and options), from |
| time to time to manage risks whilst maintaining expected investment returns. | |
| Interest rates and | The legacy RMPP section’s liabilities and assets are impacted by movements in interest rates and inflation. |
| inflation changes | In order to reduce the risk of movements in these rates driving the RMPP into a funding deficit, the RMPP Trustee |
| has hedged the liabilities. It has done this predominantly through investment in index-linked gilts and derivatives. | |
| The nature of the risks and their mitigation are similar for the DBCBS, although the level of hedging is less than the RMPP. | |
| In the RMPP section, many of the inflation linked increases that apply are restricted to a maximum increase of 5% | |
| in any year. The scheme’s rules therefore give some protection from the risk of significantly high levels of inflation. | |
Equity exposure | Equity holdings totalling £95 million (2022-23: £61 million) were held at the discretion of the relevant investment |
| managers under the terms of their mandates. These were held in the DBCBS. | |
| Changes in life | The RMPP’s liabilities could be impacted by longer than expected life expectancy, resulting in higher than expected |
| expectancy | payout levels. |
| Although this risk is not hedged, mortality studies are undertaken as part of actuarial funding valuations and where | |
| appropriate updated assumptions are adopted for accounting valuations. | |
| Changes in corporate | An increase in yields on AA-rated corporate bonds, used to set the IAS 19 discount rates, has led to a decrease in |
| and Government | the IAS 19 liabilities. |
| bond yields | The legacy RMPP’s assets include corporate bonds, HM Government bonds and interest rate derivatives to partly |
| offset the impact of movements in the discount rate. The RMPP section is hedged against gilt movements to limit | |
| the impact on funding (and therefore cash) but, to the extent that gilts move differently to corporate bonds, the | |
| accounting liability is more exposed. |
Notes to the Consolidated Financial Statements continued
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Defined benefit asset | Defined benefit liability | Net defined benefit surplus | ||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| £m | £m | £m | £m | £m | £m | |
| Retirement benefit surplus | ||||||
| (before withholding tax payable) | ||||||
at 27 March 2023 and 28 March 2022 | 7,604 | 11,142 | (4,601) | (6,960) | 3,003 | 4,182 |
Amounts included in the income statement: | ||||||
| Ongoing UK defined benefit pension | ||||||
| plan and administration costs | ||||||
(included in people costs) | (9) | (11) | – | – | (9) | (11) |
| Pension interest income/(cost) | 356 | 311 | (214) | (194) | 142 | 117 |
Total included in profit before tax | 347 | 300 | (214) | (194) | 133 | 106 |
Amounts included in other comprehensive income – | ||||||
| remeasurement (losses)/gains | ||||||
| Actuarial (loss)/gain arising from: | ||||||
Financial assumptions | – | – | 178 | 2,668 | 178 | 2,668 |
Demographic assumptions | – | – | 103 | – | 103 | – |
Experience assumptions | – | – | (81) | (196) | (81) | (196) |
| Return on plans’ assets | ||||||
(excluding interest income) | (856) | (3,757) | – | – | (856) | (3,757) |
| Total remeasurement (losses)/gains | ||||||
of the defined benefit surplus | (856) | (3,757) | 200 | 2,472 | (656) | (1,285) |
Other Benefits paid | (94) | (81) | 94 | 81 | – | – |
Transfer between sections | (18) | – | – | – | (18) | – |
Total other movements | (112) | (81) | 94 | 81 | (18) | – |
| Retirement benefit surplus | ||||||
| (before withholding tax payable) | ||||||
at 31 March 2024 and 26 March 2023 | 6,983 | 7,604 | (4,521) | (4,601) | 2,462 | 3,003 |
Withholding tax payable | n/a | n/a | n/a | n/a | (616) | (1,051) |
| Retirement benefit surplus | ||||||
| (net of withholding tax payable) | ||||||
at 31 March 2024 and 26 March 2023 | n/a | n/a | n/a | n/a | 1,846 | 1,952 |
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11. Retirement benefit plans continued
d) Movement in RMSEPP assets, liabilities and net position continued
Defined benefit asset | Defined benefit liability | Net defined benefit surplus | ||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| £m | £m | £m | £m | £m | £m | |
| Retirement benefit surplus | ||||||
(before withholding tax payable) at 27 March 2023 and 28 March 2022 | 8 | 320 | – | (312) | 8 | 8 |
Amounts included in the income statement: | ||||||
| Pension interest income/(cost) | – | 2 | – | (2) | – | – |
Total included in profit before tax | – | 2 | – | (2) | – | – |
Amounts included in other comprehensive income – | ||||||
| remeasurement (losses)/gains | ||||||
| Actuarial (loss)/gain arising from: | ||||||
Financial assumptions | – | – | – | 64 | – | 64 |
| Return on plans’ assets | ||||||
(excluding interest income) | (1) | (64) | – | – | (1) | (64) |
| Total remeasurement (losses)/gains | ||||||
of the defined benefit surplus | (1) | (64) | – | 64 | (1) | – |
Other Transfer to insurer | – | (242) | – | 242 | – | – |
Benefits paid | – | (8) | – | 8 | – | – |
Total other movements | – | (250) | – | 250 | – | – |
| Retirement benefit surplus | ||||||
| (before withholding tax payable) | ||||||
at 31 March 2024 and 26 March 2023 | 7 | 8 | – | – | 7 | 8 |
Withholding tax payable | n/a | n/a | n/a | n/a | (2) | (3) |
| Retirement benefit surplus | ||||||
| (net of withholding tax payable) | ||||||
at 31 March 2024 and 26 March 2023 | n/a | n/a | n/a | n/a | 5 | 5 |
Notes to the Consolidated Financial Statements continued
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Defined benefit asset | Defined benefit liability | Net defined benefit deficit | ||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| £m | £m | £m | £m | £m | £m | |
Retirement benefit deficit at 27 March 2023 and 28 March 2022 | 1,652 | 1,536 | (1,797) | (1,926) | (145) | (390) |
Amounts included in the income statement: | ||||||
| Ongoing UK defined benefit pension plan | ||||||
| service cost including administration | ||||||
costs (included in people costs) | (4) | (5) | (329) | (451) | (333) | (456) |
Past service credit | – | – | 172 | – | 172 | – |
| Pension interest income/(cost) | 84 | 45 | (91) | (57) | (7) | (12) |
Total included in profit before tax | 80 | 40 | (248) | (508) | (168) | (468) |
Amounts included in other comprehensive income – | ||||||
| remeasurement gains/(losses) | ||||||
| Actuarial gain/(loss) arising from: | ||||||
Financial assumptions | – | – | 4 | 662 | 4 | 662 |
Experience assumptions | – | – | (32) | (89) | (32) | (89) |
Return on plan assets | (31) | (195) | – | – | (31) | (195) |
| Total remeasurement gains/(losses) | ||||||
of the defined benefit deficit | (31) | (195) | (28) | 573 | (59) | 378 |
Other Employer contributions | 294 | 335 | – | – | 294 | 335 |
Employee contributions | 7 | 10 | (7) | (10) | – | – |
Benefits paid | (117) | (74) | 117 | 74 | – | – |
Transfer between sections | 18 | – | – | – | 18 | – |
Total other movements | 202 | 271 | 110 | 64 | 312 | 335 |
Retirement benefit deficit at 31 March 2024 and 26 March 2023 | 1,903 | 1,652 | (1,963) | (1,797) | (60) | (145) |
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| Altimax | Other | Total | |
| £m | £m | £m | |
Property plant and equipment | 3 | 1 | 4 |
Intangible assets recognised on acquisition | 10 | 4 | 14 |
Trade and other receivables | 2 | 3 | 5 |
Cash and cash equivalents | 1 | – | 1 |
Goodwill recognised on acquisition | 9 | 16 | 25 |
Total assets acquired | 25 | 24 | 49 |
Trade and other payables | (1) | (2) | (3) |
Loans and leases | (3) | (1) | (4) |
Deferred tax liabilities | (3) | (1) | (4) |
Net assets acquired | 18 | 20 | 38 |
Cash paid during the period | 15 | 12 | 27 |
Contingent consideration | 3 | 8 | 11 |
Total consideration | 18 | 20 | 38 |
Total consideration net of cash and cash equivalents acquired | 17 | 20 | 37 |
Notes to the Consolidated Financial Statements continued
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| Land and | Plant and | Motor | Fixtures and | ||
| buildings | machinery | vehicles | equipment | Total | |
| £m | £m | £m | £m | £m | |
| Cost | |||||
At 27 March 2023 | 4,894 | 1,609 | 1,149 | 487 | 8,139 |
Exchange rate movements | (32) | (17) | (5) | (4) | (58) |
| Reclassification | (1) | – | – | (2) | (3) |
| Modifications | 28 | – | (14) | – | 14 |
Additions | 264 | 151 | 120 | 43 | 578 |
Disposals | (38) | (20) | (172) | (28) | (258) |
Acquisition of subsidiaries | 2 | – | 2 | – | 4 |
Reclassification to assets held for sale | (13) | (2) | (33) | – | (48) |
At 31 March 2024 | 5,104 | 1,721 | 1,047 | 496 | 8,368 |
| Depreciation and impairment | |||||
At 27 March 2023 | 2,500 | 1,146 | 816 | 379 | 4,841 |
Exchange rate movements | (10) | (8) | (1) | (3) | (22) |
Impairment charge | 1 | 11 | (3) | 6 | 15 |
| Modifications | 2 | – | – | – | 2 |
Charge for the year | 262 | 65 | 62 | 31 | 420 |
Disposals | (39) | (20) | (86) | (27) | (172) |
Reclassification to assets held for sale | (6) | (1) | (16) | – | (23) |
At 31 March 2024 | 2,710 | 1,193 | 772 | 386 | 5,061 |
| Net book value: | |||||
At 31 March 2024 | 2,394 | 528 | 275 | 110 | 3,307 |
At 26 March 2023 | 2,394 | 463 | 333 | 108 | 3,298 |
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13. Property, plant and equipment continued
| Land and | Plant and | Motor | Fixtures and | ||
| buildings | machinery | vehicles | equipment | Total | |
| £m | £m | £m | £m | £m | |
| Cost | |||||
At 28 March 2022 | 4,630 | 1,467 | 1,112 | 495 | 7,704 |
Exchange rate movements | 50 | 25 | 6 | 8 | 89 |
| Reclassification | 2 | (2) | – | (3) | (3) |
| Modifications | 42 | – | 2 | – | 44 |
Additions | 233 | 170 | 65 | 49 | 517 |
Disposals | (52) | (51) | (36) | (62) | (201) |
Reclassification to assets held for sale | (11) | – | – | – | (11) |
At 26 March 2023 | 4,894 | 1,609 | 1,149 | 487 | 8,139 |
| Depreciation and impairment | |||||
At 28 March 2022 | 2,282 | 968 | 537 | 346 | 4,133 |
Exchange rate movements | 17 | 12 | 3 | 5 | 37 |
| Reclassification | 1 | (2) | – | – | (1) |
Depreciation charge | 257 | 78 | 110 | 40 | 485 |
Impairment charge | – | 141 | 199 | 50 | 390 |
Disposals | (54) | (51) | (33) | (62) | (200) |
Reclassification to assets held for sale | (3) | – | – | – | (3) |
At 26 March 2023 | 2,500 | 1,146 | 816 | 379 | 4,841 |
| Net book value: | |||||
At 26 March 2023 | 2,394 | 463 | 333 | 108 | 3,298 |
At 27 March 2022 | 2,348 | 499 | 575 | 149 | 3,571 |
2
3
2
Depreciation rates are disclosed within Note 1. No depreciation is provided on land, which represents £296 million (2022-23: £290 million)
of the total cost of property assets.
The net book value of the Group’s property, plant and equipment includes £137 million (2022-23: £250 million) in respect of assets in the
course of construction. The net book value of the Group’s land and buildings includes £310 million (2022-23: £286 million) in respect of
building fit-out.
The £578 million (2022-23: £517 million) additions include £1 million (2022-23: £3 million) borrowing costs capitalised at a rate of 3.52%
(2022-23: 2.67%) in relation to specific qualifying assets.
Notes to the Consolidated Financial Statements continued
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14. Leases
The Group primarily leases office buildings and letter and parcel processing facilities. At 31 March 2024, the Group held approximately
4,500 land and building leases (2022-23: 2,297). The Group also has leases for some of its vehicle fleet and plant and equipment used
in operations. Leases are negotiated on an individual basis and may include extension or termination options.
