TIDMRMG
RNS Number : 0156U
Royal Mail PLC
27 November 2013
ROYAL MAIL plc
INTERIM FINANCIAL REPORT FOR THE HALF YEAR ENDED
29 SEPTEMBER 2013
Royal Mail plc (RMG.L) today announced its results for the half
year ended 29 September 2013.
Moya Greene, Chief Executive Officer, Royal Mail plc, said:
"Our first half financial performance was in line with our
expectations of delivering low single digit revenue growth and
margin expansion. The combination of increasing EBITDA and
moderating investment spend underpins value creation for our
shareholders."
Financial highlights
------------------------------------------------------------------------ --------------
Half year Half year Like-for-like
ended ended change(1)
29 Sept 2013 23 Sept 2012
---------------------------------------- -------------- -------------- --------------
Revenue (GBPm) 4,520 4,355 2%
Operating costs before transformation
costs (GBPm)* (4,167) (4,091) } flat
Transformation costs (GBPm) (70) (120)
Operating profit after transformation
costs (GBPm)* 283 144
Operating profit margin after
transformation costs (%) *
- Like-for-like 5.2 3.3 + 190bps
- Reported(2) 6.3 3.3
Profit before taxation (GBPm)
* Excluding specific items**
* Reported(2)
Notional earnings per share(3)
(pence)
* Excluding specific items**
* Reported(2) 233 94
1,580 113
16.8 6.1
122.0 37.7
EBITDA before transformation costs
(GBPm)* 483 405
Free cash flow (GBPm) 183 218
* Before specific items.
** Reported results excluding a number of items which management
believes better represent the trading and external financing of the
Group. Note 2 provides the full definition of specific items.
Key points
-- Revenue growth of two per cent was driven by strong growth in
parcel revenue in UKPIL and GLS, which offset letter revenue
decline. Parcel revenue now accounts for 51 per cent of Group
revenue.
-- Operating costs after transformation costs were flat, due to
tight cost control and lower transformation costs. Transformation
costs were lower than expected, in part due to delays in
transformation expenditure related to the industrial relations
situation. Transformation costs are now expected to be
approximately GBP160 million for the full year.
-- Operating profit after transformation costs of GBP283 million
benefitted from a one-off VAT credit of GBP35 million, lower
depreciation and amortisation of GBP10 million, as well as GBP50
million lower transformation costs.
-- While the improved Group operating profit margin after
transformation costs reflects continued tight cost control, the VAT
credit and lower depreciation and amortisation benefitted margins
by approximately one percentage point.
-- Profit before taxation of GBP233 million and notional
earnings per share of 16.8 pence (both excluding specific items)
reflect the operating performance of the Group. Pension accounting
standards require us to include a one-time, non-cash benefit of
GBP1,350 million(4) as a result of the Pensions Reform in reported
profit before taxation and reported notional earnings per
share.
-- EBITDA before transformation costs increased to GBP483 million.
-- Net debt of GBP723 million was GBP183 million lower than at
31 March 2013. On 15 October 2013, Royal Mail refinanced and
replaced all loans previously provided by HM Government. These
loans(5) and existing finance leases are currently forecast to have
a blended interest rate of approximately 3.5 per cent per annum
over the life of the facilities.
Outlook
We remain focused on delivering our value drivers to achieve
revenue growth, margin expansion and underlying free cash flow
growth for the full year. It should be noted that the first half
costs benefitted from certain one-off and other items of GBP45
million, which will not be repeated in the second half.
We are about to enter our busiest period of the year. Since
September, as expected, there has been some customer reaction to
the industrial relations situation. To date this has been limited
to a slowdown in the rate of business customer acquisition in
parcels and switching of some volume to competitors in anticipation
of strike action. Depending on the strength of the seasonal parcels
volume growth in late November and December, this may result in
Royal Mail reporting broadly unchanged parcel volumes but
significant revenue growth for the nine months to December
2013.
Our letters business had a good start to the second half and has
particularly benefitted from energy company mailings. GLS continues
to perform well.
In the absence of unforeseen circumstances, the Board intends to
propose a final dividend of GBP133 million for the full year.
Notes
1. Throughout this document, margins and growth/decline rates
are stated on a like-for-like basis, unless otherwise indicated.
Like-for-like revenue and cost growth/decline percentages are
calculated after adjusting for movements relating to foreign
exchange effects in GLS' revenue and costs, and working days in
UKPIL revenue. For volumes, like-for-like movements are adjusted
for working days in UKPIL.
(GBPm) Increase compared to prior year
relating to:
--------- ----------------------------------------
Foreign exchange Working days Total
--------- ----------------- ------------- ------
Revenue 43 48 91
--------- ----------------- ------------- ------
Costs 40 n/a 40
--------- ----------------- ------------- ------
The cumulative average translation rates for the half year ended
29 September 2013 are GBP1 = EUR1.1729, compared with GBP1 =
EUR1.2445 for the half year ended 23 September 2012.
2. Reported: fully compliant with accounting standards (IFRS), including specific items.
3. Notional basic earnings per share assumes that one billion
shares, as at 29 September 2013, existed for the whole of the half
year ending on that date and for the comparative half year ending
23 September 2012.
4. The agreed changes due to Pensions Reform are considered to
be a 'plan amendment', which meets the IAS 19 definition of a past
service cost. The Pensions Reform resulted in a reduction in
assessed liabilities of GBP1,350 million. In line with the
accounting standard, this has been recorded in the income statement
for H1 2013-14 as a one-time, non-cash benefit.
