Full Year Results 2023-24

International Distribution Svcs PLC

24 May 2024

International Distribution Services plc

(Incorporated in England and Wales)

Company Number: 8680755

LSE Share Code: IDS

ISIN: GB00BDVZYZ77

LEI: 213800TCZZU84G8Z2M70

24 May 2024

INTERNATIONAL DISTRIBUTION SERVICES plc (IDS or IDS plc) RESULTS FOR THE 53 WEEKS ENDED 31 MARCH 2024

Good performance against a challenging macroeconomic backdrop: Royal Mail returned to revenue growth in the second half; GLS continuing to build on its track record of growth and strategic delivery.

IDS overview:

· Revenue £12,679 million, up £635 million year-on-year, driven by GLS and strong H2 in Royal Mail.

· Reported operating profit of £26 million (2022-23: loss of £742 million); adjusted operating loss¹ reduced to £28 million (2022-23: loss of £71 million).

· Adjusted operating profit¹ in GLS of £320 million and adjusted loss of £348 million in Royal Mail;

· Excluding voluntary redundancy charges, Royal Mail adjusted operating loss¹ was £336 million, broadly offset by GLS adjusted operating profit¹, as expected.

· Strong balance sheet retained with ample liquidity:

· Dividend: final dividend proposed of 2.0p for 2023-24, funded by GLS, as previously indicated;

Royal Mail: crossed an inflection point, although headwinds remain

· Strong letter revenue growth and parcels recovery in second half

· Royal Mail close to breakeven in H2 at the adjusted operating level¹, excluding voluntary redundancy charges.

· Operational turnaround accelerating at pace:

· Quality of service on positive trajectory across both commercial and Universal Service Obligation (USO) products, although still below USO targets, with more to do.

· Modernisation agenda progressing: significant expansion of out-of-home footprint with new partnerships and plans to increase parcel drop off locations by more than 50% to 21,000; optimising and automating parcel hubs; delivering CWU agreement and productivity improvements; reducing CO₂ emissions.

· No timetable as yet for reform of Universal Service: Royal Mail's proposal would:

· Ensure a more efficient and financially sustainable Universal Service;

· Maintain the one-price-goes-anywhere service for the entire UK;

· Continue with six-days a week delivery for First Class letters;

· Ofcom should act without delay.

· Emma Gilthorpe joined on 1 May as Royal Mail Chief Executive Officer (CEO).

GLS: revenue growth and adjusted operating profit at upper end of guidance; continuing to invest to deliver on strategic priorities

· Good revenue growth of 4.6% year-on-year driven by B2C and cross-border.

· Investing to support strategic ambitions: expanding network capacity, launching two new hubs and investing in automation; parcel lockers grew by 53%.

· Adjusted operating profit lower year-on-year, as expected, due to inflationary pressures not fully offset by pricing and efficiency measures, and impact of strategic investments.

Reported measures (£m)¹	53 weeks ended March 2024	52 weeks ended March 2023
Revenue² · Royal Mail · GLS	12,679 7,834 4,865	12,044 7,411 4,650
Operating profit/(loss)³	26	(742)
Basic earnings/(loss) per share (pence)	5.6	(91.3)
Adjusted measures (£m)¹	53 weeks ended March 2024	52 weeks ended March 2023
Operating (loss) · Royal Mail · GLS	(28) (348) 320	(71) (419) 348
Operating margin (%)	(0.2)%	(0.6)%
Loss before tax	(75)	(110)
Basic loss per share (pence)	(14.6)	(20.5)
In year trading cash outflow	(73)	(34)
Pre-IFRS 16 in-year trading cash outflow	(279)	(213)
Net debt	(1,716)	(1,500)
Net debt (pre-IFRS 16)	(328)	(181)

Footnotes:

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.

2. Includes intragroup revenue, which represents trading between Royal Mail and GLS, principally a result of Parcelforce Worldwide operating as GLS' partner in the UK. This was £20 million in 2023-24 and £17 million in the prior year.

3. 2022-23 reported operating loss has been re-presented to £742 million from £748 million. This is due to gains on disposal of fixed assets now being recognised in operating profit.

Martin Seidenberg, Chief Executive Officer of IDS commented:

"IDS delivered a good performance during the year in a challenging macroeconomic environment.

"I would like to thank all my colleagues across both Royal Mail and GLS who have worked hard over the past year to serve our customers and play their part in the progress we have made.

"In the last six months we have set Royal Mail on the right trajectory. We made good progress delivering our modernisation agenda and returned to growth in the second half. We have improved quality, won back customers lost during industrial action, controlled costs and delivered Christmas for our customers. Positive momentum is building, although there is hard work in front of us to get back to profitability.

"GLS delivered a strong financial performance, with volume growth of 5% and revenue growth in almost all markets. Operating margin is lower than prior year due to prolonged investment into growth, and cost pressures, both of which we see continuing.

"The transformation of Royal Mail must be supported by Universal Service reform. Our proposal to Ofcom would deliver a more efficient, more reliable and more financially sustainable service, whilst protecting what matters most to customers. The need for reform is urgent and these changes, which do not require legislative change, should be enacted quickly by Ofcom. They just need to get on with it."

Results presentation

A results webcast for analysts and institutional investors is available now at https://www.internationaldistributionservices.com/en/investors/financial-results-presentations.

Enquiries:

Investor Relations

John Crosse

Email: investorrelations@ids-plc.com

Media Relations

Jenny Hall

Phone: 07776 993 036

Email: jenny.hall@royalmail.com

Greg Sage

Phone: 07483 421 374

Email: greg.sage@royalmail.com

Royal Mail press office: press.office@royalmail.com

Company Secretary

Mark Amsden

Email: cosec@ids-plc.com

IDS today confirms it has changed its name from International Distributions Services plc to International Distribution Services plc. 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.

Shareholders should note that their shareholdings will be unaffected by the change of name. Existing share certificates should be retained as they will remain valid for all purposes and no new share certificates will be issued.

Our TIDM, ISIN, SEDOL, CUSIPs and Legal Entity Identifier (LEI) remain unchanged.

The person responsible for arranging the release of this announcement on behalf of IDS plc is Mark Amsden, Company Secretary.

Chair's statement

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.

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.

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

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, CO₂e 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*. 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 submitted its Net-Zero targets for SBTi validation. 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

*Based on internal analysis of publicly available competitor fleet data.

Chief Executive's Review

During the year we have focused on a number of strategic initiatives to improve the customer experience and drive growth.

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.

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.

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 an 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.

Operational performance

Volume and revenue¹


Revenue (£m)	53 weeks March 2024	52 weeks March 2024 ex. 53^rd week in Royal Mail	52 weeks March 2023	Change^1,2 52 wks 2024 ex. 53^rd wk in Royal Mail vs 52 wks 2023
Group³	12,679	12,539	12,044	4.1%
Royal Mail	7,834	7,694	7,411	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 Parcels⁵	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. 53^rd week in Royal Mail	52 weeks March 2023	Change^1,2 52 wks 2024 ex. 53^rd wk in Royal Mail vs 52 wks 2023
Royal Mail
Total Parcels	1,295	1,273	1,205	6%
Domestic Parcels (excluding international)⁴	1,120	1,101	1,064	3%
International Parcels⁵	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 53^rd week revenue and incremental costs in relation to Royal Mail, see the Group's APMs in the section titled 'Presentation of results and alternative performance measures' 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.

Royal Mail

In the following commentary all percentage changes are based on a comparison¹ of 52 weeks March 2024, excluding the 53^rd 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.

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 macroenvironment 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.

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.

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 tCO₂e per year or over 50% of Royal Mail's base year domestic air freight 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 refueling 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.

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.

Risk

Status

Current and planned mitigations

1. Economic and political environment - High 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.

Stable risk

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.

· 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 sub-contractors and implementing appropriate compliance measures, digital tools and adapting to local market circumstances.

Risk

Status

Current and planned mitigations

2. Failure to reduce our operational cost base - High 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.

Stable risk

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.

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.

Risk

Status

Current and planned mitigations

3. Industrial relations (previously 'Industrial action') - High 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.

Stable risk

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.

· 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.

4. Major breach of information security, data protection regulation and/or cyber attack - High 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.

Stable risk

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.

· 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.

Risk		Status	Current and planned mitigations
5. Customer expectations and our ability to grow revenue (previously 'Customer expectations and responsiveness to market changes') - High 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.		Stable risk 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 surcharges 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 out-of-home 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 out-of-home 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.	Royal Mail is focused on: · Restoring quality of service. · Implementing strategic pricing and surcharge actions. · Expanding channel mix and service offerings such as out-of-home, 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 out-of-home 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.
Risk	Status			Current and planned mitigations
6. Financial sustainability of the Universal Service (previously 'Failure to secure Universal Service reform') - High 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.	Increasing risk 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.			· 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.

Risk

Status

Current and planned mitigations

7. Talent: workforce for the future - Moderate 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.

Stable risk

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.

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.

Risk

Status

Current and planned mitigations

8. Climate change and environmental management - Moderate 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.

Stable risk

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 Task Force on Climate-related Financial Disclosures (TCFD) recommendations and have made progress during the year on our ongoing TCFD implementation project.

· 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.

· 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.

Risk

Status

Current and planned mitigations

9. Actual or suspected breaches of material law and/or regulation - Moderate 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).

Stable risk

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 (£8 million 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.

· 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.

10. Business continuity and operational resilience - Moderate 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).

Stable risk

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.

· 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.

Risk

Status

Current and planned mitigations

11. Health, safety and wellbeing - Moderate 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.

Stable risk

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 collisions 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.

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.

Risk

Status

Current and planned mitigations

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

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.

Stable risk

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.

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.

IDS plc:

· Ongoing monitoring of Royal Mail's and GLS' 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.

Financial Review

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 53^rd week revenue and incremental costs in relation to Royal Mail, see the Groups APMs in the section entitled 'Presentation of results and Alternative Performance Measures'. 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'.

Summary results (£m)	Reported 53 weeks March 2024	Specific items and other adjustments	Adjusted¹ 53 weeks March 2024	Reported 52 weeks March 2023	Specific items and other adjustments	Adjusted¹ 52 weeks March 2023
Revenue	12,679	-	12,679	12,044	-	12,044
Royal Mail	7,834	-	7,834	7,411	-	7,411
GLS	4,865	-	4,865	4,650	-	4,650
Intragroup revenue²	(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 costs²	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)

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-IFRS 16 in-year trading cash flow is a non-GAAP measure.