The lease liabilities are reported as follows in the balance sheet:
At 31 March 2024 | At 26 March 2023 | |
| Present value of | Present value of | |
| lease payments | lease payments | |
| Lease liabilities | £m | £m |
| Current liabilities | ||
Lease liabilities due within one year | (241) | (220) |
| Non-current liabilities | ||
Lease liabilities due between one and five years | (738) | (669) |
Lease liabilities due beyond five years | (444) | (473) |
The right of use assets resulting from lease agreements are detailed below:
Right of use assets
| Land and | Plant and | Motor | Fixtures and | ||
| buildings | machinery | vehicles | equipment | Total | |
| £m | £m | £m | £m | £m | |
| At 31 March 2024 | |||||
Cost | 1,780 | 183 | 584 | 20 | 2,567 |
of which additions | 172 | 8 | 102 | 13 | 295 |
Accumulated depreciation and impairment | (648) | (149) | (429) | (12) | (1,238) |
Depreciation charge | (167) | (9) | (34) | (3) | (213) |
Impairment (see Note 1) | – | (1) | (23) | (5) | (29) |
Total | 1,132 | 34 | 155 | 8 | 1,329 |
Right of use assets
| Land and | Plant and | Motor | Fixtures and | ||
| buildings | machinery | vehicles | equipment | Total | |
| £m | £m | £m | £m | £m | |
| At 26 March 2023 | |||||
Cost | 1,627 | 178 | 547 | 8 | 2,360 |
of which additions | 100 | 20 | 45 | 1 | 166 |
Accumulated depreciation and impairment | (518) | (141) | (420) | (5) | (1,084) |
Depreciation charge | (169) | (10) | (51) | (1) | (231) |
Impairment charge (see Note 1) | – | (11) | (73) | – | (84) |
Total | 1,109 | 37 | 127 | 3 | 1,276 |
Leases in the income statement
Leases are recognised in the income statement as detailed below:
| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £m | £m | |
| Other operating income | ||
| Sublease income | 5 | 6 |
| Operating expenses | ||
Expenses from short-term/low-value leases | (46) | (57) |
| Depreciation | ||
Depreciation of right of use assets | (213) | (231) |
| Net finance costs | ||
Interest expense on lease liabilities | (43) | (32) |
1
1. The prior year number has been re-presented for the inclusion of £2 million sublease income in GLS.
The Group enters into sale and leaseback transactions for vehicles. Cash received from these transactions in the year was £79 million
(2022-23: £nil).
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| 2024 | 2023 | |
| £m | £m | |
| Cost | ||
At 27 March 2023 and 28 March 2022 | 895 | 850 |
Exchange rate movements | (24) | 36 |
Acquisition of business | 25 | 9 |
Reclassification to assets held for sale | (1) | – |
At 31 March 2024 and 26 March 2023 | 895 | 895 |
| Impairment | ||
At 27 March 2023 and 28 March 2022 | 450 | 422 |
Impairment charge | – | 4 |
Exchange rate movements | (13) | 24 |
At 31 March 2024 and 26 March 2023 | 437 | 450 |
| Net book value: | ||
At 31 March 2024 and 26 March 2023 | 458 | 445 |
At 26 March 2023 and 27 March 2022 | 445 | 428 |
Notes to the Consolidated Financial Statements continued
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2024 | 2023 | |||||||||
| Master | Master | |||||||||
| franchise | Customer | franchise | Customer | |||||||
| licences | listings | Software | Brands | Total | licences | listings | Software | Brands | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Cost | ||||||||||
| At 27 March 2023 | ||||||||||
and 28 March 2022 | 23 | 172 | 1,261 | 38 | 1,494 | 22 | 171 | 1,183 | 37 | 1,413 |
| Exchange rate | ||||||||||
movements | – | (3) | (5) | (1) | (9) | 1 | – | 8 | 1 | 10 |
Additions | – | – | 112 | – | 112 | – | – | 93 | – | 93 |
Disposals | – | – | (13) | – | (13) | – | – | (25) | – | (25) |
| Reclassification | – | – | 3 | – | 3 | – | – | 2 | – | 2 |
| Acquisition | ||||||||||
of business | – | 11 | 1 | 2 | 14 | – | 1 | – | – | 1 |
Reclassification to assets held for sale | – | (6) | – | (1) | (7) | – | – | – | – | – |
| At 31 March 2024 | ||||||||||
and 26 March 2023 | 23 | 174 | 1,359 | 38 | 1,594 | 23 | 172 | 1,261 | 38 | 1,494 |
Amortisation and impairment | ||||||||||
| At 27 March 2023 | ||||||||||
and 28 March 2022 | 23 | 84 | 1,057 | 26 | 1,190 | 22 | 66 | 814 | 23 | 925 |
| Exchange rate | ||||||||||
movements | – | (2) | (4) | – | (6) | 1 | 1 | 6 | 1 | 9 |
| Amortisation | ||||||||||
| charge | – | 16 | 61 | 5 | 82 | – | 17 | 117 | 2 | 136 |
| Impairment charge | ||||||||||
(see Note 1) | – | – | 40 | – | 40 | – | – | 145 | – | 145 |
Disposals | – | – | (13) | – | (13) | – | – | (25) | – | (25) |
Reclassification to assets held for sale | – | (2) | – | (1) | (3) | – | – | – | – | – |
| At 31 March 2024 | ||||||||||
and 26 March 2023 | 23 | 96 | 1,141 | 30 | 1,290 | 23 | 84 | 1,057 | 26 | 1,190 |
| Net book value: | ||||||||||
| At 31 March 2024 | ||||||||||
and 26 March 2023 | – | 78 | 218 | 8 | 304 | – | 88 | 204 | 12 | 304 |
| At 26 March 2023 | ||||||||||
and 27 March 2022 | – | 88 | 204 | 12 | 304 | – | 105 | 369 | 14 | 488 |
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Company | Principal activities | Country of incorporation | Reporting date | % ownership 2024 | % ownership 2023 |
JICMAIL Limited | Market research | UK | 31 March | 20.0 | 20.0 |
Charac Limited | Digital pharmacy prescription services | UK | 31 March | 29.6 | 32.9 |
| 2024 | 2023 | |
| £m | £m | |
| Cost | ||
At 27 March 2023 and 28 March 2022 | 1 | 1 |
At 31 March 2024 and 26 March 2023 | 1 | 1 |
18. Share-based payments
Employee Free Shares
Employee Free Shares are held on behalf of employees in a tax-advantaged Share Incentive Plan (SIP).
The shares are held in a Trust administered by Equiniti Share Plan Trustees Limited (Equiniti) and may only be distributed to, or for the benefit
of, eligible employees. The Trust is funded by the Company and has therefore been consolidated within these Financial Statements.
Partnership and Matching Shares
Beginning in October 2018, a Partnership and Matching Share scheme was introduced for eligible employees. Under the terms of the
scheme, employees may elect to purchase a limited number of International Distribution Services plc shares through monthly payroll
deductions at the current market price (Partnership Shares). For every five Partnership Shares purchased, the employee receives one
unallocated SIP share (Matching Shares), up to a maximum of two Matching Shares per month, free of charge.
At 31 March 2024, there had been 66 (2022-23: 54) such monthly awards and a total of 2,073,822 (2022-23: 1,709,034) Matching Shares
had been awarded to eligible staff members at a weighted average market price of 291.0 pence (2022-23: 300.7 pence). The vesting period
for each award is three years from the award date, with all allocated shares to be equity-settled.
A charge to the income statement of £1 million (including £nil National Insurance) has been made for the year ended 31 March 2024
(2022-23: £1 million charge including £nil National Insurance) for all SIP allocations.
A reconciliation of the ordinary shares held in the SIP at 31 March 2024 and 26 March 2023 is shown below.
| Number | Number | |
| of shares | of shares | |
Total shares remaining in SIP at 27 March 2023 and 28 March 2022 | 37,600,824 | 40,417,904 |
Shares sold/transferred out of SIP during the reporting year (fully vested) | (1,236,159) | (1,907,577) |
| Shares transferred out of SIP during the reporting year (good leavers) | (3,526,443) | (909,503) |
Total shares remaining in SIP at 31 March 2024 and 26 March 2023 | 32,838,222 | 37,600,824 |
1
1. ‘Good leavers’ refers to former employees whose shares vested under specific circumstances, in accordance with the rules of the scheme.
Of the total shares remaining in the scheme, 31,587,436 (2022-23: 36,114,161 ) have been allocated to current employees. The remaining
1,250,786 (2022-23: 1,486,663) shares are unallocated and have arisen as a result of forfeitures.
Notes to the Consolidated Financial Statements continued
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Award of shares under the Long-Term Incentive Plan
| Fair value/share (pence) Monte-Carlo | |||||
| simulation | |||||
| Maximum number | |||||
| Market-based | Non-market- | of potential shares | |||
Award year | Grant date | Shares vest from | conditions | based conditions | to vest |
2021 | 12/08/2021 | 12/08/2024 | 305.6 | 500.7 | 683,098 |
2022 | 01/09/2022 | 01/09/2025 | 100.1 | 272.6 | 1,741,416 |
2023 | 31/07/2023 | 31/07/2026 | 179.0 | 269.8 | 4,693,710 |
A charge to the income statement of £3 million (including £nil for National Insurance) has been made for the year ended 31 March 2024
in relation to all LTIP schemes (2022-23: £1 million, including £nil for National Insurance).
Award of shares under the Deferred Share Bonus Plan
| Maximum number | ||||
| Fair value/share | of potential shares | |||
Award year | Grant date | Shares vest from | (pence) | to vest |
2022 | 29/03/2022 | 29/03/2025 | 358.6 | 107,816 |
2022 | 28/07/2022 | 28/07/2025 | 290.2 | 190,832 |
2022 | 28/07/2022 | 28/07/2024 | 290.2 | 203,797 |
2023 | 02/03/2023 | 02/03/2024 | 232.3 | 29,061 |
2023 | 02/03/2023 | 02/03/2025 | 232.3 | 29,061 |
2023 | 31/07/2023 | 01/09/2025 | 272.6 | 62,707 |
2023 | 31/07/2023 | 31/07/2026 | 269.8 | 137,132 |
2023 | 31/07/2023 | 31/07/2025 | 269.8 | 30,317 |
2023 | 30/11/2023 | 30/11/2025 | 269.8 | 17,310 |
A charge to the income statement of £1 million (including £nil for National Insurance) has been recognised for the year ended 31 March 2024
in relation to all DSBP schemes (2022-23: £nil, including £nil for National Insurance).
| At | At | |
| 31 March | 26 March | |
| 2024 | 2023 | |
| £m | £m | |
Property and other assets held for sale | 18 | 4 |
Total | 18 | 4 |
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| At | At | |
| 31 March | 26 March | |
| 2024 | 2023 | |
| £m | £m | |
Trade receivables | 1,462 | 1,391 |
Accrued income | 31 | 32 |
Prepayments | 102 | 167 |
Total | 1,595 | 1,590 |
| 2024 | 2023 | |
| £m | £m | |
At 27 March 2023 and 28 March 2022 | (43) | (51) |
Receivables provided for during the year | (28) | (19) |
Release of allowance | 16 | 18 |
Utilisation of allowance | 11 | 9 |
Exchange differences | 1 | – |
At 31 March 2024 and 26 March 2023 | (43) | (43) |
| At | At | |
| 31 March | 26 March | |
| 2024 | 2023 | |
| £m | £m | |
Not yet overdue | 1,285 | 1,289 |
Past due not more than one month | 141 | 83 |
Past due more than one month and not more than two months | 12 | 4 |
Past due more than two months | 24 | 15 |
Total | 1,462 | 1,391 |
21. Cash and cash equivalents
| At | At | |
| 31 March | 26 March | |
| 2024 | 2023 | |
| £m | £m | |
Cash at bank and in hand | 410 | 431 |
Client cash | 47 | 36 |
Cash equivalent investments: Short-term bank deposits and money market fund investments | 573 | 431 |
Total cash and cash equivalents in the balance sheet | 1,030 | 898 |
Bank overdrafts (part of a cash pool) | (56) | (89) |
Total cash and cash equivalents in the statement of cash flows | 974 | 809 |
Cash and cash equivalents comprise amounts held physically in cash, bank balances available on demand and deposits for three months or
less, dependent on the immediate cash requirements of the Group. Where interest is earned, this is either at floating or short-term fixed rates
based upon bank deposit rates.
Client cash is cash collected from consignees by GLS on behalf of its posting customers. It is maintained in separate bank accounts to the
cash of the business and allocated to a separate payables account in the balance sheet so it can be tracked and reconciled.
Bank overdrafts are included within the statement of cash flows net, alongside equivalent offsetting balances of cash at bank in the cash
pool. The overdraft balances, which are part of a cash pool for the UK companies within the Group, are an integral part of the Group’s cash
management and are presented net within cash and cash equivalents at the beginning and end of the year in the statement of cash flows.