5. Includes arrangement and commitment fees.
BUSINESS PERFORMANCE
Revenue (GBPm) Operating profit Operating profit
after transformation margin after transformation
costs (GBPm) costs (%)
------- ---------------------------------- ----------------------------------- ------------------------------------
Half Half Like-for-like Half Half Like-for-like Half Half Like-for-like
year year change year year change year year change
ended ended ended ended ended ended
29 Sept 23 Sept 29 Sept 23 Sept 29 Sept 23 Sept
2013 2012(1) 2013 2012 2013 2012
------- -------- -------- -------------- -------- --------- -------------- --------- --------- --------------
UKPIL 3,711 3,636 1% 224 97 4.8 2.7 210bps
GLS 801 712 6% 53 45 11% 6.6 6.3 30bps
Other 8 7 14% 6 2
------- -------- -------- -------------- -------- --------- -------------- --------- --------- --------------
4,520 4,355 2% 283 144 5.2 3.3 190bps
------- -------- -------- -------------- -------- --------- -------------- --------- --------- --------------
UK Parcels, International & Letters (UKPIL)
-- Revenue increased by one per cent. Operating costs after
transformation costs decreased by one per cent:
o Parcel revenue grew nine per cent, driven by the impact of
size-based pricing.
o As expected, parcel volumes were broadly unchanged compared
with the same period last year. Strong growth in account parcels
and Parcelforce Worldwide was offset by lower volumes in consumer
channels, driven by the impact of size-based pricing and a
temporary slowdown in growth in e-retailing due to the good summer
weather in the UK.
o Letter revenue (including marketing mail) was four per cent
lower. Excluding the impact of London 2012 philatelic sales in the
prior period, revenue declined three per cent.
o Addressed letter volumes decline of six per cent was within
our expected range of four to six per cent, compared with a decline
of nine per cent in the same period last year.
-- Operating profit after transformation costs was GBP224
million, with operating profit margin after transformation costs
increasing from 2.7 per cent to 4.8 per cent.
General Logistics Systems (GLS)
-- GLS performed well, with revenue growth of six per cent, well
ahead of Eurozone GDP growth for the period:
o Revenue increased to GBP801 million, driven by growth in all
the major countries.
o Volumes increased six per cent to 193 million items.
-- Operating profit was up 11 per cent. The operating profit margin improved to 6.6 per cent.
(1) There have been a number of minor restatements to H1 2012-13
comparatives to reflect:
-- Refined methodology to define a small element of
international mail formats impacting letter and parcel volumes and
revenue
-- Inclusion of non-revenue generating volumes increasing both
UKPIL parcel and letter volumes
-- Reclassification between Other and UKPIL impacting revenue,
costs and profit (all less than or equal to GBP1 million).
GROUP CHIEF EXECUTIVE OFFICER'S REVIEW
In our first financial results as a listed company, I would like
to welcome our new shareholders, including the many thousands of
retail shareholders - some 150,000 of whom are Royal Mail employees
- who took part in the recent Offer. I am pleased to announce that
we are building on the improved financial performance we have
achieved across the Group in recent years.
In the first half, our financial performance was in line with
our expectations. Low single digit revenue growth has been achieved
and operating costs after transformation costs were flat, thus
improving margins. Free cash flow was positive again during the
period.
The performance in our core UK business has improved, with
UKPIL's operating profit after transformation costs increasing from
GBP97 million to GBP224 million. UKPIL's operating margin after
transformation costs increased from 2.7 per cent to 4.8 per cent.
GLS, our ground-based, European deferred parcels delivery network,
delivered an improved performance after a challenging 2012-13.
Revenue was up six per cent. The operating margin improved to 6.6
per cent from 6.3 per cent in the prior period.
As previously announced, in the absence of unforeseen
circumstances, the Directors intend to propose only a final
dividend in respect of this financial year, to be paid in July
2014, of GBP133 million. This amount is approximately two-thirds of
the notional full year dividend of GBP200 million that the
Directors believe they would have proposed if the Company had been
listed throughout this financial year.
Delivering our strategy
Our vision is to be recognised as the best delivery company in
the UK and across Europe. We have made good progress in our parcels
businesses; the decline in addressed letter volumes has moderated
to within our expected range; and we are continuing to leverage our
reputational and operational strengths to deliver improvements in
our customer service.
Being a successful parcels business
The Group has three main parcels networks. UKPIL operates in the
UK through the Royal Mail core network and Parcelforce Worldwide.
GLS operates in continental Europe and the Republic of Ireland
through one of the largest ground-based, deferred parcel delivery
networks in Europe. We have a clear strategy to grow parcel revenue
by leveraging structural trends in e-retailing and optimising our
traffic mix.
Volume growth in the UK parcels market is being driven primarily
by growth in e-retailing, which is driving B2C activity. Whilst the
market saw a temporary slowdown in the growth of e-retailing during
the summer, the IMRG Capgemini e-Retail Sales Index for October
2013 quotes average year-on-year total e-retail sales growth of 16
per cent from October 2012 to September 2013. We continue to expect
the B2C and C2X segments combined to deliver volume growth of
between 4.5 per cent and 5.5 per cent per annum, and the B2B
segment to grow slightly above the UK GDP growth rate.
We introduced size-based pricing in April 2013 to ensure that
parcels are delivered through the most appropriate UK network
according to their size, value and urgency. Our core network is
best at delivering smaller consumer goods, rather than bulkier
parcels. Our core network's scale and configuration allows
lower-cost delivery of these smaller parcels, which are delivered
on foot. We changed prices as part of our size-based pricing
approach and anticipated that some volume would transfer to
Parcelforce Worldwide from the core network, with some larger,
uneconomical items exiting our networks completely.
As expected, UK parcel volumes were broadly unchanged in the
first half due to the impact of the size-based pricing approach and
a temporary slowdown the growth of e-retailing due to the good
summer weather in the UK. We saw a slightly higher rate of volume
reduction than expected in the consumer, micro-SME and SME
segments. Changes announced in October 2013 in response to feedback
from customers will enable them to post a greater range of items
through our Small Parcels format in time for Christmas. This will
ensure Royal Mail offers the most competitive price in the market
for shoe box sized parcels of up to 1kg.