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. 53^rd week in Royal Mail	52 weeks March 2023	% change 52 wks 2024 ex. 53^rd wk in Royal Mail vs 52 wks 2023
Group	12,679	12,539	12,044	4.1%
Royal Mail	7,834	7,694	7,411	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. 53^rd week in Royal Mail	52 weeks March 2023	% change 52 wks 2024 ex. 53^rd wk in Royal Mail vs 52 wks 2023
People costs	(6,793)	(6,719)	(6,440)	4.3%
People costs excluding voluntary redundancy	(6,781)	(6,707)	(6,407)	4.7%
Voluntary redundancy costs	(12)	(12)	(33)	(63.6)%
Non-people costs	(5,914)	(5,886)	(5,675)	3.7%
Total	(12,707)	(12,605)	(12,115)	4.0%

5. The 52 week 2023-24 results are derived by removing the 53^rd week revenue and incremental costs in relation to Royal Mail, see the Groups APM's set out in the section titled 'Presentation of results and alternative performance measures' 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 macroeconomic 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.

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. 53^rd week	52 weeks March 2023	% change 52 wks 2024 ex. 53^rd wk vs 52 wks 2023
Royal Mail	7,834	7,694	7,411	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 Parcels⁷	726	713	684	4.2%
Letters	3,726	3,654	3,501	4.4%
Volume (m units)⁵	53 weeks March 2024	52 weeks March 2024 ex. 53^rd week	52 weeks March 2023	% change 52 wks 2024 ex. 53^rd 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 Parcels⁷	175	172	141	22%
Addressed letters (excluding elections)	6,736	6,617	7,280	(9)%

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 53^rd 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 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%.

Adjusted operating costs^1,5

(£m)	53 weeks March 2024	52 weeks March 2024 ex. 53^rd week	52 weeks March 2023	% change 52 wks 2024 ex. 53^rd wk 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%

5. The 52 week 2023-24 results are derived by removing the 53^rd week revenue and incremental costs in relation to Royal Mail, see the Groups APM's set out in the

section titled 'Presentation of results and alternative performance measures' 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 FTEs 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.

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%)

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.

Operating costs

(£m)	Reported 12 months 31 March 2024	Reported 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)	12 months 31 March 2024	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%

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 benefited 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 benefited 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.

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 benefited 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)

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.

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 flow¹

	53 weeks ending March 2024			52 weeks ending March 2023
(£m)	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 Programme⁹	(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 repayments¹⁰	(125)	(81)	(206)	(104)	(75)	(179)
Pre-IFRS 16 in-year trading cash flow	(371)	92	(279)	(410)	197	(213)

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 53^rd 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).

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 Programme¹¹	18	3
and London Development Portfolio)
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)
Reclassification to liabilities held for sale	18	-
Movement in GLS client cash¹²	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 leases¹³	1,388	1,319
Pre-IFRS 16 net debt¹⁴	(328)	(181)

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.

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 or acquired 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.

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 investments¹⁵	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 facility 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).
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 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, £49 million 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.

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 2024. Due to the timing 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 8 to the Consolidated Financial Statements.

Dividends

A final dividend of 2.0p for 2023-24 has been proposed, to be funded by GLS.

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 Principal Risks and Uncertainties).

· The Group's capital structure and the allocation of capital to support Royal Mail and GLS' respective growth strategies (see Approach to Capital Management). 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 severe but plausible downside scenarios which have 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.

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.

· 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 Principal Risks and Uncertainties).

· 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 scenarios, 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 our Approach to Capital Management 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 scenarios) 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
Scenario:	· Deteriorating economic and market conditions.	· Economic and political environment · Customer expectations and our ability to grow revenue. · Failure to reduce our operational cost base. · Business continuity and operational resilience
Assumptions:	· Revenue growth in the Business Plan is not achieved and decline in operating margins.
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.	· Customer expectations and our ability to grow revenue.
Scenario:	· Incurring costs to avoid industrial action in Royal Mail.	· Industrial relations. · Failure to reduce our operational cost base. · Customer expectations and our ability to grow revenue.
Assumptions:	· Lower operating profit as a result of incurring additional costs to avoid industrial action.
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.	· Failure to reduce our operational cost base.
Scenario:	· Cyber attack triggering service and/or operational interruption.	· Major breach of information security, data protection regulation and/or cyber attack. · Business continuity and operational resilience.
Assumptions:	· Cyber security breach impacting revenue/cost to rectify.

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 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 in the Consolidated Financial Statements.

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.

Consolidated Income Statement

For the 53 weeks ended 31 March 2024 and 52 weeks ended 26 March 2023

	Notes	Reported 53 weeks 2024 £m	Reported 52 weeks 2023 £m
Continuing operations
Revenue		12,679	12,044
Operating costs^1,2	3	(12,545)	(12,248)
People costs		(6,752)	(6,573)
Distribution and conveyance costs		(3,890)	(3,721)
Infrastructure costs		(1,087)	(1,178)
Other operating costs		(816)	(776)
Profit on disposal of property, plant and equipment^{2, 3}	4	15	6
Operating profit/(loss) before specific items²	2	149	(198)
Operating specific items²	4	(123)	(544)
Operating profit/(loss)	2	26	(742)
Finance costs		(98)	(60)
Finance income		51	21
Net pension interest (non-operating specific item)²	4/8	135	105
Profit/(loss) before tax		114	(676)
Tax charge	5	(60)	(197)
Profit/(loss) for the year		54	(873)

Earnings per share (pence)
Basic	6	5.6	(91.3)
Diluted	6	5.6	(91.3)

1. Operating costs are stated before operating specific items.

2. For further details on APMs used, see the Financial Review.

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).

Consolidated Statement of Comprehensive Income

For the 53 weeks ended 31 March 2024 and 52 weeks ended 26 March 2023

	Notes	Reported 53 weeks 2024 £m	Reported 52 weeks 2023 £m
Profit/(loss) for the year		54	(873)
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		(280)	(488)
Decrease in withholding tax payable on distribution of RMPP and RMSEPP surplus	8	436	413
Remeasurement losses of the defined benefit surplus in RMPP and RMSEPP	8(c)	(657)	(1,285)
Remeasurement (losses)/gains of the defined benefit deficit in DBCBS	8(d)	(59)	378
Deferred tax associated with DBCBS	5	-	6
Items that may be subsequently reclassified to profit or loss:
Foreign exchange translation differences		(29)	25
Exchange differences on translation of foreign operations (GLS)		(41)	50
Net gain/(loss) on hedge of a net investment (€500 million bond)		12	(24)
Net loss on hedge of a net investment (Euro-denominated lease payables)		-	(1)
Designated cash flow hedges		(7)	(70)
Gains/(losses) on cash flow hedges deferred into equity		2	(2)
Gains on cash flow hedges released from equity to income		(15)	(85)
Losses released from equity to the carrying value of non-financial assets		1	2
(Loss)/gain on cross-currency swap cash flow hedge deferred into equity		(7)	22
Loss/(gain) on cross-currency swap cash flow hedge released from equity to income - interest payable		13	(26)
Gain on cost of hedging deferred into equity		-	2
Gain on cost of hedging released from equity to income - interest payable		(1)	(1)
Tax on above items	5	-	18
Total other comprehensive expense for the year		(316)	(533)
Total comprehensive expense for the year		(262)	(1,406)

Consolidated Balance Sheet

At 31 March 2024 and 26 March 2023

	Notes	Reported at 31 March 2024 £m	Reported at 26 March 2023 £m
Non-current assets
Property, plant and equipment		3,307	3,298
Goodwill		458	445
Intangible assets		304	304
Investments in associates		1	1
Financial assets
Pension escrow investments		102	208
Derivatives		2	3
RMPP/RMSEPP retirement benefit surplus - net of withholding tax payable	8	1,851	1,957
Other receivables		15	13
Deferred tax assets	5	7	10
		6,047	6,239
Current assets
Inventories		32	42
Trade and other receivables		1,595	1,590
Income tax receivable		23	20
Financial assets
Investments		216	-
Derivatives		6	23
Cash and cash equivalents		1,030	898
Assets held for sale		42	4
		2,944	2,577
Total assets		8,991	8,816
Current liabilities
Trade and other payables		(2,106)	(2,144)
Financial liabilities
Interest-bearing loans and borrowings		(315)	(3)
Lease liabilities		(241)	(220)
Derivatives		(16)	(13)
Income tax payable		(3)	(5)
Provisions	9	(95)	(129)
Bank overdrafts		(56)	(89)
Liabilities held for sale		(24)	-
		(2,856)	(2,603)

Consolidated Balance Sheet continued

At 31 March 2024 and 26 March 2023

	Notes	Reported at 31 March 2024 £m	Reported at 26 March 2023 £m
Non-current liabilities
Financial liabilities
Interest-bearing loans and borrowings		(1,168)	(944)
Lease liabilities		(1,182)	(1,142)
Derivatives		(24)	(22)
DBCBS retirement benefit deficit	8	(60)	(145)
Provisions	9	(89)	(79)
Other payables		(16)	(24)
Deferred tax liabilities	5	(51)	(55)
		(2,590)	(2,411)
Total liabilities		(5,446)	(5,014)
Net assets		3,545	3,802
Equity
Share capital		10	10
Retained earnings		3,540	3,761
Other reserves		(5)	31
Total equity		3,545	3,802

The Financial Statements were approved and authorised for issue by the Board of Directors on 24 May 2024 and were signed on its behalf by:

Martin Seidenberg Michael Snape
Group Chief Executive Officer Group Chief Financial Officer

Consolidated 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	Foreign currency translation reserve £m	Hedging reserve £m	Total equity £m
Reported at 27 March 2022	10	5,248	7	69	5,334
Loss for the year	-	(873)	-	-	(873)
Other comprehensive (expense)/income for the year	-	(488)	25	(70)	(533)
Total comprehensive (expense)/income for the year		(1,361)	25	(70)	(1,406)
Transactions with owners of the Company, recognised directly in equity
Dividend paid to equity holders of the Parent Company	-	(127)	-	-	(127)
Share-based payments
Employee Free Shares issue	-	1	-	-	1
Long Term Incentive Plan (LTIP)	-	1	-	-	1
Tax charge on share-based payments	-	(1)	-	-	(1)
Reported at 26 March 2023	10	3,761	32	(1)	3,802
Profit for the year	-	54	-	-	54
Other comprehensive expense for the year	-	(280)	(29)	(7)	(316)
Total comprehensive expense for the year	-	(226)	(29)	(7)	(262)
Transactions with owners of the Company, recognised directly in equity
Share-based payments
Employee Free Shares issue	-	1	-	-	1
Long Term Incentive Plan (LTIP)	-	3	-	-	3
Deferred Share Bonus Plan (DSBP)	-	1	-	-	1
Reported at 31 March 2024	10	3,540	3	(8)	3,545