Notes to the Consolidated Financial Statements continued
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| At | At | |
| 31 March | 26 March | |
| 2024 | 2023 | |
| £m | £m | |
Trade payables and accruals | (1,648) | (1,695) |
Advance customer payments (including stamps held, not yet used by customers) | (227) | (250) |
Social security | (125) | (110) |
Client creditors | (57) | (52) |
Capital expenditure payables | (19) | (27) |
Other | (30) | (10) |
Total | (2,106) | (2,144) |
| At 31 March 2024 | |||||||
| Further | Average interest | Average maturity | Average | ||||
| Loans and | committed | Total | rate of loan | date of loan | maturity date of | ||
| borrowings¹ | facility | facility | drawn down | Basis of interest | drawn down | loan facility | |
| £m | £m | £m | % | rate chargeable | Year | Year | |
Bank syndicate loan facility | – | 925 | 925 | n/a | SONIA+CAS | n/a | 2026 |
| +0.575% | |||||||
| €364.5 million 2024 | 312 | – | 312 | 2.5 | Fixed at 2.5% | 2024 | 2024 |
| Senior Fixed Rate Notes | |||||||
| €550 million 2026 Senior | 469 | – | 469 | 2.7 | Fixed at 2.7% | 2026 | 2026 |
| Fixed Rate Notes | |||||||
| €500 million 2028 Senior | 425 | – | 425 | 5.5 | Fixed at 5.5% | 2028 | 2028 |
| Fixed Rate Notes | |||||||
| £250 million 2030 Senior | 248 | – | 248 | 7.5 | Fixed at 7.5% | 2030 | 2030 |
| Fixed Rate Notes | |||||||
| Asset finance | 29 | – | 29 | 2.9 | Fixed at 2.9% | 2027 | 2027 |
Total | 1,483 | 925 | 2,408 | 4.2 | 2027 | 2027 |
| At 26 March 2023 | |||||||
| Further | Average interest | Average | Average | ||||
| Loans and | committed | Total | rate of loan | maturity date of | maturity date of | ||
| borrowings | facility | facility | drawn down | Basis of interest | loan drawn | loan facility | |
| £m | £m | £m | % | rate chargeable | down Year | Year | |
Bank syndicate loan facility | – | 925 | 925 | n/a | SONIA+CAS | n/a | 2026 |
| +0.475% | |||||||
| €500 million bond – | 440 | – | 440 | 2.5 | Fixed at 2.5% | 2024 | 2024 |
| 2.375% Senior Fixed | |||||||
| Rate Notes | |||||||
| €550 million bond – 1.25% | 482 | – | 482 | 2.7 | Fixed at 2.7% | 2026 | 2026 |
| Senior Fixed Rate Notes | |||||||
Asset finance | 25 | – | 25 | 2.1 | Fixed at 2.6% | 2031 | 2031 |
Total | 947 | 925 | 1,872 | 2.6 | 2025 | 2026 |
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23. Loans and borrowings continued
Notes to the Consolidated Financial Statements continued
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| At | At | At | At | |||
| 31 March | 31 March | 26 March | 26 March | |||
| 2024 | 2024 | 2023 | 2023 | |||
| Carrying | Fair | Carrying | Fair | |||
| amount | value | amount | value | |||
Level | Classification | £m | £m | £m | £m | |
| Financial assets | ||||||
Cash¹ | 1 | 457 | 457 | 467 | 467 | |
Cash held within cash pool | 56 | 56 | 89 | 89 | ||
Client Cash | 47 | 47 | 36 | 36 | ||
All other cash | 354 | 354 | 342 | 342 | ||
Cash equivalent investments | 1 | 573 | 573 | 431 | 431 | |
Money market funds | FVTPL | 428 | 428 | 349 | 349 | |
Short-term deposits – bank | Amortised cost | 145 | 145 | 82 | 82 | |
Cash and cash equivalents | 1 | 1,030 | 1,030 | 898 | 898 | |
| Current asset investments – short-term | ||||||
deposits – bank | 1 | Amortised cost | 216 | 216 | – | – |
Pension escrow investments | 1 | FVTPL | 102 | 102 | 208 | 208 |
| Trade and other receivables | 2 | Amortised cost | 1,493 | 1,493 | 1,423 | 1,423 |
Derivative assets (current) | 2 | FVTPL | 6 | 6 | 23 | 23 |
Derivative assets (non-current) | 2 | FVTPL | 2 | 2 | 3 | 3 |
Total financial assets | 2,849 | 2,849 | 2,555 | 2,555 |
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24. Financial assets and liabilities and risk management continued
| At | At | At | At | |||
| 31 March | 31 March | 26 March | 26 March | |||
| 2024 | 2024 | 2023 | 2023 | |||
| Carrying | Fair | Carrying | Fair | |||
| Amount | Value | amount | value | |||
Level | Classification | £m | £m | £m | £m | |
| Financial liabilities | ||||||
Bank overdrafts (in a cash pool)¹ | 1 | (56) | (56) | (89) | (89) | |
Obligations under leases (current) | 2 | Amortised cost | (241) | (241) | (220) | (220) |
| Interest-bearing loans and borrowings | ||||||
(current) | (315) | (313) | (3) | (3) | ||
Asset finance | 2 | Amortised cost | (3) | (3) | (3) | (3) |
€364.5 million 2024 bond | 2 | Amortised cost | (312) | (310) | – | – |
| Trade and other payables | 2 | Amortised cost | (1,879) | (1,879) | (1,894) | (1,894) |
Derivative liabilities (current) | FVTPL | (16) | (16) | (13) | (13) | |
| Interest-bearing loans and borrowings | ||||||
(non-current) | (1,168) | (1,175) | (944) | (894) | ||
€500 million 2024 bond | 2 | Amortised cost | – | – | (440) | (432) |
€550 million 2026 bond | 2 | Amortised cost | (469) | (440) | (482) | (441) |
€500 million 2028 bond | 2 | Amortised cost | (425) | (445) | – | – |
£250 million 2030 bond | 2 | Amortised cost | (248) | (264) | – | – |
Asset finance | 2 | Amortised cost | (26) | (26) | (22) | (21) |
Obligations under leases (non-current) | 2 | Amortised cost | (1,182) | (1,097) | (1,142) | (1,022) |
Derivative liabilities (non-current) | 2 | FVTPL | (24) | (24) | (22) | (22) |
Total financial liabilities | (4,881) | (4,801) | (4,327) | (4,157) | ||
Net total financial liabilities | (2,032) | (1,952) | (1,772) | (1,602) |
Notes to the Consolidated Financial Statements continued
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| Interest-bearing | Interest-bearing | |||||
| loans and | loans and | Obligations | Obligations | |||
| Bank overdrafts | borrowings | borrowings | under leases | under leases | ||
| (in a cash pool) | (current) | (non-current) | (current) | (non-current) | Total | |
| £m | £m | £m | £m | £m | £m | |
At 27 March 2023 | (89) | (3) | (944) | (220) | (1,142) | (2,398) |
| Movements through income statement: | ||||||
Interest payable on financial liabilities | – | – | (39) | – | (43) | (82) |
| Movements through cash flow: | ||||||
| Finance costs paid | – | – | 38 | – | 43 | 81 |
Proceeds from bond issues | – | – | (674) | – | – | (674) |
Repayments of bonds and loans | – | 5 | 117 | – | – | 122 |
Proceeds from sale and leaseback | – | – | – | – | (71) | (71) |
| Payment of capital element of lease | ||||||
contracts | – | – | – | 216 | – | 216 |
| Other movements: | ||||||
Reclassification between categories | – | (318) | 318 | (243) | 243 | – |
Reclassification to liabilities held for sale | – | – | – | 6 | 12 | 18 |
Decrease in gross cash pool overdraft | 33 | – | – | – | – | 33 |
Increase in lease obligations | – | – | – | – | (232) | (232) |
Acquisitions | – | – | – | – | (4) | (4) |
New asset finance | – | – | (10) | – | – | (10) |
Effect of foreign currency exchange rates | – | 1 | 26 | – | 12 | 39 |
At 31 March 2024 | (56) | (315) | (1,168) | (241) | (1,182) | (2,962) |
| Interest-bearing | Interest-bearing | |||||
| loans and | loans and | Obligations | Obligations | |||
| Bank overdrafts | borrowings | borrowings | under leases | under leases | ||
| (in a cash pool) | (current) | (non-current) | (current) | (non-current) | Total | |
| £m | £m | £m | £m | £m | £m | |
At 28 March 2022 | (62) | – | (872) | (213) | (1,128) | (2,275) |
| Movements through income statement: | ||||||
Interest payable on financial liabilities | – | – | (19) | – | (32) | (51) |
| Movements through cash flow: | ||||||
| Finance costs paid | – | – | 19 | – | 32 | 51 |
| Payment of capital element of lease | ||||||
contracts | – | – | - | 202 | – | 202 |
Payment of asset finance | – | – | 2 | – | – | 2 |
| Other movements: | ||||||
Reclassification between categories | – | – | – | (209) | 209 | – |
Increase in gross cash pool overdraft | (27) | – | – | – | – | (27) |
Increase in lease obligations | – | – | – | – | (204) | (204) |
New asset finance | – | (3) | (24) | – | – | (27) |
Effect of foreign currency exchange rates | – | – | (50) | – | (19) | (69) |
At 26 March 2023 | (89) | (3) | (944) | (220) | (1,142) | (2,398) |
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24. Financial assets and liabilities and risk management continued
| Percentage of next 12 months’ | |||
| exposure that has been hedged | |||
| At | At | ||
| 31 March | 26 March | ||
Hedge programme | Risk | 2024 | 2023 |
Capital programmes | €/£ exchange rate movements | 98% | 100% |
Overseas postal administrations | SDR/£ exchange rate movements | 41% | 59% |
Notes to the Consolidated Financial Statements continued
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International Distribution Services plc Annual Report 2023-24
| Sterling | US$ | Euro | Other | Total | |
| £m | £m | £m | £m | £m | |
Net total financial liabilities at 31 March 2024 | (724) | (6) | (1,214) | (88) | (2,032) |
Net total financial liabilities at 26 March 2023 | (485) | (27) | (1,189) | (71) | (1,772) |
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24. Financial assets and liabilities and risk management continued
| At 31 March 2024 | ||||||
| Average effective | Within | One to | Two to | More than | ||
| interest rate | one year | two years | five years | five years | Total | |
| % | £m | £m | £m | £m | £m | |
| Fixed rate | ||||||
| Cash equivalent investments – | ||||||
bank deposits | 3.8 | 96 | – | – | – | 96 |
| Current asset investments – short-term | ||||||
deposits – bank | 3.9 | 216 | – | – | – | 216 |
€364.5 million 2024 bond | 2.5 | (312) | – | – | – | (312) |
€550 million 2026 bond | 2.7 | – | – | (469) | – | (469) |
€500 million 2028 bond | 5.4 | – | – | (425) | – | (425) |
£250 million 2030 bond | 7.5 | – | – | – | (248) | (248) |
Asset finance | 2.9 | (3) | (4) | (15) | (7) | (29) |
Lease obligations | 3.4 | (241) | (224) | (514) | (444) | (1,423) |
Total | (244) | (228) | (1,423) | (699) | (2,594) | |
| Floating rate | ||||||
Cash at bank | 2.8 | 305 | – | – | – | 305 |
| Cash equivalent investments – | ||||||
money market funds | 5.2 | 428 | – | – | – | 428 |
| Cash equivalent investments – | ||||||
bank deposits | 5.3 | 49 | – | – | – | 49 |
| Financial assets – pension escrow | ||||||
investments (non-current) | 5.2 | – | – | – | 102 | 102 |
Total | 782 | – | – | 102 | 884 | |
| Non-interest bearing | ||||||
Cash at bank or in hand | 152 | – | – | – | 152 | |
Bank overdrafts (in a cash pool) | (56) | – | – | – | (56) | |
Trade and other receivables | 1,493 | – | – | – | 1,493 | |
Trade and other payables | (1,879) | – | – | – | (1,879) | |
Derivative assets | 6 | 2 | – | – | 8 | |
Derivative liabilities | (16) | (7) | (17) | – | (40) | |
Total | (300) | (5) | (17) | – | (322) | |
Total financial assets | 2,745 | 2 | – | 102 | 2,849 | |
Total financial liabilities | (2,507) | (235) | (1,440) | (699) | (4,881) | |
Net total financial assets/(liabilities) | 238 | (233) | (1,440) | (597) | (2,032) |
Notes to the Consolidated Financial Statements continued
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International Distribution Services plc Annual Report 2023-24
| At 26 March 2023 | ||||||
| Average effective | Within | One to | Two to | More than | ||
| interest rate | one year | two years | five years | five years | Total | |
| % | £m | £m | £m | £m | £m | |
| Fixed rate | ||||||
€500 million bond | 2.5 | – | (440) | – | – | (440) |
€550 million bond | 2.7 | – | – | (482) | – | (482) |