Parcelforce Worldwide's volumes increased by nine per cent and
we are expanding capacity through our previously announced
investment programme. In September 2013, we opened the new
Parcelforce Worldwide parcel processing centre in Chorley,
complementing our existing centre in Coventry. We have also opened
10 new, replacement or extended Parcelforce Worldwide depots around
the country.
GLS performed well in the first half, with revenue growth of six
per cent. Approximately 70 per cent of GLS' revenue is generated in
Germany, France and Italy. While revenue has grown in Germany,
conditions continue to be challenging due to the highly competitive
marketplace, and low levels of unemployment leading to increased
subcontractor costs. In France, where we are in the early stages of
a turnaround plan, revenue has increased marginally which, together
with cost reductions has reduced losses. In GLS Italy revenue grew
strongly, in part benefitting from competitor disruption. GLS
continues to focus on increasing the scale of its operations in
Europe on a targeted basis, including monitoringemerging markets
for new opportunities.
Managing the decline in letters
While addressed letter volumes are in structural decline, our
UKPIL letter business remains a key part of our future success. The
decline in addressed letter volumes moderated to six per cent (H1
2012-13 nine per cent), in line with our forecast range of
approximately four to six per cent per year. Letter revenue
(including marketing mail) declined by four per cent. When the
impact of London 2012 philatelic sales in the prior period is
excluded, this decline was three per cent.
In March 2013, we announced that First Class and Second Class
stamp prices for 2013-14 would be frozen at 2012-13 levels. We have
been encouraged to see increasing levels of support from business
mail customers with regard to giving their customers the choice to
keep paper statements if they wish. However, we continued to see
declines in business mail volumes as business customers -
particularly in the financial services industry - sought to move
some customer communications online.
Our marketing mail business delivered revenue of GBP545 million,
down three per cent on the prior year. The same period in the prior
year benefitted from additional marketing activity in the build-up
to London 2012 and the Diamond Jubilee. In July 2013, we announced
an investment of GBP70 million to introduce our 'Mailmark' barcode
reading technology for large, bulk mail customers. This will
significantly increase our ability to track addressed letters
through our network for these customers.
We are seeing increased competition in the direct delivery of
business mail, with TNT Post UK extending its alternative delivery
operations to Greater Manchester. Unchecked, this could lead to
cherry-picking of more profitable, higher-density delivery areas
and could undermine the sustainability of the Universal Service. We
are reassured that the regulator will act to protect the Universal
Service given its primary duty, but we are not complacent. Our
focus is on continuing to improve Royal Mail's service and
efficiency as part of our transformation programme. We are also
using the greater commercial freedom granted to Royal Mail by
Ofcomto compete for business.
Being customer focused
The regulatory Quality of Service standard specifications Royal
Mail is subject to are amongst the highest of any postal operator
in any major European country. It is pleasing to note therefore
that, on a cumulative basis in the first half, we exceeded our
targets for First Class and Second Class mail. We delivered 93.2
per cent of First Class mail the next working day, against a target
of 93 per cent. Our Second Class delivery performance was 98.8 per
cent in three working days, against a target of 98.5 per cent.
We continue to focus on delivering a better parcels experience.
We believe that our strong brands and high quality of service will
help to drive growth. A recent survey in the UK conducted on behalf
of Which? found that regular post was the consumer's favourite way
to receive their online shopping, achieving a customer score of 80
per cent(1) . A separate survey found 76 per cent of consumers
would be more likely to re-use a particular online retailer if they
use Royal Mail for delivery (58 per cent said the same for
Parcelforce Worldwide)(2) .
The parcels sector is highly competitive, with a number of
distinct market segments and multiple players. Our competitors have
introduced many initiatives in the online parcels delivery market,
aimed at taking share from Royal Mail. We aim to react quickly in
response to competitor initiatives to ensure we continue to deliver
what customers want. It is vital that we continue to invest in the
customer experience. IT investment to enhance customer convenience,
including tracking, is an important sectoral theme. In April 2013,
we introduced our tracked returns service, which provides greater
convenience for both consumers and online retailers. We have also
introduced enhanced delivery information for our Special Delivery
offering - a key product for us.
As previously announced, we are ready to capitalise on the
increasing popularity of 'click and collect' networks and have
introduced our own 'click and collect' service in Post Offices,
providing more convenient parcel delivery options for online
retailers and their customers. Post Office has one of the largest
retail networks in the UK - its branches are in ideal locations to
provide convenient, secure parcel collection facilities.
We have also launched our first major TV advertising campaign
for some time. It focuses on our unique position as the UK's
leading parcel delivery company. The campaign highlights the role
our people play - they feature in the advert along with the voices
of the Royal Mail choir - all across the country, six-days-a-week
and in all weathers, to deliver the parcel that the consumer has
ordered online for themselves, a family member or a friend. We make
commerce happen by connecting customers, companies and
communities.
Our brand is a great strength. Our mean business customer
satisfaction score, which tracks the satisfaction of business
customers with the service they receive and products they have used
from Royal Mail, remains constant at 74. The strength of our brand
and reputation is one of the key ways we are maintaining our strong
market position. We know there are no grounds for complacency,
especially as we are now entering our busiest period of the year -
Christmas. We plan all year round for this key time of year. So, we
have opened 10 temporary parcel sort centres, and employed 21,000
extra temporary staff. They will work alongside approximately
124,000(3) postmen and women as we seek to deliver a great
Christmas for our customers.
Transformation
Royal Mail is delivering what we believe is one of the largest
industrial transformation programmes undertaken in the UK in recent
history. This wide-ranging programme requires difficult change for
our people. In the first half, we closed three Mail Centres in
Derby, Darlington and Bradford. Leicester Mail Centre has closed
since the end of the period and four more closures are expected in
the second half of the year. We have begun modernising our 1,000th
Delivery Office out of a total of approximately 1,400. However, in
the first half we have seen a slowdown in transformation activity.