Consolidated Statement of Cash Flows

For the 53 weeks ended 31 March 2024 and 52 weeks ended 26 March 2023

	Notes	Reported 53 weeks 2024 £m	Reported 52 weeks 2023 £m
Cash flow from operating activities
Profit/(loss) before tax		114	(676)
Adjustment for:
Net pension interest (non-operating specific item)	4	(135)	(105)
Net finance costs		47	39
Profit on disposal of property, plant and equipment	4	(15)	(6)
Specific items (operating)	4	123	544
Operating profit/(loss) before profit on disposal of property, plant and equipment and specific items¹		134	(204)
Adjustment for:
Depreciation and amortisation		481	602
EBITDA before specific items and profit on disposal of property, plant and equipment¹		615	398
Working capital movements		(155)	(54)
Decrease/(increase) in inventories		11	(8)
(Increase)/decrease in receivables		(62)	180
Decrease in payables		(36)	(237)
Net decrease in derivative assets		3	7
(Decrease)/increase in provisions (non-specific items)		(71)	4
Pension charge adjustment²	4/8	(171)	133
Share-based awards (LTIP and DSBP) charge		4	2
Cash cost of operating specific items	4	(11)	(53)
Cash inflow from operations		282	426
Income tax paid		(67)	(53)
Net cash inflow from operating activities		215	373
Cash flow from investing activities
Finance income received		47	20
Proceeds from disposal of property (excluding London Development Portfolio), plant and equipment		10	11
Cash received on sale and leasebacks - rights of assets transferred		8	-
London Development Portfolio net proceeds/(costs)		87	(6)
Purchase of property, plant and equipment³		(272)	(328)
Acquisition of business interests, net of cash acquired		(35)	(7)
Purchase of intangible assets (software)³		(113)	(93)
Sale of pension escrow investments		130	21
Purchase of pension escrow investments		(16)	(13)
(Purchase)/sale of financial asset investments (current)		(216)	70
Net cash outflow from investing activities		(370)	(325)
Net cash (outflow)/inflow before financing activities		(155)	48

Consolidated Statement of Cash Flows continued

For the 53 weeks ended 31 March 2024 and 52 weeks ended 26 March 2023

	Notes	Reported 53 weeks 2024 £m	Reported 52 weeks 2023 £m
Cash flow from financing activities
Finance costs paid		(79)	(61)
Payment of capital element of obligations under lease contracts		(216)	(202)
Cash received on sale and leasebacks - rights to assets retained		71	-
Proceeds from loans and borrowings		674	-
Repayment of loans and borrowings		(122)	-
Payment of capital element of asset finance		-	(2)
Dividends paid to equity holders of the Parent Company	7	-	(127)
Net cash inflow/(outflow) from financing activities		328	(392)
Net increase/(decrease) in cash and cash equivalents		173	(344)
Effect of foreign currency exchange rates on cash and cash equivalents		(8)	16
Cash and cash equivalents at the beginning of the year		809	1,137
Cash and cash equivalents at the end of the year		974	809

1. For further details on APMs used, see the Financial Review.

2. Excludes £130 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).

Notes to the Consolidated Financial Statements

1. Basis of preparation and accounting policies

General information

International Distribution Services plc (the Company) is incorporated in the United Kingdom (UK). The Consolidated Financial Statements have been produced in accordance with UK-adopted international accounting standards (UK-adopted International Financial Reporting Standards (IFRS)).

The Consolidated Financial Statements of the Company for the 53 weeks ended 31 March 2024 (2022-23: 52 weeks ended 26 March 2023) comprise the Company and its subsidiaries (together referred to as 'the Group') and the Group's interest in its associate undertakings.

The Consolidated Financial Statements for the 53 weeks ended 31 March 2024 were authorised for issue by the Board on 24 May 2024.

Basis of preparation and accounting

The Consolidated Financial Statements are presented in Sterling (£) as that is the currency of the primary economic environment in which the Group operates. All values are rounded to the nearest whole £million except where otherwise indicated. The Consolidated Financial Statements have been prepared on an historic cost basis, except for pension assets, derivative financial instruments and the assets and liabilities relating to the acquisition of businesses, which are measured at fair value. The assets within the partially impaired Royal Mail excluding Parcelforce Worldwide CGU are measured at fair value less costs of disposal.

The Group's 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). GLS' reporting period is the 52 weeks ending 31 March each year. There were no significant transactions in GLS between this reporting period and the remainder of the Group's 53 week reporting period.

The financial information set out above does not constitute the Company's statutory accounts for the 53 weeks ended 31 March 2024 and the 52 weeks 26 March 2023 but is derived from those statutory accounts. Statutory accounts for the 52 weeks 26 March 2023 have been delivered to the registrar of companies. The statutory financial statements for the 53 weeks ended 31 March 2024 were approved by the Board of Directors on 24 May 2023 along with the Financial Report and will be delivered to the Registrar of Companies in due course. The auditor has reported on the statutory financial statements for the 53 weeks ended 31 March 2024 accounts; their report was (i) unqualified, (ii) drew attention to the material uncertainty over going concern by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Presentation of results and accounting policies

As stated above, the Consolidated Financial Statements have been produced in accordance with UK-adopted IFRS, i.e. on a 'reported' basis. In some instances, APMs are used by the Group to provide 'adjusted' results. This is because management is of the view that these APMs provide a useful basis on which to analyse underlying business performance and is consistent with the way that financial performance is measured by management and reported to the Board. Details of the APMs used by the Group are explained in the section titled 'Presentation of results and alternative performance measures'.

Going concern

In assessing the going concern status of the Group, the Directors are required to look forward a minimum of 12 months from the date of approval of these Financial Statements to consider whether it is appropriate to prepare the financial statements on a going concern basis. The Directors have reviewed business activities, together with factors likely to affect the Group's future development and performance, as well as the Group's principal risks and uncertainties.

The Board has concluded that it is appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, with specific consideration of the trading position of the Group in the context of the current global economic environment for the reasons as set out below.

At 31 March 2024 the Group had net current assets of £88 million and net assets of £1.6 billion (excluding defined benefit scheme balances and pension escrow investments). Liquidity available as at the reporting date was £2.1 billion (excluding GLS client cash), made up of cash and cash equivalents of £927 million, current asset investments of £216 million and a committed and undrawn bank syndicate loan facility of £925 million - available until September 2026. The bank syndicate loan facility contains financial covenants, which were amended on 24 March 2023. The amendment, which is relevant for the measurement periods from March 2023 to March 2024, means that the covenants will be calculated by reference to the EBITDA of General Logistics Systems (GLS) B.V. and its subsidiaries rather than the Consolidated EBITDA of the Group.

In their assessment of going concern over the period to 24 May 2025 (the 'going concern assessment period'), the Group has modelled two scenarios referred to below as the Base Case and the Downside Case.

The key inputs and assumptions underlying the Base Case include the economic impact driven by the ongoing macro-economic headwinds in both Royal Mail and GLS. In Royal Mail, following agreement with the CWU of the Business Recovery, Transformation and Growth Agreement in July 2023, it does not assume any further industrial action taking place, and it also assumes that the benefits associated with activity to restore quality of service and transformation of the business are realised resulting in a more efficient operation that meets customers' changing needs. The Base Case assumes Royal Mail has 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). It will benefit from a general election in 2024-25 in letters but structural decline in letters will continue to be offset by pricing actions. Productivity improvements enabled by the pay deal will more than offset operational headwinds including the 2% pay increase, the impact of higher workload and increasing fuel and fleet maintenance costs, and continued focus on cost control. GLS assumes low to mid single digit revenue growth in 2024-25 and some margin dilution linked to ongoing inflationary cost pressure. The Base Case assumes a dividend will be restored over the going concern period funded by GLS.

In September 2023, the Group issued two further bonds and used part of the proceeds to repurchase €135.5 million of the existing €500 million bond. The Group now has four bonds outstanding, of which the remaining €364.5 million outstanding on the 2024 €500 million bond matures in July 2024, which is within the going concern assessment period. The Group holds bank deposits to cover this repayment. The maturity of the €550 million bond in October 2026 is outside of the going concern assessment period.

On 9 May 2023, the Group secured a backstop facility of €500 million from a syndicate of banks to provide additional flexibility on the timing for refinancing the €500 million bond maturing in July 2024. The backstop was cancelled undrawn when the new bonds were issued in September 2023.

The Base Case does not anticipate any regulatory support from Ofcom or the Government, for example change to 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.

In the Base Case it is projected that the Group will have sufficient cash and liquidity. The £925 million bank syndicate loan facility would remain available as covenants would not be breached.

The Downside Case applies further stress to the Base Case to model further deteriorating economic and market conditions impacting both Royal Mail and GLS.

Further details of the scenarios modelled are as follows;

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.

The Directors believe that the downside is a severe but plausible scenario, recognising that the Base Case already anticipates the negative impacts from the weak economy and flow through impact from industrial action that has already taken place in Royal Mail. The gross liquidity impact of the Downside Case to 24 May 2025 is approximately £0.7 billion.

Royal Mail has embarked on its transformation journey but the Board remains concerned about the financial situation in Royal Mail following the difficult trading circumstances as a result of industrial action last year and the continuing uncertainty and prospects of USO reform. The operational changes and improvements required in Royal Mail, including USO reform are fundamental to its turnaround and to restore profitability in that business.

Royal Mail's parent company IDS plc has been clear in their expectation that Royal Mail will take reasonable steps to finance its transformation and ongoing business requirements from its own resources, which include a substantial freehold property portfolio. To the extent that there are short-term working capital needs outside of these arrangements the IDS plc Board would arrange and/or provide access to funds if satisfied these can be repaid.

If the severe but plausible scenario were to materialise, the Directors would be required to take mitigating actions to preserve cash and maintain liquidity by building covenant headroom. The Directors have identified a number of mitigations, all within management's control, to reduce costs and optimise the Group's cash flow, liquidity and covenant headroom.

The mitigation 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.

The Directors have assessed the Group's financial commitments and consider that in the Downside Case, after taking into account mitigations and cash generated from operations and existing facilities, the Group is forecast to have sufficient cash and liquidity. The Group is not projected to breach the financial covenants under its committed credit facilities under the Downside Case, with the lowest EBITDA headroom during the financial year 2024-25 being above £0.2 billion, increasing to approximately £0.3 billion by September 2025. The lowest total availability liquidity modelled under the Downside Case was c.£1.5 billion in August 2024 including the £925 million undrawn bank syndicate loan facility. As such, the Group has sufficient liquidity to continue to operate and to discharge its liabilities as they fall due over the going concern assessment period.