Asset finance | 2.1 | (3) | (4) | (11) | (7) | (25) |
Lease obligations | 2.6 | (220) | (203) | (466) | (473) | (1,362) |
Total | (223) | (647) | (959) | (480) | (2,309) | |
| Floating rate | ||||||
Cash at bank | 1.7 | 218 | – | – | – | 218 |
| Cash equivalent investments – money | ||||||
market funds | 3.9 | 349 | – | – | – | 349 |
| Cash equivalent investments – bank | ||||||
deposits | 2.7 | 82 | – | – | – | 82 |
| Financial assets – pension escrow | ||||||
investments (non-current) | 1.4 | – | – | – | 208 | 208 |
Total | 649 | – | – | 208 | 857 | |
| Non-interest bearing | ||||||
Cash at bank or in hand | 249 | – | – | – | 249 | |
Bank overdrafts (in a cash pool) | (89) | (89) | ||||
Trade and other receivables | 1,423 | – | – | – | 1,423 | |
Trade and other payables | (1,894) | – | – | – | (1,894) | |
Derivative assets | 23 | 3 | – | – | 26 | |
Derivative liabilities | (13) | (12) | (10) | – | (35) | |
Total | (301) | (9) | (10) | – | (320) | |
Total financial assets | 2,344 | 3 | – | 208 | 2,555 | |
Total financial liabilities | (2,219) | (659) | (969) | (480) | (4,327) | |
Net total financial assets/(liabilities) | 125 | (656) | (969) | (272) | (1,772) |
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24. Financial assets and liabilities and risk management continued
| At 31 March 2024 | ||||||||
| Gross loans and | Gross payments | Gross payments | ||||||
| Bank overdrafts | borrowings | Gross lease | Gross trade and | on derivatives | on derivatives | |||
| (in a cash pool) | commitments | instalments | other payables | Sub-total | settled gross | settled net | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
| Amounts falling due in: | ||||||||
One year or less or on demand (current) | (56) | (371) | (256) | (1,879) | (2,562) | (91) | (13) | (2,666) |
| More than one year | ||||||||
(non-current) | – | (1,437) | (1,529) | – | (2,966) | (517) | (4) | (3,487) |
More than one year but not more than two years | – | (52) | (238) | – | (290) | (13) | (4) | (307) |
More than two years but not more than five years | – | (1,088) | (569) | – | (1,657) | (504) | – | (2,161) |
More than five years | – | (297) | (722) | – | (1,019) | – | – | (1,019) |
Total | (56) | (1,808) | (1,785) | (1,879) | (5,528) | (608) | (17) | (6,153) |
Less interest | – | 277 | 362 | – | 639 | n/a | n/a | n/a |
| Less exchange rate | ||||||||
adjustment | – | 48 | – | – | 48 | n/a | n/a | n/a |
Net total | (56) | (1,483) | (1,423) | (1,879) | (4,841) | n/a | n/a | n/a |
| At 26 March 2023 | ||||||||
| Gross loans and | Gross payments | Gross payments | ||||||
| Bank overdrafts | borrowings | Gross lease | Gross trade and | on derivatives | on derivatives | |||
| (in a cash pool) | commitments | instalments | other payables | Sub-total | settled gross | settled net | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
| Amounts falling due in: | ||||||||
One year or less or on demand (current) | (89) | (20) | (219) | (1,894) | (2,222) | (96) | (9) | (2,327) |
| More than one year | ||||||||
(non-current) | – | (1,000) | (1,400) | – | (2,400) | (530) | (9) | (2,939) |
More than one year but not more than two years | – | (468) | (205) | – | (673) | (13) | (8) | (694) |
More than two years but not more than five years | – | (525) | (493) | – | (1,018) | (517) | (1) | (1,536) |
More than five years | – | (7) | (702) | – | (709) | – | – | (709) |
Total | (89) | (1,020) | (1,619) | (1,894) | (4,622) | (626) | (18) | (5,266) |
Less interest | – | 46 | 257 | – | 303 | n/a | n/a | n/a |
| Less exchange | ||||||||
rate adjustment | – | 27 | – | – | 27 | n/a | n/a | n/a |
Net total | (89) | (947) | (1,362) | (1,894) | (4,292) | n/a | n/a | n/a |
Notes to the Consolidated Financial Statements continued
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| At 31 March 2024 | ||||||
| Derivative | Derivative | Derivative | ||||
| Nominal | Derivative | current | current | non-current | ||
| Nominal | value | non-current assets | assets | liabilities | liabilities | |
| amount | £m | £m | £m | £m | £m | |
Diesel | 168m litres | 85 | 2 | 5 | (2) | (1) |
Jet | 11m litres | 5 | – | 1 | – | – |
Gas | 16m therms | 27 | – | – | (11) | (3) |
Conveyance costs | 15m US$ | 12 | – | – | – | – |
Capex | 17m Euro | 15 | – | – | – | – |
€550m bond cross-currency swap | 550m Euro | 491 | – | – | (3) | (20) |
Total | 2 | 6 | (16) | (24) |
| At 26 March 2023 | ||||||
| Derivative | Derivative | Derivative | Derivative | |||
| Nominal | non-current | current | current | non-current | ||
| Nominal | value | assets | assets | liabilities | liabilities | |
| amount | £m | £m | £m | £m | £m | |
Diesel | 201m litres | 90 | 2 | 16 | (4) | (4) |
Jet | 27m litres | 11 | – | 2 | – | – |
Gas | 19m therms | 29 | 1 | 5 | (5) | (5) |
Conveyance costs | 19m US$ | 15 | – | – | – | – |
Capex | 38m Euro | 35 | – | – | (1) | – |
€550m bond cross-currency swap | 550m Euro | 491 | – | – | (3) | (13) |
Total | 3 | 23 | (13) | (22) |
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24. Financial assets and liabilities and risk management continued
| 53 weeks 2024 | |||||||
Change in fair value during year – gain/(loss) | Gains/(losses) reclassified during year | ||||||
| Cost of | |||||||
| Cash flow hedges | hedging | Ineffectiveness | Distribution and | ||||
| deferred to | deferred to | taken to other | conveyance | Finance | Initial carrying | ||
| reserves | reserves | operating costs | costs | Infrastructure costs | costs | value of fixed asset | |
| £m | £m | £m | £m | £m | £m | £m | |
Diesel | 13 | – | – | 16 | – | – | – |
Jet | 2 | – | – | 3 | – | – | – |
Gas | (12) | – | (1) | – | (4) | – | – |
Conveyance costs | – | – | – | – | – | – | – |
Capex | (1) | – | – | – | – | – | (1) |
€550m bond cross- currency swap | (7) | – | – | – | – | (12) | – |
Total | (5) | – | (1) | 19 | (4) | (12) | (1) |
| 52 weeks 2023 | |||||||
Change in fair value during year – gain/(loss) | Gains/(losses) reclassified during year | ||||||
| Cost of | |||||||
| Cash flow hedges | hedging | Ineffectiveness | Distribution and | Initial carrying | |||
| deferred to | deferred to | taken to other | conveyance | Infrastructure | Finance | value of fixed | |
| reserves | reserves | operating costs | costs | costs | costs | asset | |
| £m | £m | £m | £m | £m | £m | £m | |
Diesel | 8 | – | 3 | 62 | – | – | – |
Jet | 2 | – | – | 8 | – | – | – |
Gas | (15) | – | (4) | – | 14 | – | – |
Conveyance costs | 1 | – | – | 1 | – | – | – |
Capex | 2 | – | – | – | – | – | (2) |
€550m bond cross- currency swap | (12) | 2 | – | – | – | (7) | – |
Total | (14) | 2 | (1) | 71 | 14 | (7) | (2) |
| At 31 March 2024 | ||||||
| Change in fair | Change in fair | |||||
| Line item | value of hedge | value of hedged | Ineffectiveness – | |||
| in the statement | instrument during year | item during | gains/(losses) | |||
| Carrying | of financial position where | – gains/ | year – gains/ | recognised in other | ||
| Nominal | value | the hedging instrument is | (losses) in OCI | (losses) in OCI | operating income | |
| amount | £m | included | £m | £m | £m | |
€500m bond | 500m Euro | 425 | Interest-bearing | 12 | (12) | – |
| loans and borrowings | ||||||
| – non-current | ||||||
| Euro-denominated | 3m Euro | 3 | Lease liabilities | – | – | – |
| lease payables | ||||||
Total | 12 | (12) | – |
| At 26 March 2023 | ||||||
| Change in fair | Change in fair | |||||
| Line item | value of hedge | value of hedged | Ineffectiveness – | |||
| in the statement | instrument during | item during | gains/(losses) | |||
| Carrying | of financial position where | year – gains/ | year – gains/ | recognised in other | ||
| Nominal | value | the hedging instrument is | (losses) in OCI | (losses) in OCI | operating income | |
| amount | £m | included | £m | £m | £m | |
€500m bond | 500m Euro | 440 | Interest-bearing loans | (24) | 24 | – |
| and borrowings – | ||||||
| non-current | ||||||
| Euro-denominated | 9m Euro | 8 | Lease liabilities | (1) | 1 | – |
| lease payables | ||||||
Total | (25) | 25 | – |
Notes to the Consolidated Financial Statements continued
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| Cash flow | Cost of | Total | Cash flow | Cost of | Total | |
| hedge | hedging | hedging | hedge | hedging | hedging | |
| reserve | reserve | reserve | reserve | reserve | reserve | |
| 2024 | 2024 | 2024 | 2023 | 2023 | 2023 | |
| £m | £m | £m | £m | £m | £m | |
Opening Balance | (3) | 2 | (1) | 68 | 1 | 69 |
| Changes in fair value – cash flow hedges | ||||||
Diesel | 13 | – | 13 | 8 | – | 8 |
Jet | 2 | – | 2 | 2 | – | 2 |
Gas | (12) | – | (12) | (15) | – | (15) |
Conveyance costs | – | – | – | 1 | – | 1 |
Capex | (1) | – | (1) | 2 | – | 2 |
€550m bond cross-currency swap | (7) | – | (7) | 22 | 2 | 24 |
| Amounts reclassified to Income | ||||||
| statement | ||||||
Diesel | (16) | – | (16) | (62) | – | (62) |
Jet | (3) | – | (3) | (8) | – | (8) |
Gas | 4 | – | 4 | (14) | – | (14) |
Conveyance costs | – | – | – | (1) | – | (1) |
€550m bond cross-currency swap | 13 | (1) | 12 | (26) | (1) | (27) |
| Amounts reclassified to non-financial | ||||||
| assets | ||||||
Capex | 1 | – | 1 | 2 | – | 2 |
Tax on movements on reserves in the year | – | – | – | 18 | – | 18 |
Closing Balance | (9) | 1 | (8) | (3) | 2 | (1) |
25. Provisions
Charged as specific items | Charged in operating costs | |||||||
| Property | ||||||||
| Industrial | Regulatory and | Voluntary | decommi- | Litigation | ||||
| diseases | legal | Other | redundancy | ssioning | claims | Other | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
At 27 March 2023 | (44) | – | (3) | (12) | (25) | (50) | (74) | (208) |
(Charged)/released | – | (52) | – | (12) | 2 | (35) | (3) | (100) |
Utilised | 6 | – | – | 18 | 1 | 33 | 13 | 71 |
Reclassifications | – | – | – | 3 | – | – | 51 | 54 |
Unwinding of discount | (1) | – | – | – | – | – | – | (1) |
At 31 March 2024 | (39) | (52) | (3) | (3) | (22) | (52) | (13) | (184) |
| Disclosed as: | ||||||||
Current | (7) | (37) | – | (3) | (4) | (42) | (2) | (95) |
Non-current | (32) | (15) | (3) | – | (18) | (10) | (11) | (89) |
At 31 March 2024 | (39) | (52) | (3) | (3) | (22) | (52) | (13) | (184) |
| Disclosed as: | ||||||||
Current | (10) | – | – | (12) | (3) | (38) | (66) | (129) |
Non-current | (34) | – | (3) | – | (22) | (12) | (8) | (79) |
At 26 March 2023 | (44) | – | (3) | (12) | (25) | (50) | (74) | (208) |
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25. Provisions continued
Specific items provisions
Industrial diseases
The Group has a potential liability for industrial diseases claims relating to individuals who were employed in the General Post Office
Telecommunications division and whose employment ceased prior to October 1981. The provision is derived using estimates and ranges
calculated by its external actuarial consultant, based on current experience of claims, and an assessment of potential future claims, the
majority of which are expected to be received over the next 25 to 35 years.
There is considerable uncertainty associated with estimating the future reporting of latent disease claims, over future decades.
Consistent with the approach last year, our advisor has leveraged the updated scenarios provided by the Asbestos Working Party (AWP).
The AWP model was released in late 2021.