Some of this was expected. However, the industrial relations
environment has meant some activity has been deferred into next
year.
Our ongoing transformation programme is also optimising our
operations for continued growth in our parcels businesses. More
than 38,500 new trolleys and over 13,000 shared vans are now in
operation across our network. We have completed the roll out of
around 74,000 handheld electronic scanners. This means that every
postman and woman will have access to a scanner in time for this
Christmas. The scanners enable us to track items in real time at
key points throughout the network, through to the customer's
doorstep. This is a key part of our strategy, as outlined in the
previous section.
A reduction in gross hours of 3.3 per cent has helped to deliver
a core network processing and delivery productivity improvement of
1.7 per cent in the first half. Productivity is the primary measure
of our ability to efficiently process and deliver mail.
In November 2013, after the period end, Royal Mail received an
APM Project Management Award for the transformation of mail
collection, processing and delivery in London. Our investment
programme, which included the transformation of our Mount Pleasant
site, was designed to deliver an improved customer service for
seven million people in Greater London.
Our people
Our people are the key to our transformation and the delivery of
our strategic priorities. It is testament to the commitment of our
UK workforce that the transformation has been delivered without
compromising on the quality of our service. That is why I am
pleased to report that, through the Free Shares Offer,
approximately 10 per cent of shares in Royal Mail are now owned by,
or on behalf of, eligible Royal Mail Group Limited employees - the
overwhelming majority of our employees in the UK. Second only to
the Government, our employees have the largest stake in their
Company.
We are making substantial efforts to communicate with both
frontline colleagues and managers during this very important time
in our history. The senior management team and I have conducted
more than 37 Town Hall meetings in the first half. More than 140
senior managers have visited sites as part of our engagement
programme. As part of the Free Shares education programme,
specialists from our share scheme administrator visited
approximately 100 Royal Mail sites. Our face-to-face communications
programme will continue in the coming months.
Discussions with the Communication Workers Union (CWU) on a new
multi-year agreement are ongoing. Significant progress is being
made on proposals for a legal framework to deliver a stable
industrial relations environment, protections for employees and a
competitive pay increase. A new agreement will create an agenda for
change in Royal Mail and a new model for how we work together with
the CWU. Building on pre-existing agreements, it will help us to
complete our modernisation and build a strong platform for the
future success of the Company.
(1) Which?, November 2013.
(2) Hall & Partners, April 2013.
3 As reported at 31 March 2013
BUSINESS AND FINANCIAL REVIEW
UKPIL
UK Parcels, International & Letters (UKPIL) comprises the
Group's core UK and international parcel and letter delivery
businesses under the Royal Mail and Parcelforce Worldwide brands
and through the Royal Mail core network and the Parcelforce
Worldwide network. In addition, UKPIL provides specialist delivery
services and carries out a number of other letter-related
activities, including marketing mail consulting services. It is
also responsible for the processing of international mail under
reciprocal arrangements with other overseas postal
administrations.
Trading results (GBPm)
--------------------------------------- ---------------- -------------- --------------
Half year Half year Like-for-like
ended ended change(1)
29 Sept 2013 23 Sept 2012
--------------------------------------- ---------------- -------------- --------------
Revenue 3,711 3,636 1%
People costs (2,320) (2,261) 3%
Distribution & conveyance costs (387) (382) 1%
Infrastructure costs (452) (459) (2%)
Other operating costs (258) (317) (19%)
---------------- -------------- --------------
Operating costs (3,417) (3,419) 0%
---------------- -------------- --------------
Transformation costs (70) (120) (42%)
Operating costs after transformation
costs (3,487) (3,539) (1)%
---------------- -------------- --------------
Operating profit after transformation
costs 224 97
---------------- -------------- --------------
Operating profit margin after
transformation costs
* Like-for-like 4.8% 2.7% +210 bps
* Reported(2) 6.0% 2.7%
--------------------------------------- ---------------- -------------- --------------
Revenue (GBPm)
--------------------------------------------- ------------------------------------------
Letters 1,685 1,741 (5%)
Marketing mail 545 552 (3%)
---------------- -------------- --------------
Total letters (including marketing
mail) 2,230 2,293 (4%)
Parcels 1,481 1,343 9%
---------------- -------------- --------------
Total 3,711 3,636 1%
---------------- -------------- --------------
Volumes (m)
Letters
--------------------------------------- ---------------- -------------- --------------
Addressed letters 6,477 6,793 (6)%
Unaddressed letters 1,513 1,599 (7)%
Parcels
----------------------- ---- ---- -----
Core network 454 452 (1%)
Parcelforce Worldwide 36 32 9%
---- ---- -----
Total 490 484 0%
---- ---- -----
Trading performance
Revenue growth of one per cent contrasted with a decline of one
per cent in operating costs after transformation costs. The revenue
performance was driven primarily by changes to pricing and products
in our parcels portfolio offsetting the decline in letters revenue.
Operating profit margin after transformation costs improved to 4.8
per cent.
Parcels
Parcel revenue was GBP1,481 million, up nine per cent. Parcel
revenue now accounts for 40 per cent of UKPIL revenue. Parcel
volumes were broadly unchanged when compared with the same period
in the prior year, as expected.
Letters, including marketing mail
Overall letter revenue (including marketing mail) of GBP2,230
million declined by four per cent. Excluding the impact of London
2012 philatelic sales in the prior year, letter revenue declined
three per cent. The rate of decline in addressed letter volumes
reduced to six per cent, in line with our forecast range.
Revenue for our marketing mail business of GBP545 million
declined by three per cent, as the prior period benefitted from the
additional marketing activity in the build-up to London 2012 and
the Diamond Jubilee.