Having reviewed the Base Case, and Downside Case, the Directors have a reasonable expectation that the Group has sufficient liquidity to continue in operational existence over the going concern assessment period and hence continue to adopt the going concern basis in preparing the Financial Statements.

Consideration of non-binding proposal by EP Group to acquire IDS plc

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.

Basis of consolidation

The Consolidated Financial Statements comprise the Financial Statements of the Company and its subsidiary undertakings. The Financial Statements of the major subsidiaries are for the periods as explained in the 'Basis of preparation and accounting' section above, using consistent accounting policies.

All intragroup balances and transactions, including unrealised profits arising from intragroup transactions, have been eliminated in full. Transfer prices between business segments are set at arm's length/fair value on the basis of charges reached through negotiation with the respective businesses.

Subsidiaries are consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is no longer held by the Group. Where the Group ceases to hold control of a subsidiary, the Consolidated Financial Statements include the results for the part of the reporting year during which the Group held control.

Changes in accounting policy and disclosures

The accounting policies applied in the preparation of these Consolidated Financial Statements are consistent with those in the Annual Report and Financial Statements for the 52 weeks ended 26 March 2023, along with the adoption of new and amended accounting standards with effect from 27 March 2023 as detailed below:

New and amended accounting standards adopted in 2023-24

None of the following new and amended standards have a material impact on the financial performance or position of the Group.

IFRS 17 'Insurance Contracts'

This new standard aims to increase transparency and reduce diversity in the accounting for insurance contracts and allow users of financial statements to assess the effect that insurance contracts have on the entity's financial position, financial performance and cash flows.

Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2

These amendments require disclosure of material accounting policies instead of significant accounting policies. This is intended to improve accounting policy disclosures so that they provide more useful information to investors and other primary users of the financial statements and distinguish changes in accounting estimates from changes in accounting policies.

Definition of Accounting Estimates - Amendments to IAS 8

This amendment aims to differentiate between changes in accounting policies and changes in accounting estimates and reduce diversity in this regard in companies' financial statements.

Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to IAS 12

These amendments clarify whether the initial recognition exception applies to certain transactions that often result in both an asset and a liability being recognised simultaneously.

International Tax Reform Pillar Two Model Rules - Amendments to IAS 12

These amendments introduce a mandatory exemption from recognising deferred tax assets and liabilities related to Pillar Two income taxes.

Accounting standards issued but not yet applied

The following new and amended accounting standards are relevant to the Group and are in issue but were not effective at the balance sheet date:

· Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants - Amendments to IAS 1

· Lease Liability in a Sale and Leaseback - Amendments to IFRS 16 Disclosures.

· Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7

· Lack of exchangeability - Amendments to IAS 21

· Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28

· IFRS 18 Presentation and Disclosure in Financial Statements

The Directors do not expect that the adoption of the amendments and new standard listed above (which the Group does not expect to early adopt) will have a material impact on the financial performance or position of the Group in future periods.

Profit/(loss) on disposal of property plant and equipment - income statement re-presentation

Profit/(loss) on disposal of property plant and equipment has been re-presented in the income statement within operating profit/(loss), previously presented as an operating specific item, after operating profit/(loss).

Sources of estimation uncertainty

The preparation of Consolidated Financial Statements necessarily requires management to make certain estimates and judgements that can have a significant impact on the Financial Statements. These estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The areas involving a higher degree of judgement or complexity, or areas where there is thought to be a significant risk of a material adjustment to the Consolidated Financial Statements within the next financial year as a result of the estimation uncertainty are disclosed below.

Significant accounting estimates

Pensions - defined benefit obligation

The value of defined benefit pension plan liabilities and assessment of pension plan costs are determined by long-term actuarial assumptions. These assumptions include discount rates (which are based on the long-term yield of high-quality corporate bonds), inflation rates and mortality rates. Differences arising from actual experience or changes in assumptions will be reflected in the Group's consolidated statement of comprehensive income.

The Group exercises its judgement in determining the assumptions to be adopted, after discussion with a qualified actuary. Details of the key actuarial assumptions used and of the sensitivity of these assumptions for the RMPP and DBCBS pension plans are included within Note 8.

Defined benefit pension plan assets are measured at fair value. Where these assets cannot be valued directly from quoted market prices, the Group applies judgement in selecting an appropriate valuation method, after discussion with an expert fund manager. For the main classes of assets:

· Equities listed on recognised stock exchanges are valued at the closing bid price, or the last traded price, depending on the convention of the stock exchange on which they are quoted.

· Bonds are measured using a combination of broker quotes and pricing models with assumptions made for credit risk, market risk and market yield curves.

· Pooled investment vehicles are valued using published prices or the latest information from investment managers, which includes any necessary fair value adjustments.

· Properties are valued on the basis of open market value as at the year-end date, in accordance with Royal Institute of Chartered Surveyors (RICS) Valuations Standards (under 'Red Book' guidelines) adjusted for any capital expenditure and impairments since that valuation.

· For exchange-traded derivatives that are assets, fair value is based on bid prices. For exchange-traded derivatives that are liabilities, fair value is based on offer prices.

Non-exchange traded derivatives are valued as follows:

· Open forward foreign currency contracts at the balance sheet date are over-the-counter contracts and are valued using forward currency rates at that point. The unrealised appreciation or depreciation of open foreign currency contracts is calculated by the difference between the contracted rate and the rate to close out the contract.

· Interest rate swaps are over-the-counter contracts and fair value is the current value of the future expected net cash flows, taking into account the time value of money and market data at the year end.

The assumptions used in valuing unquoted investments are affected by current market conditions and trends, which could result in changes to the fair value after the measurement date. Details of the carrying value of the unquoted pension plan asset classes can be found in Note 8.

Pensions - DBCBS constructive obligation

The Defined Benefit Cash Balance Section (DBCBS) was introduced in the Group's reporting year 2018-19. In addition to recognising its legal obligations under the DBCBS rules, the Group also recognises any constructive obligation arising from the entity's informal practices. Although there is no legal obligation on the Group or DBCBS Trustees to award increases to the DBCBS lump sum benefits to members in future years, since its inception, the Group has included an accounting constructive obligation in relation to annual increases.

When the DBCBS commenced in 2018-19, the Directors agreed that an appropriate IAS 19 accounting treatment was to recognise a 'specific' constructive obligation of CPI plus 2% in respect of annual increases over the lifetime of the scheme, with any differences compared with actual increases awarded being recognised as an experience gain/loss through other comprehensive income (OCI).

As a result of past experience, the Directors have agreed that the constructive obligation should change, commencing in 2024‑25, to a non-specific constructive obligation, calculated based on the average of the previous five years of increases, but reserving the right to adjust the percentage addition to CPI if future increase expectations are significantly different to the calculated figure. The assumed future increases at 31 March 2024 are CPI plus 1.2% for accounting purposes.

The Group's appointed actuary has determined that a change to a constructive obligation to CPI plus 1.2% has resulted in a £172 million reduction in the DBCBS liability at 31 March 2024, which has been recognised as a 'past service credit' in the income statement as per IAS 19. Any future changes will be recognised through OCI to the extent that the methodology for calculating the assumption remains the same.

The Group's 'adjusted operating profit/(loss)' APM includes an adjustment to offset the impact of this £172 million credit in reported operating profit/(loss) in line with the APM definition in the section titled 'Presentation of results and alternative performance measures'.

Deferred revenue

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'). Management must assess the value of deferred revenue in relation to SITHOP, and this requires a degree of estimation. These estimates require assumptions over various factors as set out below and were there to be significant changes in these estimates, the amount recognised in respect of SITHOP could materially impact the carrying value of the liability. Management utilises a number of different data sources to calculate the estimated SITHOP liability, given that stamps can be held and used for varying time periods. Royal Mail introduced barcoded stamps in February 2022 to replace non‑barcoded stamps. A Stamp Swap Out scheme (where customers could swap out their existing unbarcoded stamps for barcoded stamps) was launched on 31 March 2022. Unbarcoded stamps became invalid for postage in August 2023.

Since the official introduction of barcoded stamps, Royal Mail has been developing a new methodology to calculate the SITHOP balance by using the barcode scan data. The new methodology uses barcode scan data to build a profile of how long stamps are held by customers before being used for postage, this profile is referred to as 'usage curve'. In building this profile it is necessary to estimate the month in which stamps are sold as there is no unique scan of individual stamps at the time of sale. This is estimated through 'bucketing' which makes the assumption that small groups of sequential barcodes ('buckets') are sold at a similar time and that the first stamp scanned in the bucket indicates the month of sale for all stamps in that bucket. The new methodology is reliant on having sufficient scan data history to develop the usage curves over a sufficient length of time and is therefore being used to calculate the SITHOP balance for the first time in 2023-24, now that sufficient scan data is available. The new methodology is based on actual scan data which seeks to estimate when the performance obligation in relation to stamp sales has been fulfilled and as such, is more data driven and less reliant on historic trends and judgements to reflect posting patterns of customers, as was necessary in the previous methodology. Given the impact of this change in methodology on future periods is dependent on sales made in future period, it is impractical to quantify this impact and has therefore not been disclosed.

At 31 March 2024, the Group recognised £138 million (2022-23: £147 million) deferred revenue in respect of stamps

sold to the general public but not used at the balance sheet date. This is materially consistent with the number that would have been recognised under the previous methodology and therefore the future impact of the change on the income statement is also not material.

The usage curves in conjunction with a number of assumptions are applied to historic sales to derive the deferred revenue liability.

Management must exercise a degree of estimation in deriving the SITHOP balance in relation to the following:

· Products removed from both scan data and sales data (to reflect that certain stamps are not typically purchased to be used e.g. collector stamps).

· Non-scan percentage (which refers to the estimate of stamps that are not scanned as they are manually sorted and therefore need to be reflected in the usage curve).

· Bucket size - referring to the number of stamps grouped together as part of estimating the month of sale.

· Method of extrapolating the usage curve beyond the 24 months for which actual scan data is not currently available, the usage curve is extrapolated out to 36 months.

· Level of breakage (which refers to the value of stamps sold that management estimate will not be used, and therefore the likelihood of a performance obligation being required is remote).

· Breakage period - the number of months after which Management considers it a remote possibility that any remaining stamps will be utilised. This is estimated to be after 36 months.

· Buy forward of stamps (refers to an adjustment required to reflect the change in customer behaviour in relation to purchasing stamps in advance of price increases).

· Retail stamp stock days - stamps sold direct to retailers for onwards sale to the public are included in the model but assumes a stock holding period by retailers before being included in the usage curve.