The AWP collects industry data each year which helps it understand how the existing models are performing against actual experience
and helps inform any adjustments to the model. The projections for 2024-25 and later years are based on recent levels of reporting, net
of estimated levels of repudiation in more recent historical periods.
Benchmark projections have been adopted and it is assumed that no more claims will arise after 2060. The cut-off date for reporting
of claims is one of the sources of uncertainty in the projections.
The Group has a rigorous process for ensuring that only valid claims are accepted.
Regulatory and legal
The regulatory and legal provisions are pertaining to obligations for Royal Mail and GLS, in relation to regulated quality of service, legal claims
and tax-related disputes in GLS Italy.
Operating costs provisions
During the year, settlements for the remaining voluntary redundancies relating to the right-sizing of the operational frontline were made,
along with a number of current year, small ad-hoc voluntary redundancy schemes.
Other provisions movements in the year mainly relate to £60 million in respect of the costs of a one-off payment of £500 per person to
frontline employees as part of their negotiated pay agreement (mostly reclassified as accruals prior to payment).
Property decommissioning obligations represent an estimate of the costs of removing fixtures and fittings and restoring the leased property
to its original condition.
Provisions for litigation claims, based on best estimates as advised by external legal experts, mainly comprise outstanding liabilities in relation
to road traffic accident and personal injury claims.
Below is a summary of the ageing profile of the provisions.
At 31 March 2024 | At 26 March 2023 | |||||||||
Expected period of settlement | Expected period of settlement | |||||||||
| Within | One to | Two to | After five | Within | One to | Two to five | After five | |||
| one year | two years | five years | years | Total | one year | two years | years | years | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Specific items | ||||||||||
| Industrial disease | ||||||||||
claims | (7) | (2) | (6) | (24) | (39) | (10) | (2) | (6) | (26) | (44) |
Regulatory and legal | (37) | (15) | – | – | (52) | – | – | – | – | – |
Other | – | – | – | (3) | (3) | – | – | – | (3) | (3) |
Total | (44) | (17) | (6) | (27) | (94) | (10) | (2) | (6) | (29) | (47) |
| Operating costs | ||||||||||
Voluntary redundancy | (3) | – | – | – | (3) | (12) | – | – | – | (12) |
| Property | ||||||||||
decommissioning | (4) | (1) | (9) | (8) | (22) | (3) | (2) | (12) | (8) | (25) |
Litigation claims | (42) | (8) | (2) | – | (52) | (38) | (11) | – | (1) | (50) |
Other | (2) | (2) | (2) | (7) | (13) | (66) | (2) | (1) | (5) | (74) |
Total | (51) | (11) | (13) | (15) | (90) | (119) | (15) | (13) | (14) | (161) |
Notes to the Consolidated Financial Statements continued
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International Distribution Services plc Annual Report 2023-24
| At | At | ||
| 31 March | 26 March | ||
| 2024 | 2023 | ||
| £m | £m | ||
958,293,475 | (2022-23: 956,193,475) ordinary shares of £0.01 each | 10 | 10 |
Total | 10 | 10 |
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| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £m | £m | |
| Recharges to: | ||
RMPP – Defined benefit pension plan (administration and investment service recharge) | 7 | 7 |
| 53 weeks | 52 weeks | |
| 2024 | 2023 | |
| £000s | £000s | |
Short-term employee benefits | (4,382) | (3,907) |
Post-employment benefits | – | (5) |
Other long-term benefits | – | (170) |
Terminations benefits | (33) | – |
Share-based payments | (1,230) | (1,504) |
Total | (5,645) | (5,586) |
| % equity | % equity | |||
Company | Principal activities | Country of incorporation | interest 2024 | interest 2023 |
General Logistics Systems B.V. | Parcel services holding company Netherlands | 100 | 100 | |
Royal Mail Estates Limited | Property holdings | UK | 100 | 100 |
| IDS Holdco Limited (formerly RMGLS | ||||
Holdco Limited) | Holding company | UK | 100 | 100 |
| RM Property and Facilities | ||||
Solutions Limited | Facilities management | UK | 100 | 100 |
30. Events after the balance sheet date
On 14 May 2024, the Board received a revised non-binding proposal of 370 pence per IDS share from EP Group for the entire issued
share capital of IDS plc not already owned by EP Group and its affiliates, namely VESA Equity Investment S.à r.l. (Vesa Equity) (the Proposal).
The Proposal follows significant negotiation including a number of earlier proposals from EP Group (the first of which was made on 9 April 2024
at a price of 320 pence per share in cash).
The Board is minded to recommend the revised offer of 370 pence to IDS plc shareholders, should an offer be made at that level, subject to
satisfactory resolution of the final terms and arrangements.
The Directors considered the implications on the Financial Statements for IDS plc Group for the 53 week ended 31 March 2024 should the
EP Group acquire the IDS plc Group, in particular the implications in relation to the Group’s financing arrangements as set out in the going
concern and viability assessments on pages 171 to 173 and pages 59 to 61.
Notes to the Consolidated Financial Statements continued
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International Distribution Services plc Annual Report 2023-24
Company name | Share class | % held by Group | |||
| Austria | |||||
| Traunuferstrasse 105a, 4052 Ansfelden, Austria | |||||
General Logistics Systems Austria GmbH | €1,090,092.51 Ordinary shares | 100.000 | |||
| Belgium | |||||
| Humaniteitslaan 233, 1620 Drogenbos, Belgium | |||||
General Logistics Systems Belgium N.V. | Ordinary shares, no par value | 100.000 | |||
GLS Belgium Distribution S.A/N.V. | Ordinary shares, no par value | 100.000 | |||
| Canada | |||||
274 | Dieppe Blvd, Dieppe, NB E1A 6P8, Canada | ||||
Altimax Courier (2006) Limited | Class A Common shares | 100.000 | |||
10 | 55, Hastings Street West, Suite 1700, | ||||
| Vancouver (British Columbia), V6E 2E9, Canada | |||||
GLS Logistics Systems Canada Ltd. | Class A Common shares | 100.000 | |||
| 3400 7th Avenue SW, #350, Edmonton, Alberta, T2P 3N9, Canada | |||||
A-Crop-Olis Warehousing Inc | Class A Common shares | 100.000 | |||
Medicine Hat Express Inc | Class A Common shares | 100.000 | |||
Mid-Nite Sun Transportation Ltd | Class A Common shares | 100.000 | |||
Rosenau Transport Ltd | Class A Common shares | 100.000 | |||
Wheels Transport Ltd | Class A Common shares | 100.000 | |||
| China | |||||
Suite 2447, EBP Consultancy (Beijing) Co. Ltd | within Suite 2401, 24F, No.77, Jian Guo Rd, Chao Yang District, Beijing | – | 100.000 | ||
| Croatia | |||||
| Stupničke Šipkovine 22, 10255 Donji Stupnik, Croatia | |||||
General Logistics Systems Croatia d.o.o | €100,860.33 Ordinary shares | 100.000 | |||
| Czech Republic | |||||
| Průmyslová 5619/1, 58601 Jihlava, Czech Republic | |||||
General Logistics Systems Czech Republic s.r.o | CZK2,970,000.00 Ordinary shares | 100.000 | |||
CZK30,000.00 Ordinary shares | 100.000 | ||||
| Denmark | |||||
Kokmose 3, General Logistics Systems Denmark A/S | 6000 | Kolding, Denmark | DKK100.00 Ordinary shares | 100.000 | |
General Logistics Systems Express A/S | DKK1,000.00 Ordinary shares | 100.000 | |||
| Finland | |||||
Rydöntie | 6, | 20360 | Turku, Finland | ||
General Logistics Systems Finland 0y | €50.00 Ordinary shares | 100.000 | |||
| France | |||||
| 14 Rue Michel Labrousse, CS 93730, 31037 Toulouse Cedex 01, France | |||||
General Logistics Systems France S.A.S | €50.00 Ordinary shares | 100.000 | |||
GLS Invest France S.A.S | €12.71 Ordinary shares | 100.000 | |||
| 6 Rue des Bateliers, 92110 Clichy, France | |||||
229
Additional Information Financial Statements Corporate Governance Strategic Report
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Company name | Share class | % held by Group | ||
Tousfacteurs S.A.S | €1.00 Ordinary shares | 100.000 | ||
| Germany | ||||
| Dörrwiese 2, 36286 Neuenstein, Germany | ||||
Der Kurier Beteiligungsgesellschaft GmbH | €25,000.00 Ordinary shares | 100.000 | ||
Der Kurier GmbH & Co. KG | €2,561,572.32 Cash contribution | 100.000 | ||
| GLS Germany-Str. 1-7, 36286 Neuenstein, Germany | ||||
General Logistics Systems Germany GmbH & Co. OHG | €47,968,004.75 Cash contribution | 100.000 | ||
GLS IT Services GmbH | €127,822.97 Ordinary shares | 100.000 | ||
GLS Beteiligungs GmbH | €7,720,507.41 Ordinary shares | 100.000 | ||
GLS Verwaltungs-und Service GmbH | €153,387.56 Ordinary shares | 100.000 | ||
GLS eCom Lab GmbH | €100,000.00 Ordinary shares | 100.000 | ||
GLS Mobility Solutions GmbH | €100,000.00 Ordinary shares | 100.000 | ||
| Wendenstraße 349, 20537 Hamburg, Germany | ||||
OverNight Express & Logistics GmbH | €25,565.00 Ordinary shares | 100.000 | ||
| Siepenhöhe 5e, 44803 Bochum, Germany | ||||
Versandmanufaktur GmbH | €12,800.00 Ordinary shares | 100.000 | ||
| €256.00 Ordinary shares | ||||
| €12,544.00 Ordinary shares | ||||
| Guernsey | ||||
| PO Box 160, No 1 The Plaza, Admiral Park, St Peter Port, GY1 4EY, Guernsey | ||||
Postcap (Guernsey) Limited | £1.00 Ordinary shares | 100.000 | ||
| Hungary | ||||
| GLS Európa utca 2, 2351 Alsónémedi, Hungary | ||||
GLS General Logistics Systems Hungary Csomag-Logisztikai Kft. | HUF30,000,000.00 Ordinary shares | 100.000 | ||
| Ireland | ||||
| Unit 200 Northwest Business Park, Ballycoolin, Dublin D15, Ireland | ||||
RM Financing Operations Limited | €1.00 Ordinary shares | 100.000 | ||
€1.00 Redeemable preference shares | 100.000 | |||
| Unit P1 Horizon Logistics Park Swords Dublin K67 P2Y8, Ireland | ||||
General Logistics Systems Ireland Limited | €1.269738 | Ordinary shares | 100.000 | |
| Italy | ||||
| Via Basento No. 19, 20098 San Giuliano Milanese, Italy | ||||
Agone S.r.L | €10,400.00 Ordinary shares | 100.000 | ||
General Logistics Systems Enterprise S.r.L | €1,018,000.00 Ordinary shares | 100.000 | ||
General Logistics Systems Italy S.p.A. | €0.52 Ordinary shares | 100.000 | ||
Gruppo Executive Societa Consortile a.r.l | €0.51 Ordinary shares | 84.22 | ||
S.I.T. & Management s.r.l. | €35,000.00 Ordinary shares | 100.000 | ||
| Luxembourg | ||||
| Zae Op Zaemer 24, 4950 Bascharage, Luxembourg | ||||
General Logistics Systems Belgium S.A. Succursale de Luxembourg 1 | – | – | ||
| Morocco | ||||
| Place Roudani, Rue La Sena Résidence Beethoven II – 3ème étage, No. 82, 90000 | ||||
| Tanger, Morocco | ||||
Tousfacteurs MA S.A.R.L.A.U. | MAD1,000.00 Ordinary shares | 100.000 | ||
| The Netherlands | ||||
| Breguetlaan 28-30, 1438 BC Oude Meer, The Netherlands | ||||
Notes to the Consolidated Financial Statements continued
31. Related undertakings of International Distribution Services plc continued
230
International Distribution Services plc Annual Report 2023-24
Company name | Share class | % held by Group | ||
General Logistics Systems B.V. | €100.00 Common shares | 100.000 | ||
| Proostwetering 40, 3543 AG Utrecht, The Netherlands | ||||
General Logistics Systems Netherlands B.V. | €50.00 Ordinary shares | 100.000 | ||
GLS Netherlands Holding B.V. | €50.00 Ordinary shares | 100.000 | ||
GLS Netherlands Services B.V. | €50.00 Ordinary shares | 100.000 | ||
| Poland | ||||
| Ul. Tęczowa 10, Gluchowo, 62-052 Komorniki, Poland | ||||
General Logistics Systems Poland Spolka zo.o | PLN1,721.00 | 100.000 | ||
| Portugal | ||||
| Rua da Bica, No. 10, 2669-608 Venda do Pinheiro, Portugal | ||||
General Logistics Systems Portugal Lda | €102,000.00 quota | 100.000 | ||
| €97,900.00 quota | ||||
| €100.00 quota | ||||
| Romania | ||||
| 3, Str. Stefan cel Mare, Parcul Industrial Selimbar, 557260 Selimbar, Romania | ||||
GLS General Logistics Systems Srl | RON100.00 Ordinary shares | 100.000 | ||
| Serbia | ||||
| Pančevački put 152R, Beograd - Palilula 11060, Beograd, Serbia | ||||