Operating costs were flat. Whilst the business continued to
exercise tight cost control, the first half benefitted from a
one-off VAT credit of GBP35 million and lower year on year
depreciation and amortisation. The VAT credit arose as a result of
the change in regulations in April 2012 which increased the scope
of products attracting VAT, leading to an increased recovery rate.
The credit has been allocated to the relevant cost lines and
equates to one per cent of UKPIL operating costs.
People costs increased by three per cent, reflecting increased
pay costs, due to an accrual for a frontline pay increase. Pensions
costs increased by GBP26 million, largely due to the IAS 19 pension
service cost rate increasing from 18.2 per cent to 20.3 per cent of
pensionable pay. This was partially offset by an average reduction
in UKPIL FTEs of two per cent, in part enabled by a 1.7 per cent
improvement in processing and delivery productivity in the core
network, slightly below the target of 2-3 per cent per year.
Distribution and conveyance costs increased by one per cent,
primarily due to an increase in vehicle related costs and terminal
dues.
Infrastructure costs decreased by two per cent reflecting a
portion of the VAT credit and lower depreciation and amortisation,
as a result of a different mix in depreciable assets. In the second
half, the depreciation and amortisation charge is expected to be
flat year-on-year.
Other operating costs decreased by 19 per cent, mainly due to
tight cost control measures.
Transformation costs in the period of GBP70 million were GBP50
million lower than the same period in the prior year. This was
largely due to lower voluntary redundancy costs in relation to the
Mail Centre closure programme, which have been fully provided for.
We now expect transformation costs will be approximately GBP160
million for 2013-14, reflecting a higher level of transformation
activity in the second half.
GLS
General Logistics Systems (GLS) is the Group's European parcel
business. The GLS Network is one of the largest ground-based
deferred parcel delivery networks in Europe, covering 37 European
countries and nation states with services provided through a
combination of wholly-owned members of the GLS Group, network and
service partners of the GLS Group, franchisees and agents.
GLS offers services in all areas of the couriers-express-parcels
market, but is mainly active in the parcels segment, delivering
parcels on a deferred basis. The majority of the parcels handled by
GLS are in the B2B segment.
GLS brings a number of strategic benefits to the wider Group,
including an important level of geographical earnings
diversification, its ability to generate cash which can be used to
fund investment in other parts of the Group's business, a means to
capture growth in European cross-border parcel traffic and
opportunities for sharing operational excellence within the
Group.
Trading results (EURm)
----------------------------------------- -------------- -------------- --------------
Half year Half year Like-for-like
ended ended change(1)
29 Sept 2013 23 Sept 2012
----------------------------------------- -------------- -------------- --------------
Revenue 940 886 6%
People costs (209) (203) 3%
Distribution & conveyance costs (580) (544) 7%
Infrastructure costs (62) (60) 4%
Other operating costs (27) (23) 19%
Operating costs (878) (830) 6%
-------------- -------------- --------------
Operating profit 62 56 11%
-------------- -------------- --------------
Trading results (GBPm)
-------------- -------------- --------------
Revenue 801 712 6%
Operating costs (748) (667) 6%
Operating profit 53 45 11%
Operating profit margin (%) 6.6 6.3 30 bps
----------------------------------------- -------------- -------------- --------------
Volumes (m) 193 182 6%
----------------------------------------- -------------- -------------- --------------
Trading performance
GLS delivered a robust revenue performance, well ahead of
Eurozone GDP growth in the period. Revenue growth was achieved in
all of the major countries in which we operate. Revenue was up six
per cent to GBP801 million, driven by the increase in parcel
volumes. Costs were up six per cent, in line with volume growth. In
particular, distribution and conveyance costs were up seven per
cent, reflecting higher volumes and increased sub-contractor costs
in Germany. Other operating costs were up 19 per cent due to
increased IT consultancy costs and turnaround-related costs in
France. Operating profit increased from GBP45 million to GBP53
million, up 11 per cent. Operating profit margin improved to 6.6
per cent.
Approximately 70 per cent of GLS' revenue is generated in its
three main markets: Germany, France and Italy. GLS Germany
continues to operate in an extremely competitive market, with the
business subject to significant cost pressures due to the impact of
continued low unemployment levels. Improved delivery options to
increase the rate of first time delivery are being put in place
with the aim of reducing costs and increasing convenience.
In France, we are at an early stage of the turnaround programme.
In the first half, revenue increased marginally and costs reduced,
resulting in lower operating losses.
GLS Italy delivered a strong financial performance, growing
organically and through acquisitions. GLS Italy continued to extend
its ownership of the network, through the purchase of one
franchisee in H1 2013-14. It has also benefitted from competitor
disruption.
GLS continues to monitor emerging European markets for new
opportunities. GLS Croatia, a new company, has made an encouraging
start after it began operations in August 2013, following the
admission of Croatia to the European Union in July 2013.
gRoup FINANCIAL PERFORMANCE
Revenue
Group revenue was GBP4,520 million (H1 2012-13 GBP4,355
million), up two per cent. Parcel revenue accounted for 51 per cent
of Group revenue (H1 2012-13 47 per cent).
Operating profit after transformation costs
Operating profit after transformation costs was GBP283 million
compared with GBP144 million in the prior period. Group operating
profit margin after transformation costs improved to 5.2 per cent
from 3.3 per cent, due to revenue growing at a faster rate than
costs. One percentage point of this margin improvement was due to
the VAT credit and lower depreciation and amortisation.
Specific items
There were a number of one-off specific items in the period. The
accounting impact of the Pensions Reform (see note 10) was to
increase the accounting pension surplus significantly, resulting in
a one-time non-cash credit of GBP1,350 million. Specific items also
arose in relation to transaction-related costs of GBP26 million and
the charge associated with the Employee Free Shares Offer of GBP6
million. The Employee Free Shares Offer charge represents the
initial charge to the income statement relating to the issuing of
Free Shares, which is calculated from the start of the period when
employees could expect to receive Free Shares and based on the
mid-market closing price on the day of Admission. In H2 2013-14 the
charge will be approximately GBP80 million, as the cost will accrue
for the whole of H2 2013-14.