The Group has performed sensitivity analysis of reasonably possible changes in significant assumptions as follows:

· Increasing the bucket size for non-Christmas stamps from three sheets or books to four increases SITHOP by £6 million, whilst decreasing it from three sheets or books to two would reduce the estimate by £13 million.

· A ±5% change in non-scan percentage changes the SITHOP estimate by ±£5 million.

· Increasing or decreasing the gradient when extrapolating the usage curves (changing the speed at which the usage flattens by ±20%) changes SITHOP by c.£5-10 million.

· Increasing the breakage period from 36 to 48 months increases the SITHOP estimate by £14 million, whilst reducing the breakage period to 24 months reduces the SITHOP estimate by £21 million.

Although the impact of the assumptions are individually not material, in combination they could have a significant impact on the SITHOP balance.

Royal Mail excluding Parcelforce Worldwide CGU impairment test

In accordance with IAS 36, Management has performed an impairment assessment of the Royal Mail CGU whenever events or circumstances have indicated that the value of the balance sheet may not be recoverable. In 2023-24, this has resulted in an impairment charge of £48 million (2022-23 £539 million charge).

In the prior year the impairment review was carried out on a pre-IFRS 16 basis. This method included IFRS 16 lease liabilities in the carrying value of the CGU, excluded lease liabilities from the discount rate calculations and included the cash flows associated with lease repayments in the future cash flows. In the current year, the impairment calculation has been performed on a post-IFRS 16 basis with consequential changes to the carrying value, discount rate and future cash flows applied. The CGU carrying value of £1,925 million is therefore higher by c.£900 million to reflect this change when compared with the pre-IFRS 16 basis. There was no material difference in the impairment assessment as a result of the change in methodology.

In assessing whether the Royal Mail CGU remains impaired, the carrying value of the Royal Mail CGU of £1,925 million on a post-IFRS 16 basis (2022-23: £1,439 million on a pre-IFRS 16 basis) was compared to its recoverable amount. The recoverable amount is the higher of its Value in use (VIU) and its Fair value less cost to dispose (FVLCD).

Royal Mail's strategy to transform the business into a more efficient operation that meets customers' changing needs and the future cash flows in the 2024 five-year Business Plan reflects both the costs and benefits associated with this transformation.

Royal Mail has a robust process for tracking and managing environmental policy and legislation in the UK and is aiming to meet changing customer expectations for lower carbon alternatives. As such, management have considered the implications for the forecast cash flows in the five-year period, and the assumptions in the Business Plan reflect management's current climate strategy.

As required by IAS 36, under the VIU calculation, estimates of future cash flows shall not include cash inflows or outflows that are expected to arise from a future restructuring or improving or enhancing the assets to which an entity is not yet committed, at the balance sheet date. The VIU approach, after adjusting for the restructuring and transformational cash flows, resulted in a significant further impairment.

Management therefore assessed the recoverability of the Royal Mail CGU using the alternative FVLCD methodology. The FVLCD considers the valuation from a 'market participant' perspective. Management have calculated a valuation using a discounted cash flow model from the perspective of a market participant i.e. a buyer transacting in the principal market for an asset of this type.

The Board have used the approved 2024 five-year Business Plan as the base of the discounted cash flows in the FVLCD model (Level 3 fair value inputs). They then considered their assumptions in the context of information that would be available to a market participant. Cash flow adjustments have been made to reflect the risk in the plan.

Key assumptions in the impairment assessment

Expected revenue and operating margin performance: Forecast cash flows are based on the five-year Board Business Plan approved in April 2024.

The key inputs and assumptions underlying the Business Plan include the economic impact driven by ongoing macro-economic headwinds. Following agreement with the CWU of the Business Recovery, Transformation and Growth agreement in July 2023, it does not assume any further industrial action taking place. The plan assumes a return to market growth, driven by win back of revenue lost as a result of industrial action, pricing adjustments and other commercial initiatives designed to grow revenue. The plan assumes growth in parcel volumes but a reduction in letter volume.

Revenue growth initiatives are reliant on quality-of-service improvement. Operating margin reflects the current pay deal agreed and benefits realisation from productivity improvements, including through lower absence, new T&Cs for new joiners and delivery gap closure. The plan does not anticipate any regulatory support from Ofcom or Government, for example a change in the scope of the USO.

To reflect a market participant's view, a risk adjustment has been applied to the plan cash flows to reflect macro-economic risks to the Business Plan assumptions.

Discount rates: The discount rate is based on the UK-specific post tax discount rate of 10.5% (2022-23: 11.3%), which reflects a risk premium a market participant would apply in order to reflect uncertainty in terms of ability to deliver revenue growth and improve operating margin. In deriving the risk premium a market participant would consider past performance in terms of delivering transformational change, and the significant change and efficiency programme to be delivered.

Property proceeds: Adjustments have been made to the real estate proceeds assumed in the Business Plan to reflect current market conditions and to better represent a market participant's view of realisable sales proceeds.

Recoverable amount

In accordance with the financial reporting standards, the recoverable amount is the higher of the VIU and FVLCD. The FVLCD approach resulted in a recoverable amount that was below the carrying value at the year-end, and therefore a further impairment charge of £48 million (2022-23: impairment charge of £539 million). The additional impairment charge in the year is mainly as a result of the deterioration in the property market since the previous year end resulting in lower property disposal proceeds included in the cash flows.

Sensitivity to changes in assumptions

The valuation of the Royal Mail CGU is dependent upon a number of estimates used in arriving at revenue growth, operating margin, terminal growth rates and the discount rate. An evaluation of sensitivities to the FVLCD calculation illustrates that there are both risks and opportunities. The operational changes and improvements required in Royal Mail are fundamental to its turnaround to restore profitability. Given past performance of delivering transformational change, and the significant change and efficiency programme to be delivered, there is execution risk in delivering the plan which could lead to further impairment. However, there is also significant opportunity and, subject to progress being made in transforming the business and evolution of the letters and parcels markets, there is a reasonable possibility in the future for the business to be restored to its full carrying value.

The following represent key areas of sensitivity in the model:

Regulation: The plan does not anticipate any regulatory support from Ofcom or Government, for example a 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 and valuation of the business.

Market: if parcel growth rates are 1% per annum more positive this would result in a valuation of £3.1 billion but if parcel growth reduced by 1% it would result in a valuation of £570 million. If letter growth rates are 1% per annum less than has been assumed, this would result in a valuation of £1.0 billion.

Discount rate: Whilst we have risk-adjusted the plans for the purposes of the impairment model, further delivery risk remains that the planned change programmes are unable to progress at the rate targeted in the FVLCD model. An increase in the discount rate by a further 100 bps reflecting increased uncertainty would result in a valuation of £1,736 million and an implied further impairment of c.£140 million (2022-23: valuation of £787 million and further impairment of £113 million (pre-IFRS 16 basis)). A decrease in the discount rate of 100 bps would result in a valuation of £2,039 million and an implied impairment reversal of c.£160 million (2022-23: valuation of £1,038 million and implied reversal of £138 million (pre-IFRS 16 basis)).

Property proceeds: Current property proceeds are included at Alternative Use Value (AUV) in the cash flow workings. Using the current 'red book' valuations would result in a valuation of £1,845 million and an implied further impairment of c.£30 million.

Combined sensitivities: An 11% discount rate and 1% terminal growth rate would result in a valuation of £1,861 million. In order for there to be a full reversal of the impairment the discount rate would need to reduce by 240 bps, or the terminal growth rate would need to increase to 3.4% (2022-23: discount rate reduction of 175 bps and terminal growth rate increase to 2.0%).

Other estimates

Provisions - industrial diseases

There is considerable uncertainty associated with estimating the future reporting of latent disease claims, over future decades. Consistent with the approach last year, our external actuarial consultant has leveraged the updated scenarios provided by the Institute and Faculty of Actuaries (UK Asbestos Working Party (AWP)). The AWP's model was released in late 2021.

The provision requires estimates to be made of the likely volume and cost of future claims, as well as the discount rate to be applied to these, and is based on the best information available at the year-end date.

In view of the above, management has applied a consistent approach to that of previous years and recognised a provision at 31 March 2024 between the medium and high estimates provided by the actuarial consultant. There has been no release of the provision in 2023-24 (2022-23: £10 million - recognised in the income statement as an operating specific item). Movement in the provision has been mainly driven by the settlement of claims, resulting in a closing balance at 31 March 2024 of £39 million (2022-23: £44 million) (see Notes 4 and 9).

A 50 bps decrease to the 4.39% discount rate used at 31 March 2024 would result in a £2 million increase in the overall provision. Any income statement movements arising from a change in accounting estimate are recognised as an operating specific item, subject to the Group's materiality threshold for such items.

2. Segment information

The Group's operating segments are based on geographic business units whose primary services and products relate to the delivery of parcels and letters. These segments are evaluated regularly by the International Distribution Services plc Board - the Chief Operating Decision Maker (CODM) as defined by IFRS 8 'Operating Segments' - in deciding how to allocate resources and assess performance.

A key measure of segment performance is operating profit before specific items. This measure of performance is disclosed on an 'adjusted' basis, a non-IFRS measure, excluding specific items and other adjustments (see Alternative Performance Measures section of Financial Review). This is consistent with how financial performance is measured internally and reported to the CODM.

Transfer prices between segments are set at an arm's length/fair value on the basis of charges reached through negotiation between the relevant business units that form part of the segments.

53 weeks 2024			Adjusted		Specific items and other adjustments²		Reported
Continuing operations	Royal Mail (UK operations) £m	GLS (Non-UK operations) £m	Eliminations¹ £m	Adjusted Group £m	Royal Mail (UK operations) £m	GLS (Non-UK operations) £m	Group £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 adjustments²		Reported
Continuing operations	Royal Mail (UK operations) £m	GLS (Non-UK operations) £m	Eliminations¹ £m	Adjusted Group £m	Royal Mail (UK operations) £m	GLS (Non-UK operations) £m	Group £m
Revenue	7,411	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 equipment³	-	-	-	-	5	1	6
Operating (loss)/profit before specific items³	(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)

1. Revenue and non-people costs eliminations relate to intragroup trading between Royal Mail and GLS, due to Parcelforce Worldwide being GLS' partner in the UK. Finance costs/income eliminations relate to intragroup loans between Royal Mail and GLS.

2. See Note 4 for details of specific items and other adjustments.

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 (loss)/profit (see Note 1 - changes in accounting policy and disclosures).

The depreciation and amortisation costs shown below are included within 'operating profit before specific items' in the income statement.

The non-current assets below exclude financial assets, retirement benefit surplus and deferred tax, and are included within 'non‑current assets' on the balance sheet.