General Logistics Systems Beograd d.o.o. | RSD11,738,000.00 Ordinary shares | 100.000 | ||
| Slovakia | ||||
Budča | 103 | 9, 962 33 Budča, Slovakia | ||
GLS General Logistics Systems Slovakia s.r.o | SK98,604.00 Ordinary shares | 100.000 | ||
SK996.00 Ordinary shares | 100.000 | |||
| Slovenia | ||||
| Cesta v Prod 84, 1000 Ljubljana, Slovenia | ||||
General Logistics Systems, logisticne storitve, d.o.o. | €751,127.00 Ordinary shares | 100.000 | ||
| Spain | ||||
| Calle del Ingeniero Torres Quevedo 1, 28022 Madrid, Spain | ||||
Distribuidora de Electrodomésticos Aceval, S.A. | €0.42 Ordinary shares | 100.000 | ||
General Logistics Systems Spain S.A | €60.10 Ordinary shares | 100.000 | ||
| UK | ||||
185 | Farringdon Road, London, EC1A 1AA | |||
Angard Staffing Solutions Limited | £1.00 Ordinary shares | 100.000 | ||
IDS Group Limited (previously RM Finance CAD Limited) | £1.00 Ordinary shares | 100.000 | ||
| CAD1.00 Ordinary shares | ||||
IDS Holdco Limited (previously RMGLS Holdco Limited) | £1.00 Ordinary shares | 100.000 | ||
International Distribution Services Limited | £1.00 Ordinary shares | 100.000 | ||
Intersoft Systems & Programming Limited | £1.00 Ordinary shares | 100.000 | ||
| Nine Elms Parkside Estate Management Company Limited | £1.00 Ordinary shares | 100.000 | ||
Parcelforce Limited | £1.00 Ordinary shares | 100.000 | ||
Revisecatch Limited | £0.01 Ordinary shares | 100.000 | ||
RM 2022 | Limited | £1.00 Ordinary shares | 100,000 | |
RMCPP Trustees Limited | £1.00 Ordinary shares | 100.000 | ||
RM (International) Limited | £1.00 Ordinary shares | 100.000 | ||
| RMSEPP Pensions Trustees (2050) Limited | £1.00 Ordinary shares | 100.000 | ||
Royal Mail Courier Services Ltd | £1.00 Ordinary shares | 100.000 | ||
231
Additional Information Financial Statements Corporate Governance Strategic Report
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Company name | Share class | % held by Group | |||
Royal Mail Enterprises Limited | £1.00 Ordinary shares | 100.000 | |||
Royal Mail Estates Limited | £1.00 Ordinary shares | 100.000 | |||
Royal Mail Group Limited | £1.00 Ordinary shares | 100.000 | |||
Royal Mail Innovations Limited | £1.00 Ordinary shares | 100.000 | |||
Storefeeder Ltd | £1.00 Ordinary shares | 100.000 | |||
| Highbank House, Exchange Street, Stockport, Cheshire, SK3 0ET, United Kingdom | |||||
RM Property and Facilities Solutions Limited | £1.00 Ordinary shares | 98.040 | |||
| £1.00 B shares | 0.980 | ||||
| £1.00 C shares | 0.980 | ||||
| 11 Ironmonger Lane, London, EC2V 8EY, United Kingdom | |||||
Royal Mail Pensions Trustees Limited | £1.00 Ordinary shares | 100.000 | |||
| US | |||||
| Registered Agent Solutions Inc. 838 Walker Road, Suite 21-2 Dover, Delaware 19904, US | |||||
General Logistics Systems North America Inc. | USD | 0.001 | Common stock | 100.000 | |
6750 | South Longe Street, Suite 100 Stockton, CA 95206, US | ||||
General Logistics Systems US Interim, Inc | USD 1.00 Common stock | 100.000 | |||
General Logistics Systems US, Inc | Common stock, no par value | 100.000 | |||
GLS US Freight, Inc. | Common stock, no par value | 100.000 | |||
| GLS Solutions, Inc. | Common stock, no par value | 100.000 | |||
Postal Express, Inc. | Common stock, no par value | 100.000 | |||
| 9 East Loockerman Street, Suite 311, Dover, Delaware 19901, US | |||||
| Dicom JD, LLC. | 100 | Shares, no par value | 100.000 | ||
Company name | Share class | % held by Group |
| Associates | ||
| United Kingdom | ||
| March Studios Peills Yard, Bromley, Kent, BR2 9NS, United Kingdom | ||
Charac Limited | B Ordinary shares | 29.580 |
| Lynton House, 7-12 Tavistock Square, London, WC1H 9LT, United Kingdom | ||
| JICMAIL Limited | – | 20.000 |
Company name | Share class | % held by Group |
| Investments | ||
| United Kingdom | ||
| Aviva, Wellington Row, York, North Yorkshire, YO90,1WR | ||
| Voyager Park South Management Company Limited | Ordinary shares | 5.500 |
Notes to the Consolidated Financial Statements continued
31. Related undertakings of International Distribution Services plc continued
232
International Distribution Services plc Annual Report 2023-24
International Distribution Services plc
Parent Company Financial Statements
Balance sheet
At 31 March 2024 and 26 March 2023
Registered number: 08680755
Notes
At
31 March
2024
£m
At
26 March
2023
£m
Non-current assets
Investment in subsidiaries 6 2,919 2,914
Intergroup and other receivables 7 813 615
Total non-current assets 3,732 3,529
Current assets
Intergroup and other receivables 7 327 –
Current liabilities
Interest bearing loans and borrowings 8 (312) –
Interest and other payables 8 (30) (12)
Net current liabilities (15) (12)
Non-current liabilities
Interest-bearing loans and borrowings 9 (1,142) (922)
Net assets 2,575 2,595
Equity
Share capital 10 10 10
Retained earnings 2,565 2,585
Total equity 2,575 2,595
The Company has not presented its own income statement, as permitted by section 408 of the Companies Act 2006. The Company
reported a loss for the year of £25 million (2022-23: profit of £118 million) (see Note 4 to these financial statements).
The balance sheet was approved and authorised for issue by the Board of Directors on 24 May 2024 and signed on its behalf by:
Michael Snape
Chief Financial Officer
Statement of changes in equity
For the 53 weeks ended 31 March 2024 and 52 weeks ended 26 March 2023
Share
capital
£m
Retained
earnings
£m
Total
equity
£m
At 27 March 2022 10 2,592 2,602
Profit for the year – 118 118
Share-based payments – 2 2
Dividend paid – (127) (127)
At 26 March 2023 10 2,585 2,595
Loss for the year – (25) (25)
Share-based payments – 5 5
At 31 March 2024 10 2,565 2,575
233
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
International Distribution Services plc
Parent Company Financial Statements continued
1. Parent Company accounting policies
Accounting reference date
The financial reporting year ends on the last Sunday in March
and, accordingly, these Financial Statements are prepared for
the 53 weeks ended 31 March 2024 (2022-23: 52 weeks ended
26 March 2023).
Authorisation of Financial Statements and statement of
compliance with FRS 101
The Financial Statements of the Company for the year ended
31 March 2024 were authorised for issue by the Board of Directors
on 24 May 2024. The Company is incorporated and domiciled in
England and Wales.
These Financial Statements were prepared in accordance with
Financial Reporting Standard 101 ‘Reduced Disclosure Framework’
(FRS 101) and in accordance with applicable accounting standards.
Basis of preparation
The Financial Statements have been prepared in accordance with
Financial Reporting Standard 101 Reduced Disclosure Framework
(FRS 101). In preparing these Financial Statements, the Company
applies the recognition, measurement and disclosure requirements
of UK-adopted international accounting standards (UK-adopted
IFRS) in conformity with the requirements of the Companies Act
2006, but makes amendments where necessary in order to comply
with Companies Act 2006, and has set out below where advantage
of the FRS 101 disclosure exemptions has been taken:
(a) The requirements of IFRS 7 ‘Financial Instruments: Disclosures’.
1
(b) The requirements of paragraphs 91-99 of IFRS 13 ‘Fair Value
Measurement’ (disclosure of valuation techniques and inputs
used for fair value measurement of assets and liabilities).
1
(c) The requirements of the second sentence of paragraph 110
and paragraphs 113(a), 114, 115, 118, 119(a) to (c), 120 to 127 and
129 of IFRS 15 ‘Revenue from Contracts with Customers’.
(d) The requirement in paragraph 38 of IAS 1 ‘Presentation of
Financial Statements’ to present comparative information
in respect of: (i) paragraph 79(a)(iv) of IAS 1 (reconciliation of
shares outstanding).
(e) The requirements of paragraphs 10(d), 10(f), 16, 38A, 38B-D, 40A-D,
111 and 134-136 of IAS 1 ‘Presentation of Financial Statements’.
(f) The requirements of IAS 7 ‘Statement of Cash Flows’.
(g) The requirements of paragraphs 17 and 18(a) of IAS 24 ‘Related
Party Disclosures’ (details of key management compensation
and related party transaction amounts).
(h) The requirements in IAS 24 ‘Related Party Disclosures’ to
disclose related party transactions entered into between two or
more members of a group, provided that any subsidiary which
is a party to the transaction is wholly owned by such a member.
(i) The requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting
Policies, Changes in Accounting Estimates and Errors’.
Accounting policies
The accounting policies are consistent with those of the previous
year except for an additional policy statement regarding intergroup
receivables (see below).
Key sources of estimation uncertainty
and critical accounting judgements
The carrying amount of the Parent Company’s investments
in, and amounts due from, subsidiaries are significant balances.
The recoverability of the investments has been considered by
management by reviewing the net assets of the relevant subsidiary
(being an approximation of their minimum recoverable amount)
and confirmed that they were in excess of the carrying value of the
Parent Company’s investment in that subsidiary at 31 March 2024
(see Note 6 below).
Investment in subsidiaries
The investment in subsidiaries is stated at cost, and includes
deemed capital contributions arising from share-based payment
transactions, less any accumulated impairment losses.
Intergroup receivables
Whilst they are repayable on demand, the interest-bearing intergroup
loans are generally deemed to be non-current assets for the year
ended 31 March 2024, as the Company’s intention at the balance
sheet date is that the loans will not be settled by Royal Mail Group
Limited or IDS Holdco Limited (formerly RMGLS Holdco Limited)
within the next 12 months. The one exception is the intergroup loan
due from IDS Holdco Limited for €364.5 million which relates to the
2024 bond payable by the Company, this is deemed to be current
as the intergroup loan will be repaid in order to allow the Company
to repay the bond in July 2024.
After consideration of the financial position and future prospects
of the counterparties, management has determined they are not
in default and that any expected credit loss is not significant and
therefore no provision has been recognised.
1. Exemption taken as equivalent disclosures are included within the Consolidated Financial
Statements of International Distribution Services plc.
2. Directors’ remuneration
The Directors of the Company are not paid any fees by the Company
for their services as Directors of the Company. The Directors are
paid fees by other companies of the Group. This remuneration
is disclosed in the Group Consolidated Financial Statements
(see Note 5) and in the Group Directors’ Remuneration Report
on pages 103 to 136.
3. Auditor’s remuneration
This remuneration is disclosed in the Group Consolidated Financial
Statements (see Note 4).
4. Income statement
The Company is a non-trading company. The loss for the year
of £25 million (2022-23: profit of £118 million) is the net sum
of: a £nil million dividend received from IDS Holdco Limited
(2022-23: £127 million); net £13 million (2022-23: £5 million)
management charges from Royal Mail Group Limited, net £16 million
interest payable (2022-23: £4 million) on the bonds and on
intercompany balances with IDS Holdco Limited and Royal Mail
Group Limited, £4 million fees (2022-23 £nil) on RCF and Bonds and
£8 million (2022-23: £nil) income tax credit. A gain of £26 million
(2022-23: loss of £50 million) on re-translation of the bond liabilities
and a loss of £26 million (2022-23: gain of £50 million) on the
retranslation of intercompany balances with Royal Mail Group
Limited has also been recognised in the year.
5. Taxation
The tax credit of £8 million (2022-23: £nil) consists entirely of a
current tax credit in relation to tax losses surrendered to other group
companies.