Total specific items before taxation were a credit of GBP1,347
million.
Net finance costs
Net finance costs were GBP50 million compared with GBP28 million
in H1 2012-13, which benefitted from a one-off GBP22 million gain
from the sale of gilts, which had been held in escrow to provide
security to the Trustee of the Royal Mail Pension Plan (RMPP) to
support pension-related payments. The finance costs are based on
the borrowing facilities in place at the half year end. On 15
October 2013 the existing facilities were replaced with new
borrowing facilities. Finance costs in H2 2013-14 will reflect
these new facilities, which are currently forecast to attract a
lower effective blended interest rate of approximately 3.5 per cent
per annum over the life of the facilities, after accounting for the
charges associated with commitment and arrangement fees and finance
leases.
Net pension interest
Net pension interest credit, treated as a specific item, was
GBP19 million. The net pension interest credit is calculated using
the net pension surplus at the start of the financial year
multiplied by the Plan's discount rate. Due to the substantial
change in the RMPP surplus as a result of the Pensions Reform, the
net pension interest for H2 2013-14 will be recalculated and is
expected to be approximately GBP50 million.
Taxation
The effective tax rate on the profit before taxation was 23 per
cent, comprising the current tax charge of GBP17 million and a
deferred tax charge of GBP342 million. The Group current income tax
charge of GBP17 million represented an effective rate on profit
before taxation of one per cent (H1 2012-13 23 per cent). Whilst
GLS' current effective tax rate is over 30 per cent, as expected,
there is no UK current tax charge, as a result of the standard
treatment of the HMRC-approved Employee Free Shares Offer as well
as utilisation of some brought forward tax reliefs, including
capital allowances.
The deferred tax charge was GBP342 million (H1 2012-13 GBP292
million credit). The movement in the deferred tax charge is
principally due to the effect of the Pensions Reform. The deferred
tax credit in H1 2012-13 related to UK tax and mainly recognised
the benefits associated with carried forward tax reliefs, including
capital allowances.
Notional earnings per share (EPS)
Notional EPS excluding specific items was 16.8 pence (Reported
122.0 pence). The notional EPS is calculated using the profit from
continuing operations attributable to equity holders of the parent,
both reported and excluding specific items, and assuming the one
billion ordinary shares had been in existence throughout the first
half of the year, as required by IAS 33 Earnings per Share. Going
forward, EPS will be calculated using the weighted average number
of shares in issue over the relevant period.
Cash flow
EBITDA before transformation costs of GBP483 million increased
by GBP78 million due to the improved trading performance.
Trading working capital movements generated an outflow of GBP170
million compared with GBP94 million in the prior period. Both
periods benefitted from one-off items. H1 2013-14 benefitted from
the impact of the delay in finalising the frontline pay award of
approximately GBP65 million, which will be paid when the new wage
settlement is agreed. H1 2012-13 benefitted from the one-off impact
of the buy forward of stamps in April 2012 of GBP100 million, an
increase in the VAT creditor of GBP75 million due to an increase in
the number of products that have become liable to VAT since April
2012 and the unwinding of the pension prepayment of GBP40 million
made in March 2012.
Total investment reduced from GBP270 million to GBP212 million
mainly as a result of a decrease in transformation capital
expenditure and businesses transformation payments, partially
offset by an increase in non-transformation capital expenditure.
The principal investments were in GLS, the Parcelforce Worldwide
expansion and 'Mailmark'. Full year investment is expected to be
slightly lower than in 2012-13 due to the impact of delayed
transformation expenditure.
Excluding the one-off working capital movements and specific
items, underlying free cash flow was GBP103 million in H1 2013-14
compared with GBP14 million in H1 2012-13. H2 2013-14 will benefit
from the unwinding of the remaining GBP150 million pension
prepayment, partially offset by any payment of the delayed
frontline pay award.
Net debt
Net debt was GBP723 million at 29 September 2013, GBP183 million
lower than at 31 March 2013. The movement in the period reflects
the free cash inflow.
Pensions
The IAS 19 pension position at 29 September 2013 was a surplus
of GBP1,862 million compared with a surplus of GBP825 million as at
31 March 2013. The increased surplus reflects the impact of the
Pensions Reform (see note 10).
The IAS 19 accounting position and key assumptions for the
liability valuation are provided in note 10.
Notes
1. Throughout this document, margins and growth/decline rates
are stated on a like-for-like basis, unless otherwise indicated.
Like-for-like revenue and cost growth/decline percentages are
calculated after adjusting for movements relating to foreign
exchange effects in GLS' revenue and costs and working days in
UKPIL revenue. For volumes, like-for-like movements are adjusted
for working days in UKPIL.
(GBPm) Increase compared to prior year
relating to:
--------- ----------------------------------------
Foreign exchange Working days Total
--------- ----------------- ------------- ------
Revenue 43 48 91
--------- ----------------- ------------- ------
Costs 40 n/a 40
--------- ----------------- ------------- ------
The cumulative average translation rates for the half year ended
29 September 2013 are GBP1 = EUR1.1729, compared with GBP1 =
EUR1.2445 for the half year ended 23 September 2012.
2. Reported: fully compliant with accounting standards (IFRS),
including specific items.
Principal risks and uncertainties
The Group's principal risks and uncertainties remain the same as
those disclosed on pages 8 to 43 of the Registration Document part
of the Prospectus in relation to the initial public offer of shares
in Royal Mail plc published on 27 September 2013. Those risks are
summarised on pages 11 to 15 of the Summary part of that Prospectus
and have been summarised further below. All of them have the
potential to impact the Group's business, results of operations,
financial condition and prospects adversely. Our overall risk
management processes are designed to identify, evaluate and
mitigate our business risks.