53 weeks 2024	Royal Mail (UK operations) £m	GLS (Non-UK Operations) £m	Eliminations⁴ £m	Total £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)

52 weeks 2023	Royal Mail (UK operations) £m	GLS (Non-UK Operations) £m	Eliminations⁴ £m	Total £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)

4. Eliminations in respect of total assets relate to intragroup balances between Royal Mail and GLS.

The Company is domiciled in the UK. The split of revenue from external customers and non-current assets (excluding financial assets, retirement benefit surplus and deferred tax) between the UK and GLS' presence in Continental Europe and North America is shown below.

53 weeks 2024

£m

Continental Europe

£m

North

America

£m

Eliminations⁵

£m

Total

£m

Revenue

7,834

4,315

550

(20)

12,679

Non-current assets

2,058

1,551

476

4,085

52 weeks 2023

£m

Continental Europe

£m

North

America

£m

Eliminations⁵

£m

Total

£m

Revenue

7,411

4,043

607

(17)

12,044

Non-current assets

2,169

1,379

513

4,061

5. Eliminations in respect of revenue and non-current assets relate to intragroup balances between Royal Mail and GLS.

3. People information

	53 weeks 2024 £m	52 weeks 2023 £m
Wages and salaries	(5,770)	(5,359)
Royal Mail¹	(4,785)	(4,437)
GLS	(985)	(922)
Pensions (see Note 8)	(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%

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 equivalents³				Headcount⁴
	Year end		Average		Year end		Average
	53 weeks 2024	52 weeks 2023	53 weeks 2024	52 weeks 2023	53 weeks 2024	52 weeks 2023	53 weeks 2024	52 weeks 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. 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 2024 £'000	52 weeks 2023 £'000
Directors' remuneration⁵	(3,500)	(3,463)
Amounts earned under long-term incentive plans	-	(364)
Number of Directors accruing benefits under defined contribution plans	-	1

5. These amounts include any cash supplements received in lieu of pension. Details of the pension contributions and the highest-paid Director are included in the single figure table of the Directors' Remuneration Report in the Annual Report and Financial Statements 2023-24.

4. 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 2024 £m	52 weeks 2023 £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.

5. Taxation

	53 weeks 2024 £m	52 weeks 2023 £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

Tax recognised directly in equity:

In addition to the amount (charged)/credited to the income statement and other comprehensive income, the following amount relating to tax has been recognised directly in equity:

	53 weeks 2024 £m	52 weeks 2023 £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)

Reconciliation of the total tax charge

A reconciliation of the tax charge in the income statement and the UK rate of corporation tax applied to accounting profit for the 53 weeks ended 31 March 2024 and 52 weeks ended 26 March 2023 is shown below. The reconciliation is prepared using the UK corporation tax rate, as the Group is listed on the UK stock exchange and the UK is the main country in which the Group trades.

	53 weeks 2024 £m	52 weeks 2023 £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)

Deferred tax

Deferred tax by balance sheet category 53 weeks 2024	At 27 March 2023 £m	Credited/ (charged) to income statement £m	Acquisition of subsidiaries £m	Exchange rate movement £m	Jurisdictional right of offset £m	At 31 March 2024 £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	15	1	-	-	-	16
Losses available for offset 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)

Deferred tax by balance sheet category 52 weeks 2023¹	At 28 March 2022 £m	Credited/ (charged) to income statement £m	Credited to other comprehensive income £m	Charged directly in equity £m	Acquisition of subsidiaries £m	Exchange rate movement £m	Jurisdictional right of offset £m	At 26 March 2023 £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	25	(11)	-	-	-	1	-	15
Employee share 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)

1. Re-presented due to the impact of applying the IAS 12 amendment

Deferred tax assets and liabilities are offset within the same jurisdiction where the Group has a legally enforceable right to do so. Below is an analysis of the deferred tax balances (after offset) for balance sheet presentation purposes.

Deferred tax - balance sheet presentation	At 31 March 2024 £m	At 26 March 2023 £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)

GLS has deferred tax assets and liabilities in various jurisdictions which cannot be offset against one another. The main elements of the liability relate to goodwill and intangible assets in GLS Germany, for which the Group has already taken tax deductions, and fixed assets and intangible assets in relation to acquisitions in Canada.

Unrecognised temporary differences

The Group assesses the recoverability of deferred tax assets at each reporting date. In order to recognise a deferred tax asset, it must be probable that future taxable profits will be available against which the deductible temporary differences and unused tax losses can be utilised. IAS 12 does not define a time period over which an assessment of expected taxable profits should be made, although it is acknowledged that reliability decreases the further out into the future the forecast extends. Whilst the Board-approved Business Plan covers five years, the normal planning cycle for Royal Mail is three years. Taxable profits have been calculated based on the Board-approved Business Plan and whilst for the next three years this shows taxable profits, there are negligible taxable profits in the early years. Therefore, there remains sufficient uncertainty that future taxable profits will be generated. As a result, management continues to not recognise any deferred tax asset in respect of the Royal Mail tax losses or other temporary differences.

At 31 March 2024, the Group had the following unrecognised tax losses and temporary differences:

	At 31 March 2024 £m		At 26 March 2023 £m
	Unused losses and deductible temporary differences	Tax value	Unused losses and deductible temporary 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	35	9	29	7
GLS
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

The Group has not recognised these deferred tax assets on the basis that there is not sufficient certainty of its capacity to utilise them in the future. The Royal Mail and GLS losses available for offset against future taxable income have no expiry date.

The Group also has temporary differences of £188 million (2022-23: £174 million) in respect of capital losses, the tax effect of which is £47 million (2022-23: £44 million) in respect of assets previously qualifying for industrial buildings allowances, that would arise if the assets were sold at net book value. These losses have no expiry date. Further temporary differences exist in relation to £420 million (2022-23: £419 million) of gains for which rollover relief has been claimed, the tax effect of which is £105 million (2022-23: £105 million). No tax liability would be expected to crystallise on the basis that, were the assets (into which the gains have been rolled over) to be sold at their residual values, no capital gain would arise.

Unremitted earnings

There are also temporary differences of £1,538 million (2022-23: £1,399 million) in relation to unremitted earnings of subsidiaries. No deferred tax liability has been recognised as the Group is able to control the timing and reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Tax developments

The Group has been monitoring developments in relation to the OECD's work on the Pillar two (Global Minimum Tax) rules. Finance (No.2) Act 2023 was substantively enacted in the UK during the year, which introduced the global minimum tax rules for accounting periods beginning on or after 31 December 2023. The Group expects to be subject to the Pillar two rules. However, based on early analysis, it expects that most jurisdictions in which it operates will benefit from a transitional safe harbour. For those jurisdictions that do not meet the conditions of the safe harbour it is probable that the top-up tax would not be material.

6. Earnings per share

	53 weeks 2024			52 weeks 2023
	Reported	Specific items and other adjustments¹	Adjusted	Reported	Specific items and other adjustments¹	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. Further details of specific items and other adjustments can be seen in Note 4.

The diluted earnings per share 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.

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. The Company, however, does not hold any shares in treasury.

7. Dividends

Dividends on ordinary shares

53 weeks

2024

pence

per share

52 weeks

2023

pence

per share

53 weeks

2024

£m

52 weeks

2023

£m

Final dividend paid

13.3

127

Total dividends paid

13.3

127

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.

8. Retirement benefit plans

Summary pension information

	53 weeks 2024 £m	52 weeks 2023 £m
Ongoing UK pension service costs
UK defined benefit plans (including administration costs)¹	(254)	(385)
Past service credit²	172	-
UK defined contribution plan	(135)	(124)
UK defined benefit and defined contribution plans' Pension Salary Exchange employer contributions³	(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 costs⁴
UK defined benefit plan's employer contributions⁵	(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)⁶	(49)	-
Pension charge adjustment excluding pension escrow release⁷	171	(133)

	At 31 March 2024 '000	At 26 March 2023 '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's 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 4).

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 4 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:

UK defined contribution plan

Royal Mail Group Limited, the Group's main UK operating subsidiary, operates the Royal Mail Defined Contribution Plan (RMDCP). This plan was launched in April 2009 and is open to employees who joined the Group from 31 March 2008, following closure of the RMPP to new members.

UK defined benefit plans

Royal Mail Pension Plan (RMPP)⁸ and Defined Benefit Cash Balance Section (DBCBS)

The legacy section of the RMPP closed to future accrual in its previous form from 31 March 2018, and was replaced in 2018 by a new section of the scheme, the DBCBS.

The legacy RMPP includes sections A, B and C, each with different terms and conditions.

	Section A	Section B	Section C
Joining date for members (or beneficiaries of members)	Before 1 December 1971	On or after 1 December 1971 and before 1 April 1987 or for members of Section A who chose to receive Section B benefits.	On or after 1 April 1987 and before 1 April 2008
Terms	Pension of 1/80th of pensionable salary plus a tax-free lump sum of 3/80ths of pensionable salary for each year of pensionable service, until 31 March 2018.		Pension of 1/60th of pensionable salary for each year of pensionable service, until 31 March 2018.
			Members wishing to take a tax-free lump sum on retirement do so in exchange for a reduced pension.

8. Any references to the RMPP relate to the scheme's defined pension liabilities built up to 31 March 2018. From 1 April 2018 members began building up DBCBS benefits.

The DBCBS has been in place since 1 April 2018, when the RMPP closed. This is a transitional arrangement until the proposed Royal Mail Collective Pension Plan (RMCPP) commences.

DBCBS members build up a guaranteed lump sum benefit of 19.6% of their pensionable pay each year. Although there are no guaranteed increases to this lump sum, the aim is to provide above inflation increases and the Trustee invests the scheme assets accordingly. If the value of the DBCBS assets were to fall below the value of the members' guaranteed lump sum benefits, then no increases would be awarded until the asset values had recovered. The Group would be obligated to make the necessary contributions to ensure that members received at least the guaranteed lump sum amount. From an assessment of announcements and internal communications made to members of the scheme to date and taking into account the increases granted to date, management is however of the view that there is a requirement to recognise a constructive obligation to provide an increase to the lump sum for accounting purposes. The increase awarded from 1 April 2024 is CPI (at 6.7%) plus 0%. The liabilities of the scheme have been calculated assuming future increases of CPI plus 1.2%, although the nature of the scheme means that actual increases could be lower or higher than this amount.