234
International Distribution Services plc Annual Report 2023-24
6. Investment in subsidiaries
At
31 March
2024
£m
At
26 March
2023
£m
Investment in IDS Holdco Limited at 27 March 2023 and 28 March 2022 2,914 2,912
Charge for Employee Free Shares/LTIP/DSBP 5 2
Investment in IDS Holdco Limited at 31 March 2024 and 26 March 2023 2,919 2,914
As a result of the impairment of Royal Mail excluding Parcelforce Worldwide CGU, management has tested the Parent Company’s investment
in IDS Holdco Limited and has determined that its recoverable amount is in excess of its carrying amount at 31 March 2024.
7. Intergroup and other receivables
Non-current assets
This balance consists of intergroup loans, including accrued interest, of £1,168 million to IDS Holdco Limited amounting to the proceeds
from the issue of the 2026, 2028 and 2030 bonds (2022-23: £483 million to Royal Mail Group Limited from the issue of the 2026 Bond and
£446 million to IDS Holdco Limited from the issue of the 2024 Bond) (see Notes 8 and 9) offset by £356 million (2022-23: £316 million) loan
from IDS Holdco Limited funding the historic dividends and the share buy-back programme in excess of dividends received by International
Distribution Services plc. An additional £1 million (2022-23: £2 million) relates to other receivables.
Current assets
This relates to the intergroup loan including accrued interest of £317 million (2022-23: £nil) to IDS Holdco Limited amounting to the net
proceeds (after partial repayment in September 2023) from the issue of the 2024 bond, £2m (2022-23: £nil) of prepaid fees and £8m
(2022-23: £nil) income tax receivable owed by group companies for group tax loss relief.
8. Interest bearing loans and borrowings and other payables
This balance comprises £312 million (2022-23: £nil) bond repayable in July 2024 and £30 million (2022-23: £10 million) external interest
payable and £nil (2022-23: £2 million) other payables.
9. Interest-bearing loans and borrowings
This balance comprises £469 million (2022-23: £482million) Bond repayable in 2026, £425 million (2022-23: £nil) Bond repayable in 2028,
£248 million (2022-23: £nil) Bond repayable in 2030 and £nil (2022-23: £440 million repayable in 2024).
10. Share capital
At
31 March
2024
£m
At
26 March
2023
£m
Authorised and issued
958,293,475 (2022-23: 956,193,475) ordinary shares of £0.01 each 10 10
Total 10 10
During the year 2,100,00 shares were allotted in pursuance of employee share schemes.
Of the issued ordinary shares, a total of 1,206,638 (2022-23: 263,566 ) are held by an Employee Benefit Trustee (EBT) administered by Apex
Group Fiduciary Services Limited (formerly Sanne Fiduciary Services Limited). These shares are treated as treasury shares for accounting
purposes in accordance with IAS 32 ‘Financial Instruments: Presentation’. The Company, however, does not hold any shares in treasury.
The EBT is funded by the Company and has been treated as an extension of the Company for accounting purposes within these
Financial Statements.
235
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Additional
Information
Shareholder information 237
Glossary of alternative
performance measures
238
Forward-looking statements 244
236
International Distribution Services plc Annual Report 2023-24
Annual General Meeting
The 2024 AGM will be held on Wednesday 25 September 2024.
Full details of the business to be considered at the meeting will
be included in the Notice of Annual General Meeting that will
be sent to shareholders and published on our website at
www.internationaldistributionservices.com/investors/annual-
general-meetings.
Final dividend
The Board has proposed a final dividend payment of 2 pence per
share in respect of 2023-24, funded by GLS. This final dividend
payment is subject to shareholders approval at the Annual General
Meeting scheduled to take place on 25 September 2024.
The dividend will be paid on 30 September 2024 to shareholders on
the register at 23 August 2024. The Board is also proposing a special
dividend of 8 pence per share, conditional upon completion of the
transaction with EP Group.
Managing your shares online
Shareholders can register through Shareview, via a platform provided
by the Company’s registrars, to access shareholder information
online at www.shareview.co.uk. This service allows you to:
— Manage your shares online.
— Receive notifications of new shareholder information by email.
— Arrange dividend payments.
— Update personal records.
When registering, you will need to have your shareholder reference
number which can be found on your share certificate, dividend
voucher or AGM voting documents.
Be scam smart
Investment scams are designed to look like genuine investments.
Spot the warning signs
Have you been:
— Contacted out of the blue?
— Promised tempting returns and told the investment is safe?
— Called repeatedly?
— Told the offer is only available for a limited time?
If so, you might have been contacted by fraudsters.
Avoid investment fraud
Reject cold calls
If you have received unsolicited contact about an investment
opportunity, the chances are it is a high-risk investment or a scam.
You should treat the call with extreme caution. The safest thing to
do is to hang up.
Check the FCA Warning List
The FCA Warning List is a list of firms the FCA has identified
as operating without its authorisation.
Get impartial advice
Think about getting impartial financial advice before you hand
over any money. Seek advice from someone unconnected to
the firm that has approached you.
Report a scam
If you suspect that you have been approached by fraudsters, please
tell the FCA using the reporting form at www.fca.org.uk/consumers/
report-scam-us. You can also call the FCA Consumer Helpline
on 0800 111 6768.
If you have lost money to investment fraud, you should report it to
Action Fraud on 0300 123 2040 or online at www.actionfraud.police.uk.
Find out more at www.fca.org.uk/scamsmart.
Remember: if it sounds too good to be true, it probably is.
Information for investors
Our website provides information for investors, such as trading
updates, share price information, AGM and dividend information,
shareholder FAQs and results and reports. The website can be
accessed via www.internationaldistributionservices.com/investors.
If you have any queries relating to your shareholding, you can also
email shareholderquestions@ids-plc.com
Company contact details
Registered office
Registered in England and Wales
Company number 08680755
Investor Relations
investorrelations@ids-plc.com
Director of Investor Relations – John Crosse
Company Secretariat
cosec@ids-plc.com
Group Company Secretary – Mark Amsden
Company advisers
Registrar
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
www.shareview.co.uk
Tel: 0371 384 2656 (from outside the UK: +44 (0)121 415 7086).
Lines are open 8:30am to 5:30pm UK time, Monday to Friday,
excluding public holidays in England and Wales.
Independent auditor
KPMG LLP
Corporate brokers
Bank of America
Barclays Bank plc
Shareholder Information
237
Additional Information Financial Statements Corporate Governance Strategic Report
International Distribution Services plc Annual Report 2023-24
Glossary of Alternative Performance Measures
Presentation of results and alternative performance measures (APMs)
The Group uses certain APMs in its financial reporting that are not defined under IFRS, the Generally Accepted Accounting Principles
(GAAP) under which the Group produces its statutory financial information.
These APMs are not a substitute for, or superior to, any IFRS measures of performance. They are used by Management, who considers them
to be an important means of comparing performance period-on-period and are key measures used within the business for assessing
performance.
APMs should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP.
Where appropriate, reconciliations to the nearest GAAP measure have been provided. The APMs used may not be directly comparable with
similarly titled APMs used by other companies.
A full list of APMs used are set out in the section entitled ‘Alternative Performance Measures’.
Reported to adjusted results
The Group makes adjustments to results reported under IFRS to exclude specific items, depreciation/amortisation adjustment for impaired
assets and the pension charge adjustment. Management believes this is a useful basis upon which to analyse the business’ underlying
performance (in particular given the volatile nature of the IAS 19 charge) and is consistent with the way financial performance is reported to the
Board.
Further details on specific items excluded from adjusted operating profit are included in the paragraph ‘Specific items and adjustments’ in the
Financial Review. A reconciliation showing the adjustments made between reported and adjusted Group results can be found in the section
headed ‘Consolidated reported and adjusted results’.
Presentation of results
Consolidated reported and adjusted results
The following table reconciles the consolidated reported results, prepared in accordance with IFRS, to the consolidated 53 week adjusted results:
Group (£m)
53 weeks March 2024 52 weeks March 2023
Reported
Specific items
and other
adjustments
1
Adjusted Reported
Specific items
and other
adjustments
1
Adjusted
Revenue 12,679 – 12,679 12,044 – 12,044
Operating costs (12,545) 162 (12,707) (12,248) (133) (12,115)
People costs (6,752) 41 (6,793) (6,573) (133) (6,440)
Non-people costs (5,793) 121 (5,914) (5,675) – (5,675)
Distribution and conveyance costs (3,890) – (3,890) (3,721) – (3,721)
Infrastructure costs (1,087) 121 (1,208) (1,178) – (1,178)
Other operating costs (816) – (816) (776) – (776)
Profit on disposal of property, plant and equipment 15 15 – 6 6 –
Operating profit/(loss) before specific items 149 177 (28) (198) (127) (71)
Operating specific items
1
:
Regulatory and legal charges (57) (57) – (33) (33) –
Amortisation of intangible assets in acquisitions (21) (21) – (19) (19) –
Impairment charge (48) (48) – (539) (539) –
Damages claim – – – 35 35 –
Legacy/other items 3 3 – 12 12 –
Operating profit/(loss) 26 54 (28) (742) (671) (71)
Finance costs (98) – (98) (60) – (60)
Finance income 51 – 51 21 – 21
Net pension interest
(non-operating specific item)
1
135 135 – 105 105 –
Profit/(loss) before tax 114 189 (75) (676) (566) (110)
Tax (charge)/credit (60) 5 (65) (197) (111) (86)
Profit/(loss) for the year 54 184 (140) (873) (677) (196)
Earnings/(loss) per share (pence)
Basic 5.6 – (14.6) (91.3) – (20.5)
Diluted 5.6 – (14.6) (91.3) – (20.5)
1. Details of specific items and other adjustments can be found under ‘Adjustment and Specific items’ in the Financial Review.
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International Distribution Services plc Annual Report 2023-24
Royal Mail 52 week results
The 52 week 2023-24 adjusted results are derived by removing the 53rd week revenue and incremental costs in relation to Royal Mail, based
on working days and only incremental costs for frontline staff, distribution and conveyance, property rates and utilities and Post Office
commissions. The allocation of only incremental costs reflects the high fixed cost base of the Royal Mail business and should therefore not be
taken as representative of an exit run rate for the year. The 52 week adjusted results are in line with how the Chief Operating Decision Maker
as defined by IFRS 8 reviews performance.
The following table reconciles the Royal Mail 53 week adjusted results to the Royal Mail 52 week adjusted results.
(£m)
Adjusted
53 weeks
March 2024
53rd week
revenue and
costs
Adjusted
52 weeks
March 2024
Revenue 7,834 (140) 7,694
Operating costs
People costs (5,683) 73 (5,610)
Non-people costs (2,499) 29 (2,470)
Distribution and conveyance costs (922) 16 (906)
Infrastructure costs (874) 5 (869)
Other operating costs (703) 8 (695)
Operating profit (348) (38) (386)
Segmental reported results
The following table presents the segmental reported results, prepared in accordance with IFRS:
Group (£m)
53 weeks March 2024 52 weeks March 2023
Royal Mail GLS
Intragroup
eliminations Group Royal Mail GLS
Intragroup
eliminations Group
Revenue 7,834 4,865 (20) 12,679 7,41 1 4,650 (17) 12,044
People costs (5,642) (1,110) – (6,752) (5,542) (1,031) – (6,573)
Non-people costs (2,378) (3,435) 20 (5,793) (2,421) (3,271) 17 (5,675)
Profit on disposal
of property, plant
and equipment 14 1 – 15 5 1 – 6
Operating (loss)/profit
before specific items (172) 321 – 149 (547) 349 – (198)
Operating specific items
1
(82) (41) – (123) (492) (52) – (544)
Operating (loss)/profit (254) 280 – 26 (1,039) 297 – (742)
Net finance costs (24) (23) – (47) (17) (22) – (39)
Net pension interest (non-
operating specific item)
1
135 – – 135 105 – – 105
(Loss)/profit before tax (143) 257 – 114 (951) 275 – (676)
Tax credit/(charge) 8 (68) – (60) (119) (78) – (197)
(Loss)/profit for the period (135) 189 – 54 (1,070) 197 – (873)
1. Details of specific items and other adjustments can be found under ‘Adjustment and Specific items’ in the Financial Review.
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International Distribution Services plc Annual Report 2023-24
Alternative Performance Measures
This section lists the definitions of the various APMs disclosed throughout the Annual Report and Financial Statements. They are used by
management, who considers them to be an important means of comparing performance year-on-year and are key measures used within the
business for assessing performance including remuneration.
Adjusted operating (loss)/profit
This measure is based on reported operating profit excluding the pension charge adjustment, the depreciation/amortisation adjustment for
impaired assets, and operating specific items, which Management considers to be key adjustments in understanding the underlying result of
the Group at this level. These adjusted measures are reconciled to the reported results in the table in the 'Presentation of Results' section in
the paragraph ‘Consolidated reported and adjusted results’. Definitions of the pension charge adjustment, the depreciation/amortisation
adjustment for impaired assets, and operating specific items are provided below.