-- Letters decline and parcels growth: The use of letters as a
medium of communication has declined in recent years as a result of
greater use of electronic forms of communication, including email
and text messaging, which have become increasingly important,
especially for businesses. This is known as e-substitution. Letter
volumes in the UK may decline at a faster rate than forecast. While
the Group aims to increase revenue in its parcel businesses to
mitigate the continued decline in letter volumes and the slow or
declining growth in letter revenue, such increase is contingent on
continued growth in both the UK and the European parcel markets. It
is possible that parcel volumes in the UK and Europe may fail to
grow as forecast by the Group, grow at rates different from the
Group's forecasts or decline.
-- Changes in customer preferences and competitor activity:
Customer behaviours are constantly evolving and competition is
increasing. Consequently there is a risk that our product offerings
and the customer experience we provide may not meet changing
customer needs. In addition, customer or competitor actions could
trigger significant volumes of physical mail bypassing Royal Mail,
down-trading to lower revenue products and acceleration in
e-substitution. In particular, increased "end to end" competition
may lead to a significant decline in the volume of letters handled
through the Royal Mail Core Network, which facilitates the delivery
of the UK's universal postal service. Although Royal Mail would be
handling fewer letters, it would still be required to operate a
national network capable of delivering a next-day service six days
per week to every address in the UK at uniform and affordable
prices. The risks to maintaining the profitability of the Royal
Mail Core Network are likely to increase with increased
competition.
-- Economic environment: Historically there has been a
correlation between the state of the UK economy and the level of
mail volumes. There is a risk that the continuation of flat or
adverse economic conditions could impact our ability to stay
profitable, either by reducing volumes or by encouraging
down-trading to lower revenue products. Additionally, we have
significant European operations, and current uncertainty and
economic weaknesses in the Eurozone could impact these
businesses.
-- Business modernisation: In order to increase productivity and
manage the Group's costs, we are undergoing a significant,
extensive modernisation programme to improve our equipment and
technical and IT infrastructure, and operating models. The success
of the business strategy relies on successful extraction of cost,
productivity and other benefits from the programme, whilst
maintaining key business outcomes such as Quality of Service.
-- Risks inherent in the postal industry: The postal industry
has specific characteristics that bring particular operational and
commercial risks. Operations are at risk of disruption by, for
example, industrial action, adverse weather, health & safety
incidents, operational change, terrorism or failure of critical
suppliers. In addition to the new regulatory regime in the postal
sector, there is a risk of non-compliance with a wide range of
legal and regulatory requirements. The legal and regulatory
environment (including at EU level) in which the Group operates, is
subject to change.
-- VAT exemption applying to certain network access products:
Mandated network access services provided by Royal Mail are
currently exempt from value added tax (VAT). This VAT exemption is
the subject of judicial review proceedings. The imposition of VAT
on mandated network access services provided by the Group could
result in a loss of revenue and increased competition. As a result
of the imposition of VAT on mandated network access services,
end-users that use such network access services for distribution of
their letters may accelerate their adoption of e-substitution or
alternative means of communicating with their customers or switch
to competing third party "end to end" delivery services if they
become economically more attractive on a VAT-inclusive basis.
-- Value drivers; The Group has established certain financial
objectives or value drivers. These objectives are forward-looking
statements and the Group's achievement of these objectives is
subject to a range of sensitivities and external factors. There can
be no assurance that the Group will achieve these objectives. In
particular, the Group's earnings in the future could be highly
volatile. As many of the Group's costs are fixed, any material
reduction in volumes and revenue may have a material adverse
effect.
-- Industrial relations: There is extensive trade union
recognition in respect of the Group's workforce in the UK and there
is a risk that one or more material disagreements or disputes
between the Group and its trade unions could result in widespread
localised or national industrial action.
Condensed consolidated income statement
Half year ended Half year ended
29 September 2013 23 September 2012
---------------------------------- ------ ------------------------------------ ------------------------------------
Excluding Excluding
Specific specific Specific specific
Reported(1) items(2) items(3) Reported(1) items(2) items(3)
Notes GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Revenue 4 4,520 - 4,520 4,355 - 4,355
---------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
People costs (2,546) - (2,546) (2,471) - (2,471)
Distribution and conveyance
operating costs (880) - (880) (816) - (816)
Infrastructure costs (property,
IT, depreciation/amortisation) (504) - (504) (505) - (505)
Other operating costs (237) - (237) (299) - (299)
---------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Operating profit before
transformation costs 353 - 353 264 - 264
Transformation costs 5 (70) - (70) (120) - (120)
---------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Operating profit after
transformation costs 283 - 283 144 - 144
Operating specific items:
Royal Mail Pension Plan
(RMPP) amendment 6 1,350 1,350 - - - -
Transaction related costs 6 (26) (26) - (4) (4) -
Employee Free Shares costs 6 (6) (6) - - - -
Other 6 (9) (9) - (17) (17) -
Operating profit/(loss) 1,592 1,309 283 123 (21) 144
Profit on disposal of property,
plant and equipment 6 17 17 - 3 3 -
Profit on disposal of associate
undertaking 6 2 2 - - - -
---------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Earnings before interest
and taxation (EBIT) 1,611 1,328 283 126 (18) 144
Finance costs 7 (52) - (52) (52) - (52)
Finance income 7 2 - 2 24 22 2
Net pension interest 6 19 19 - 15 15 -
---------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Profit from continuing
operations before taxation 1,580 1,347 233 113 19 94
Current taxation (charge)/credit 8 (17) 8 (25) (26) - (26)
Deferred taxation (charge)/credit 8 (342) (303) (39) 292 297 (5)
---------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Profit for the period from
continuing operations 1,221 1,052 169 379 316 63
---------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Discontinued operations
Profit after taxation for
the period from Post Office
Limited - - - 2 2 -
================================== ====== ============ ========== ========== ============ ========== ==========
Profit for the period 1,221 1,052 169 381 318 63
================================== ====== ============ ========== ========== ============ ========== ==========
Profit for the period
attributable
to:
Equity holder of the parent
company 1,220 1,052 168 379 318 61
Non-controlling interest 1 - 1 2 - 2
================================== ====== ============ ========== ========== ============ ========== ==========
Notional earnings per share
- from continuing operations 11
Basic 122.0p 105.2p 16.8p 37.7p 31.6p 6.1p
Diluted 122.0p 105.2p 16.8p 37.7p 31.6p 6.1p
---------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
(1) Reported - the reported results prepared on an IFRS compliant basis.