The Group signed an updated Schedule of Contributions on 13 March 2024. This covers a period of five years from the date of certification of the schedule, i.e. until May 2029. In accordance with this schedule, the Group is required to make payments totalling 15.6% of pensionable payroll in respect of DBCBS. Contributions are payable in respect of periods prior to 1 February 2024 or after 30 June 2024. In the period between these two dates, employer contributions are paid instead into the RMPP Escrow per an agreement with the Pension Trustee. These contributions are not considered to be Plan assets as the Trustee does not have control over the assets. This balance is included within non-current assets.

Pensions governance and management

Royal Mail Pensions Trustees Limited acts as the corporate Trustee to the Royal Mail Pension Plan (comprising the RMPP and DBCB Sections). There are currently eight Trustee Directors who sit on the Trustee Board. There is one vacancy for an employer-nominated Trustee Director. The Trustee Board is supported by an executive team of pension management professionals. They provide day-to-day Plan management, advise the Trustee Board on its responsibilities and ensure that decisions are fully implemented.

The Trustee Board is responsible for:

Monitoring the covenant of the participating employers	To help protect benefits, the Trustee Board monitors the financial strength of 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 of all RMPP beneficiaries	The Trustee Board must pay all benefits as they fall due under the Trust Deed and Rules.

Royal Mail Senior Executives Pension Plan (RMSEPP)

This scheme for executives closed in December 2012 to future accrual; therefore, the Group makes no regular future service contributions.

In September 2018 an insurance policy was purchased in respect of all remaining pensioners and deferred members, following which it was decided to proceed to buy out and wind-up the plan.

The buy-out of this scheme was completed in June 2022, with the bulk annuity policies being exchanged for individual policies between the insurers and all remaining members. All of the Group's obligations under the plan have now been fully extinguished and the Group has therefore de-recognised all liabilities under the scheme as well as the corresponding assets that had previously represented the value of the bulk of annuity policies.

Unfunded pension

A liability of £1 million (2022-23: £1 million) has been recognised for future payment of pension benefits to a past Director.

Accounting and actuarial funding surplus position (RMPP, RMSEPP and DBCBS)

In addition to the accounting valuations calculated in accordance with IAS 19, actuarial funding valuations are carried out every three years by actuaries commissioned by the Trustee for the purposes of calculating contributions and funding requirements. For the RMPP, the main difference between the accounting and actuarial funding valuations is that different rates are used to discount the projected scheme liabilities. The accounting valuation uses yields on high-quality corporate bonds and the actuarial funding valuation uses gilt yields. As the accounting discount rate is higher than the actuarial funding discount rate, this leads to a lower computed liability.

The difference between the funding and accounting valuations for the DBCBS arises from the different financial assumptions used for the calculations of each, in particular the discount rates used and the assumptions for discretionary increases to the lump sum benefits. The discount rate used for funding purposes is higher than that used for accounting purposes. In addition, as described above, under IAS 19, the Group recognises a constructive obligation in respect of future increases to benefits until retirement, currently CPI plus 1.2% (refer to Note 1), for accounting purposes; however, for funding purposes the increases are set based on the level of the available assets. This results in the accounting liabilities for the DBCBS being higher than the funding liabilities.

The updated triennial valuation for RMPP and the first triennial valuation for the DBCBS at 31 March 2021 were approved in May 2022. Since the liabilities under the RMSEPP scheme have now been fully bought out, the Trustee did not carry out a full triennial valuation at 31 March 2021. The estimated funding positions for the RMPP and DBCBS are shown below.

	RMPP	DBCBS
Date of valuation	31 March 2021 (agreed on 17 May 2022)	The first full valuation was performed as at 31 March 2021 and was agreed on 17 May 2022.
Valuation	The triennial valuation was calculated on a self sufficiency basis. The surplus calculated for the purposes of the March 2021 triennial valuation was £661 million. Based on a set of assumptions which form the basis for the March 2021 valuation and then rolled forward, the actuarial surplus at 31 March 2024 was estimated to be around £1,025 million.	An estimated funding position at 31 March 2024 has been calculated based on the assumption that the funding surplus is equal to the amount held in respect of the risk reserve. Under this method, the DBCBS actuarial surplus was estimated to be around £47 million at 31 March 2024.

Below is a summary of the combined plans' assets and liabilities on an accounting (IAS 19) basis.

	DBCBS		RMPP		RMSEPP
	At 31 March 2024 £m	At 26 March 2023 £m	At 31 March 2024 £m	At 26 March 2023 £m	At 31 March 2024 £m	At 26 March 2023 £m
Fair value of plans' assets (11(b) below)	1,903	1,652	6,983	7,604	7	8
Present value of plans' liabilities⁹	(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 payable¹⁰	n/a	n/a	(616)	(1,051)	(2)	(3)
(Deficit)/surplus in plans	(60)	(145)	1,846	1,952	5	5

9. The 2024 DBCBS liabilities have been reduced by a one-off past service credit of £172 million which has arisen from the change in constructive obligation.

10. Any reference to a withholding tax adjustment relates to withholding tax payable on distribution of a pension surplus. Withholding tax was 35% in the prior year and has changed to 25% in the current year.

Having taken legal advice with regard to the rights of the Group under the Trust deeds and rules, the Directors believe there is an obligation to recognise a pension surplus for the RMPP on an accounting basis. The surplus on an accounting basis will be different to the scheme's funding position. Under IAS 19 and IFRIC 14, it must recognise the economic benefit it considers to arise from either a reduction to its future contributions or a refund of the surplus at some point in the future, using current long-term accounting assumptions at the reporting date. This is a technical adjustment made on an accounting basis only.

This surplus is presented on the balance sheet net of a withholding tax adjustment of £616 million (at 26 March 2023: £1,051 million) in respect of the RMPP, which represents the tax that would be withheld on the surplus amount. Any actuarial surplus will remain in the RMPP for the benefit of members until the point at which all benefits have been paid out or secured.

Under the terms of the DBCBS, any surplus would be awarded to members and therefore if this section was found to be in surplus the defined benefit liabilities would increase to equal the asset value under IAS 19.

Guaranteed Minimum Pensions

Pension schemes are now under an obligation to address the issue of unequal Guaranteed Minimum Pensions (GMPs). The transfer of RMPP's historical pension liabilities to HM Government in 2012, in accordance with the Postal Services Act 2011, included all of the RMPP's accrued GMP liabilities for members. The requirement to remove the inequality in former RMPP benefits deriving from GMPs for those members therefore rests with HM Government. Following the decision by the High Court in Lloyds Banking Group Pensions Trustees Limited versus Lloyds Bank plc (2020), however, which determined that schemes are also obliged to equalise GMPs by topping up payments for any past members who have transferred out of a scheme since May 1990, the Trustee sought legal advice as to whether this decision also applies in the case when liabilities were transferred to another scheme before April 2012. The Trustee considers that the Lloyds judgment is likely to give rise to a residual liability for statutory transfers out which included GMP benefits between May 1990 and March 2012 and expects that this will require top-up payments to be made for affected former members. The Trustee is still reviewing historic data to calculate the exact expected impact, which will take some time to complete, but the Group's Corporate Actuary provisionally estimated the cost to be c.£6 million, based on historic values of transfers out of the scheme. This was charged to the income statement in the year ended 27 March 2022 as a past service cost. This cost will be funded from the RMPP assets and no additional employer contributions are expected to be required.

All GMP liabilities relating to RMSEPP members (both past and present) have now been settled and, following the transfer of the liabilities under this Scheme to insurers, its liabilities have been extinguished.

Virgin Media Case

The Group is aware of the 2023 high court case that considered the validity of deeds where no Section 37 certificate (confirming that the minimum level of benefits had not been breached) was attached to the deed; and further understands that the case is being appealed with judgment expected in June 2024. The RMPP Trustees are of the view that the liabilities prior to 2012 have been discharged and the important rules changes since 2012 occurred in 2017 and 2018. Given that the ruling relates to contracted out benefits between 1997 and 2016, it is unlikely that these changes would be affected by the judgment. The Group will await the outcome of the appeal prior to assessing what, if any, impact there might be on the scheme balances. The Group considers this approach reasonable and appropriate.

The following disclosures relate to the major assumptions, sensitivities, assets and liabilities in the RMPP, RMSEPP and DBCBS.

a) Major long-term assumptions used for accounting (IAS 19) purposes - RMPP and DBCBS

IAS 19 assumptions will be derived separately for the legacy RMPP and DBCBS, in particular taking into account the different weighted durations of the future benefit payments. No assumptions have been derived for RMSEPP at 26 March 2023 and 31 March 2024 since the scheme has now been fully bought out and the liabilities extinguished.

The major assumptions used to calculate the accounting position of the pension plans are as follows:

	At 31 March 2024	At 26 March 2023
Retail Price Index (RPI) - RMPP^11,15	3.2%	3.2%
Retail Price Index (RPI) - DBCBS^11,15	3.3%	3.2%
Consumer Price Index (CPI) - RMPP^11,15	2.9%	2.9%
Consumer Price Index (CPI) - DBCBS^11,15	2.9%	2.8%
Discount rate - RMPP^11,12
- nominal	4.9%	4.7%
- real (nominal less RPI)	1.7%	1.5%
Discount rate - DBCBS¹³
- nominal	4.8%	4.7%
- real (nominal less RPI)	1.5%	1.5%
Rate of increase in pensionable salaries¹⁴	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 C¹⁴	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

11. 31 March 2024 assumptions are derived for RMPP and DBCBS only since the RMSEPP scheme was fully bought out in the year.

12. The discount rate reflects the average duration of the RMPP benefits of around 19 years (2022-23: 20 years). The reduction in duration is due to the increase in the liability discount rate and rounding.

13. The discount rate reflects the average duration of the DBCBS benefits of 11 years (2022-23: 13 years). The pension service cost applicable from 27 March 2023 is based on 27 March 2023 assumptions. The reduction in duration is due to the increase in the liability discount rate and rounding.

14. The rate of increase in salaries, and the rate of pension increase for Section C members (who joined the RMPP on or after April 1987), is capped at 5.0%, which results in the average long-term pension increase assumption being 10 basis points lower than the RPI long-term assumption.

15. This is a measure of long-term inflation expectations so while short-term inflation expectations have increased over the period, in the long-term, they are expected to be lower.

Mortality

As part of the actuarial valuation as at 31 March 2021, the Scheme Actuary carried out an updated mortality experience analysis in respect of the legacy RMPP. As a result of that analysis, the RMPP assumptions are based on the heavy version of the latest Self-Administered Pension Scheme (SAPS) S3 mortality tables with appropriate scaling factors (96% for male pensioners and 113% for female pensioners). Future improvements for accounting purposes use the parameters identified from that analysis but for the year end have been based on the CMI 2022 core projections (smoothing factor 7.5 with a long-term trend of 1.5% per annum, and weightings to experience in 2020, 2021 and 2022 of 0%, 0% and 25% respectively). The choice of the non-zero weighting to 2022 experience is driven by the fact that mortality was persistently higher for most of 2022 when compared to 2019, which was not solely due to COVID, suggesting that experience in 2022 may to some extent be indicative of future mortality.