Adjusted operating (loss)/profit margin
This is a measure of performance that management uses to understand the efficiency of the business in generating profit. It calculates
‘adjusted operating profit’ as a proportion of revenue in percentage terms.
Earnings before interest, tax, depreciation and amortisation (EBITDA) before specific items and adjusted EBITDA
EBITDA is reported operating profit before specific items with depreciation and amortisation added back. Adjusted EBITDA is EBITDA before
specific items with the pension charge adjustment added back.
(£m)
53 weeks ended
March 2024
52 weeks ended
2023
Reported operating profit/(loss) before specific items 149 (198)
Adjustment for profit disposal of property, plant and equipment (15) (6)
Reported operating profit/(loss) before profit on disposal of property, plant and equipment and specific items 134 (204)
Reported depreciation and amortisation 481 602
EBITDA before profit on disposal of property, plant and equipment and specific items 615 398
Pension charge adjustment (41) 133
Adjusted EBITDA 574 531
Adjusted earnings per share
Adjusted earnings per share is reported basic earnings per share, excluding operating and non-operating specific items, the pension charge
adjustment and the depreciation/amortisation adjustment for impaired assets. A reconciliation of this number to reported basic earnings per
share is included in the ‘Presentation of Results’ section in the paragraph ‘Consolidated reported and adjusted results’.
Adjusted people costs
People costs incurred in respect of the Group’s employees and comprise wages and salaries, temporary resource, pensions, bonus and
social security costs. People costs relating to projects and voluntary redundancy costs are also included. The pension charge adjustment is
excluded from reported people costs in establishing adjusted people costs.
(£m)
53 weeks ended
March 2024
52 weeks ended
March 2023
Reported people costs (6,752) (6,573)
Pension charge adjustment (41) 133
Adjusted people costs (6,793) (6,440)
Pension charge adjustment
Management have sought to clarify the definition of this APM for the 2023-24 and future reporting periods. Having previously referred to the
adjustment as representing the difference between the IAS 19 income statement pension charge and the ‘actual cash payments’ into the
schemes, management’s intention has always been to show the difference between the IAS 19 charge and the pension ‘funding cost’.
The revised definition is shown below.
This adjustment represents the difference between the IAS 19 income statement pension charge and the funding cost of accrual as specified
in the DBCBS Schedule of Contributions, plus any payments into, or out of, RMPP pension escrow investments and any scheme deficit
payments. Management reviews the performance of the business based on the cash cost of the pension plans in the adjusted operating
profit/(loss) of the Group.
In the current year, the pension charge adjustment includes £130 million credit in relation to a refund of cash from the RMPP pension escrow,
£172 million charge in respect of a change in the DBCBS constructive obligation, and £1 million credit for the difference between the IAS 19
income statement charge rate for the DBCBS and the scheme’s cash funding rate (see Note 4 for further details).
In the first half year to 24 September 2023, cash management actions were implemented such that payments to the DBCBS Scheme are
aligned to the due dates per the schedule of contributions, resulting in £30 million lower cash payments in the year. The definition of the APM
was clarified such that this reduction was not treated as an adjustment, since it did not change the funding cost.
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International Distribution Services plc Annual Report 2023-24
Depreciation/amortisation adjustment for impaired assets
This adjustment is new in the year and represents the reinstatement of the amounts for depreciation and amortisation that would have been
charged to the income statement, had the partial impairment of the Royal Mail excluding Parcelforce Worldwide CGU impairment in the prior
year not taken place. The reported depreciation and amortisation is in accordance with UK-adopted IFRS, however when reviewing these
balances management exclude the impact of impairments and the related impact on depreciation and amortisation. Due to the unpredictability
of impairments and the resulting impact on depreciation, this measure is used to provide a consistent basis for operating profit
Operating specific items
These are items that management do not consider to be operating in nature that are considered significant by nature or value and that, in
management’s opinion, require separate identification. Management does not consider them to be reflective of year-on-year operating
performance.
Profit/(loss) on disposal of property, plant and equipment
Management separately identifies the profit/(loss) on disposal of property plant and equipment as these disposals are not part of the Group’s
trading activity and are driven primarily by business strategy.
Amortisation of intangible assets in acquisitions
These charges, which arise as a direct consequence of IFRS business combination accounting requirements, are separately identified as
management does not consider these costs to be directly related to the trading performance of the Group.
Legacy/other items
These costs/credits relate either to unavoidable ongoing costs arising from historic events (such as the industrial diseases provision).
Non-operating specific items
These are recurring or non-recurring items of income or expense of a particular size and/or nature which do not form part of the Group’s
trading activity and in management’s opinion require separate identification.
Adjusted tax (charge)/credit
The adjusted tax (charge)/credit is the total reported tax (charge)/credit excluding the tax (charge)/credit in relation to specific items, the
depreciation/amortisation adjustment for impaired assets, and the pension charge adjustment.
Weighted average tax rate
This rate is calculated by taking the weighted average sum of the expected tax charge of each territory. The expected tax charge in a territory
is calculated by taking the profits multiplied by the standard rate of tax in that territory. The weighted average tax rate is sometimes
considered as a useful alternative to the parent company standard rate of tax when reconciling the effective tax rate.
Adjusted effective tax rate
The adjusted effective tax rate is the adjusted tax charge or credit for the year expressed as a proportion of adjusted profit before tax.
The adjusted effective tax rate is considered by Management to be a useful measure of the tax impact for the period. It approximates to the
tax rate on the underlying trading business through the exclusion of specific items, the pension charge adjustment and the depreciation/
amortisation adjustment for impaired assets.
Free cash flow
Free cash flow (FCF) is calculated as statutory (reported) net cash flow before financing activities, adjusted to include finance costs paid and
exclude net cash from the purchase/sale of financial asset investments and GLS client cash movements. FCF represents the cash that the
Group generates after spending the money required to maintain or expand its asset base, thus is useful for Management in assessing
liquidity. FCF is also shown on a pre-IFRS 16 basis as it is used to support dividend cover analysis, taking into account all cash flows related to
the operating businesses.
The following table reconciles free cash flow to the nearest IFRS measure ‘net cash inflow before financing activities’.
(£m)
Reported
53 weeks
March 2024
Reported
52 weeks
March 2023
Net cash inflow before financing activities (155) 48
Adjustments for:
Finance costs paid (79) (61)
Movement in GLS client cash
1
(12) 2
Payments to/(from) pension escrow investments 16 (8)
Purchase/(sale) of financial asset investments 216 (70)
Free cash flow (14) (89)
Capital element of operating lease repayments
2
(206) (179)
Pre-IFRS 16 free cash flow (220) (268)
1. The movement in GLS client cash is shown excluding foreign currency exchange loss of £1 million (2022-23: £2 million gain).
2. The capital element of lease payments of £216 million (2022-23: £202 million) shown in the statutory cash flow is made up of the capital element of operating lease payments of £206 million
(2022-23: £179 million) and the capital element of finance lease payments of £10 million (2022-23: £23 million).
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In-year trading cash flow
In-year trading cash flow reflects the cash generated from the trading activities of the Group. It is based on reported net cash inflow from
operating activities, adjusted to exclude movements in GLS client cash and the cash cost of operating specific items and to include the cash
cost of property, plant and equipment and intangible asset acquisitions, net finance payments and dividends received from associates.
In-year trading cash flow is also shown on a pre-IFRS 16 basis as it is used to support dividend cover analysis, taking into account all cash
flows related to the operating businesses.
The following table reconciles in-year trading cash flow to the nearest IFRS measure ‘net cash inflow from operating activities’.
(£m)
Reported
53 weeks
ended
March
2024
Reported
52 weeks
ended
March
2023
Net cash (outflow)/inflow from operating activities 215 373
Adjustments for:
Movement in GLS client cash
1
(12) 2
Cash cost of operating specific items 11 53
Purchase of property, plant and equipment (272) (328)
Purchase of intangible assets (113) (93)
Receipts from pension escrow investments 130 –
Net finance costs paid (32) (41)
In-year trading cash flow (73) (34)
Capital element of operating lease repayments
2
(206) (179)
Pre-IFRS 16 in-year trading cash flow (279) (213)
1. The movement in GLS client cash is shown excluding foreign currency exchange loss of £1 million (2022-23: £2 million gain).
2. The capital element of lease payments of £216 million (2022-23: £202 million) shown in the statutory cash flow is made up of the capital element of operating lease payments of £206 million
(2022-23: £179 million) and the capital element of finance lease payments of £10 million (2022-23: £23 million).
Net debt
Net debt is calculated by netting the value of financial liabilities (excluding derivatives) against cash and other liquid assets. Management
consider this APM to be useful as it is a measure of the Group’s net indebtedness that provides an indicator of the overall balance sheet
strength. It is also a single measure that can be used to assess the combined impact of the Group’s indebtedness and its cash position.
The use of the term net debt does not necessarily mean that the cash included in the net debt calculation is available to settle the liabilities
included in this measure. Net debt is also shown on a pre-IFRS 16 basis as the banking covenants are calculated on a pre-IFRS 16 basis.
(£m)
At
31 March
2024
At
26 March
2023
Loans/bonds (1,454) (922)
Asset finance (29) (25)
Leases (1,423) (1,362)
Cash and cash equivalents
1
927 773
Investments 216 –
GLS client cash 47 36
Net debt (1,716) (1,500)
Operating leases
2
1,388 1,319
Pre-IFRS 16 net (debt) (328) (181)
1. Cash and cash equivalents includes bank overdrafts of £56 million at 26 March 2024 and £89 million at 26 March 2023 that are part of a cash pool for the UK companies which generally has a net £nil
balance across the Group and forms an integral part of the Group’s cash management.
2. This amount represents leases that would not have been recognised on the Balance Sheet prior to the adoption of IFRS 16.
Loans and bonds increased by £532 million, largely as a result of the issue of two new bonds offset by the partial repurchase of the 2024
Bond and exchange rate movements on the value of bonds.
Net debt excludes £102 million (2022-23: £208 million) related to the RMPP and RMCPP, and pension escrow investments on the balance
sheet which are not considered to fall within the definition of net debt in the covenants.
Alternative Performance Measures continued
242
International Distribution Services plc Annual Report 2023-24
GLS performance excluding the impact of acquisitions
When reviewing GLS performance, management exclude the impact of current year acquisitions on revenue and operating costs.
This approach strips out the impact of new acquisitions on revenue and operating costs in the current year and allows for revenue
and operating costs movements to be compared on a like for like basis.
(£m)
12 months
31 March 2024 Acquisition
12 months
31 March 2024
excl.
acquisitions
12 months
31 March 2023
Revenue 4,865 38 4,827 4,650
People costs (1,110) (12) (1,098) (1,031)
Non-people costs (3,435) (27) (3,408) (3,271)
Distribution and conveyance costs (2,988) (22) (2,966) (2,847)
Infrastructure costs (334) (4) (330) (310)
GLS performance presented in Euro
IDS plc financial statements are presented in Sterling, being the Group functional currency. However, given GLS strategic targets are set
using Euros, GLS financial performance is presented in Euro as well as Sterling in order to aid transparency.
The reconciliation between the Group functional currency of Sterling and Euro are set out below:
52 weeks 2023-24 52 weeks 2022-23
GLS
performance
in Sterling
GLS
performance
in Euro
GLS
performance
in Sterling
GLS
performance
in Euro
Revenue 4,865 5,635 4,650 5,384
People costs (1,110) (1,286) (1,031) (1,194)
Non-people costs (3,435) (3,978) (3,271) (3,787)
Operating profit 320 371 348 403
GLS performance has been translated using an average exchange rate between Sterling and Euro of £1:€1.16 (2022-23: £1:€1.16). This has
resulted in a net £nil impact in GLS reported operating profit before tax in 2023-24 (2022-23: £5 million increase).
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Disclaimers
This document contains certain forward-looking statements
concerning the Group’s business, financial condition, results of
operations and certain of the 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’, ‘should’, ‘expects’,
‘believes’, ‘intends’, ‘plans’, ‘potential’, ‘targets’, ‘goal’ or ‘estimates’.
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.
Accordingly, readers are cautioned not to place undue reliance
on forward-looking statements.
By their nature, forward-looking statements relate to events
and depend on circumstances that will occur in the future and
are inherently unpredictable. Such forward-looking statements
should, therefore, be considered in light of various important
factors that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements. These factors include, among other things: changes
in the economies and markets in which the Group operates;
changes in the regulatory regime within which the Group operates;
changes in interest and exchange rates; the impact of competitive
products and pricing; the occurrence of major operational problems;
the loss of major customers; undertakings and guarantees relating
to pension funds; contingent liabilities; the impact of legal or other
proceedings against, or which otherwise affect, the Group; and
risks associated with the Group’s overseas operations.
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. 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 Company 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.
Forward-Looking Statements
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International Distribution Services plc Annual Report 2023-24
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International
Distribution
Services plc