Sensitivity analysis for RMPP and DBCBS liabilities

The RMPP and DBCBS liabilities are sensitive to changes in key assumptions. The potential impact of the largest sensitivities on the RMPP and DBCBS liabilities is as follows:

	At 31 March 2024		At 26 March 2023
Key assumption change	Potential increase in DBCBS liabilities £m	Potential increase in RMPP liabilities £m	Potential increase in DBCBS liabilities £m	Potential increase in RMPP liabilities £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	-

This sensitivity analysis has been determined based on a method that assesses the impact on the defined benefit obligation, resulting from reasonable changes in key assumptions occurring at the end of the reporting year. The discount rate and RPI sensitivities are calculated using the mean term of the relevant section to derive the impact of a 0.1% and 0.5% change in assumption. For the RPI/CPI gap, the approach is the same for DBCBS, but for legacy RMPP, the liabilities as at 31 March 2024 are considered to derive an accurate impact in percentage terms. This percentage is then applied to the liabilities at March 2024. This approach is unchanged from the prior year, although any change in mean terms will impact the sensitivities. Changes inverse to those in the table (e.g. an increase in discount rate) would have the opposite approximate effect on liabilities.

b) RMPP, RMSEPP and DBCBS assets

	At 31 March 2024			At 26 March 2023
	Quoted £m	Unquoted £m	Total £m	Quoted £m	Unquoted £m	Total £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
Equity¹⁶	60	-	60	85	-	85
Private equity¹⁶	-	261	261	-	227	227
Fixed interest	-	35	35	172	106	278
Private debt	-	443	443	-	504	504
Property	-	79	79	-	51	51
Liability-driven investments¹⁷	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
Other¹⁸	-	93	93	-	(5)	(5)
Derivatives	-	(178)	(178)	-	(5)	(5)
Total plans' assets	7,115	1,778	8,893	7,289	1,975	9,264

16. The equity and private equity assets in 2022-23 have been re-presented due to new information becoming available in the current year.

17. This portfolio comprises gilt and swap contracts that are designed to hedge the majority of the interest rate and inflation risk associated with the plans' obligations. At 31 March 2024 it included £6,066 million (26 March 2023: £5,452 million) of index-linked gilts and £214 million (26 March 2023: £555 million) in short-term money market funds, offset by negative fair value investments of £641 million (26 March 2023: £758 million) in repurchase agreements, £26 million (26 March 2023: £708 million) of bonds, £31 million (26 March 2023: £68 million asset) in cash and similar instruments and £nil million of swaps (26 March 2023: £90 million).

18. At 31 March 2024, funds amounting to £92 million had been redeemed but the cash had not yet been received and reinvested. These funds have therefore been classified as other assets.

Included within the Group's defined benefit pension scheme assets are assets with a fair value estimated to be £217 million that are based on non-observable inputs at 31 March 2024. Estimates of the fair value of these assets have been performed using the latest available statements of each of the funds that make up this balance, updated for any subsequent cash movements between the statement date and the year-end reporting date.

There were no open equity futures or options derivatives within this portfolio at 31 March 2024 (2022-23: £nil). £6.1 billion (2022-23: £5.4 billion) of HM Government bonds are primarily included in the liability-driven investments balance above. The plans' assets do not include property or other assets used by the Group or shares of International Distribution Services plc at 31 March 2024 (2022-23: £nil).

Risk exposure and investment strategy

The Group's defined benefit schemes face similar risks to other UK defined benefit schemes. Some of the key financial risks and mitigating actions are set out in the table below.

Investment market movements	The risks inherent in the investment markets are partially mitigated by pursuing a widely diversified approach across 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 inflation changes	The legacy RMPP section's liabilities and assets are impacted by movements in interest rates and inflation. 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 expectancy	The RMPP's liabilities could be impacted by longer than expected life expectancy, resulting in higher than expected 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 and Government bond yields	An increase in yields on AA-rated corporate bonds, used to set the IAS 19 discount rates, has led to a decrease in the IAS 19 liabilities. 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.

Further details on 'key sources of estimation uncertainty' relating to pension assets can be found in Note 1, including details of how the assets have been valued.

c) Movement in RMPP assets, liabilities and net position

Changes in the value of the defined benefit pension liabilities, the fair value of the plans' assets and the net defined benefit surplus are analysed as follows:

	Defined benefit asset		Defined benefit liability		Net defined benefit surplus
	2024 £m	2023 £m	2024 £m	2023 £m	2024 £m	2023 £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)¹⁹	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

19. Pension interest income for the current year results from applying the plans' discount rate at 26 March 2023 to the plans' assets at that date. Similarly, the pension interest cost results from applying the plans' discount rate as at 26 March 2023 to the plans' liabilities at that date.

d) Movement in RMSEPP assets, liabilities and net position

Changes in the value of the defined benefit pension liabilities, the fair value of the plans' assets and the net defined benefit surplus are analysed as follows:

	Defined benefit asset		Defined benefit liability		Net defined benefit surplus
	2024 £m	2023 £m	2024 £m	2023 £m	2024 £m	2023 £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)²⁰	-	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

20. Pension interest income for the current year results from applying the plans' discount rate at 26 March 2023 to the plans' assets at that date. Similarly, the pension interest cost results from applying the plans' discount rate as at 26 March 2023 to the plans' liabilities at that date.

e) Movement in DBCBS assets, liabilities and net position

Changes in the value of the defined benefit pension liabilities, the fair value of the plans' assets and the net defined benefit deficit during the reporting year are analysed as follows:

	Defined benefit asset		Defined benefit liability		Net defined benefit deficit
	2024 £m	2023 £m	2024 £m	2023 £m	2024 £m	2023 £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)²¹	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 contributions²²	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)

21. Pension interest income results from applying the plans' discount rate at 26 March 2023 to the plans' assets at that date. Similarly, the pension interest cost results from applying the plans' discount rate as at 26 March 2023 to the plans' liabilities at that date.

22. Includes PSE contributions of £94 million (2022-23: £88 million).

9. Provisions

	Charged as specific items			Charged in operating costs
	Industrial diseases £m	Regulatory and legal £m	Other £m	Voluntary redundancy £m	Property decommi-ssioning £m	Litigation claims £m	Other £m	Total £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)

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.

10. Contingent liabilities and contingent assets

The probability of the following contingent liabilities resulting in an outflow of benefits and their financial impact cannot be estimated reliably due to the nature of the cases and respective legal processes. The outcomes are not, however, expected to fundamentally impact the operations or financial performance of the Group.

Contingent liabilities

Whistl damages claim

In October 2018, Whistl filed a damages claim against Royal Mail at the High Court relating to Ofcom's decision of 14 August 2018, which found that Royal Mail had abused its dominant position. Whistl's High Court claim was paused until after the completion of the appeal by Royal Mail against the Ofcom decision. Following the exhaustion of Royal Mail's appeal against the Ofcom decision, the stay on Whistl's related damages claim has been lifted, and in March 2023, the proceedings were transferred from the High Court to the Competition Appeal Tribunal. 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.

DAF Trucks Ltd damages award

In relation to Royal Mail's damages claim against DAF Trucks Limited (DAF), the UK Competition Appeal Tribunal (CAT) passed judgment in favour of Royal Mail on 7 February 2023 and subsequently ordered DAF to pay Royal Mail £35 million in damages (see Note 4) and interest. Royal Mail has received this amount in full.

DAF unsuccessfully appealed the CAT decision to the Court of Appeal (CoA), which issued its judgment dismissing the appeal on 27 February 2024. DAF is now seeking permission to appeal to the Supreme Court. Permission has already been refused by the CoA, and the final decision now rests with the Supreme Court, which is expected later this calendar year. If the Supreme Court grants permission, there remains a risk that Royal Mail may have to return some of the £35 million damages and costs to DAF.

Contingent asset

Court-awarded compensation

In 2016 and 2017, Royal Mail investigated a group of companies and individuals suspected of a long-running under-declaration fraud. A number of individuals were charged for conspiracy to commit (statutory) fraud and a further charge of conspiracy to commit false accounting.

Work is ongoing regarding the recovery of certain identified assets and at the balance sheet date, assets with a value of £10 million have been recognised as a specific item (see Note 4) in the income statement (£1 million received and a further £9 million for which management considers the recovery of assets of this value to be virtually certain). In addition, management also considers that further assets with a value of up to £10 million could potentially be recovered over the next two to three years, although there is not sufficient certainty at the balance sheet date.

11. 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.

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:

	53 weeks March 2024			52 weeks March 2023
Group (£m)	Reported	Specific items and other adjustments¹	Adjusted	Reported	Specific items and other adjustments¹	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 items¹:
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	194	(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 'Specific items and pension charge adjustment' in the Financial Review.

Royal Mail 52 week results

The 52 week 2023-24 adjusted results are derived by removing the 53^rd 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	53^rd 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:

	53 weeks March 2024				52 weeks March 2023
Group (£m)	Royal Mail	GLS	Intragroup eliminations	Group	Royal Mail	GLS	Intragroup eliminations	Group
Revenue	7,834	4,865	(20)	12,679	7,411	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 items¹	(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 'Specific items and pension charge to cash difference adjustment' in the Financial

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 renumeration.

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 March 2023
Reported operating profit/(loss)	149	(198)
Adjustment for profit on 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 amortization	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 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 charge 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.

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 (outflow)/inflow before financing activities	(155)	48
Adjustments for:
Finance costs paid	(79)	(61)
Movement in GLS client cash¹	(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 repayments²	(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).

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 inflow from operating activities	215	373
Adjustments for:
Movement in GLS client cash¹	(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 repayments²	(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).

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 equivalents¹	927	773
Investments	216	-
GLS client cash	47	36
Net debt	(1,716)	(1,500)
Operating leases²	1,388	1,319
Pre-IFRS 16 net debt	(328)	(181)

1. Cash and cash equivalents includes bank overdrafts of £56 million at 31 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.

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 adjusts for 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).

FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking statements concerning the Group's business, financial condition, results of operations and certain 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', 'would', 'should', 'expects', 'believes', 'intends', 'plans', 'potential', 'targets', 'goal', 'forecasts' or 'estimates' or similar expressions or negatives thereof.

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.

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. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. 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 Group 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.

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END

Companies

International Distributions Services (IDS)

Thursday, 21st November 2024

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