(2) Specific items - defined in note 2.
(3) Excluding specific items - reported results excluding specific items.
Details of cumulative average translation rates can be found in
note 4.
Condensed consolidated statement of comprehensive income
Half year Half year
ended ended
29 September 23 September
2013 2012
Reported Reported
GBPm GBPm
============= =============
Profit for the period 1,221 381
Other comprehensive (expense)/income for
the period:
Items that will not be subsequently reclassified
to profit or loss:
Amounts relating to pensions accounting (219) (586)
================================================== ============= =============
IFRIC 14 adjustment relating to pensions (24) -
Actuarial losses on defined benefit schemes (277) (448)
Taxation on items taken directly to equity 82 (138)
================================================== ============= =============
Items that may be subsequently reclassified
to profit or loss:
Foreign exchange translation differences (4) (35)
Cash flow hedges (15) (16)
================================================== ============= =============
Losses on cash flow hedges deferred into
equity (15) (15)
Gains on cash flow hedges released from equity
to the carrying amount of non-financial assets - (1)
Gains on financial assets released from equity
to income - (22)
Total comprehensive income/(expense) for
the period 983 (278)
================================================== ============= =============
Total comprehensive income/(expense) for
the period attributable to:
Equity holder of the parent company 982 (280)
Non-controlling interest (other partner interest
in Romec Limited and NDC 2000 Limited) 1 2
================================================== ============= =============
Condensed consolidated statement of cash flows
The condensed consolidated statement of cash flows below has
been prepared on a 'Reported' basis. The comparative information
for the half year ended 23 September 2012 also includes comparative
information which excludes the Group's former Post Office Limited
subsidiary, as reported in the statement of cash flows in the
2012-13 Annual and Interim financial statements, and has therefore
been prepared on a non-GAAP basis. The only difference between the
two comparative columns therefore, is the GBP820 million cash flows
relating to the transfer of the former Post Office Limited
subsidiary to Royal Mail Holdings plc on 1 April 2012.
Half year Half year Half year
ended ended ended
29 September 23 September 23 September
2013 2012 2012
Reported Non-GAAP Reported
Notes GBPm GBPm GBPm
============================================= ===== ============== ============= =============
Cash flow from operating activities
Operating profit before transformation
costs 353 264 264
Adjustment for:
Depreciation and amortisation 132 142 142
Share of post taxation profit from
associates (2) (1) (1)
============================================= ===== ============== ============= =============
EBITDA before transformation costs 9 483 405 405
Working capital movements 9 (105) 121 121
============================================= ===== ============== ============= =============
Decrease in inventories 1 1 1
Decrease in receivables 39 108 108
(Decrease)/increase in payables (148) 28 28
Net decrease/(increase) in derivative
assets 3 (17) (17)
Increase in provisions (non-specific
items) - 1 1
============================================= ===== ============== ============= =============
Difference between pension costs charged
in operating profit and pension cash
flows 9 36 9 9
Payments in respect of transformation
costs(1) 9 (96) (131) (131)
Payments in respect of operating specific
items 9 (13) (18) (18)
============================================= ===== ============== ============= =============
Cash inflow from operations 305 386 386
Income taxation paid 9 (13) (13) (13)
============================================= ===== ============== ============= =============
Net cash inflow from operating activities 292 373 373
============================================= ===== ============== ============= =============
Cash flows from investing activities
Dividends received from associates 9 2 - -
Finance income received 9 2 2 2
Proceeds from sale of property, plant
and equipment 9 25 7 7
Proceeds from disposal of associate
undertaking 9 3 - -
Purchase of property plant and equipment(1) 9 (91) (126) (126)
============================================= ===== ============== ============= =============
Transformation investment in UKPIL (21) (75) (75)
Other (GLS and business as usual UKPIL
spend) (70) (51) (51)
============================================= ===== ============== ============= =============
Acquisition of business (in GLS)(1) 9 (1) - -
Purchase of intangible assets (software)(1) 9 (23) (13) (13)
Payment of deferred consideration
in respect of prior years' acquisitions(1) 9 (1) - -
Net outflow from transfer of Post
Office Limited subsidiary to Royal
Mail Holdings plc 9 - n/a (820)
Net sale of financial assets investments
(non-current) - 149 149
Net sale of financial asset investments
(current) - 30 30
============================================= ===== ============== ============= =============
Net cash (outflow)/inflow from investing
activities (84) 49 (771)
============================================= ===== ============== ============= =============
Net cash inflow/(outflow) before financing
activities 208 422 (398)
============================================= ===== ============== ============= =============
Cash flows from financing activities
Finance costs paid 9 (25) (25) (25)
Payment of capital element of obligations
under finance lease contracts (36) (32) (32)
Cash received on sale and leasebacks 56 33 33
Repayment of borrowings - (600) (600)
============================================= ===== ============== ============= =============
Net cash outflow from financing activities (5) (624) (624)
============================================= ===== ============== ============= =============
Net increase/(decrease) in cash and
cash equivalents 203 (202) (1,022)
Effect of foreign currency exchange
rates on cash and cash equivalents - (3) (3)
Cash and cash equivalents at the beginning
of the period 351 473 1,293
============================================= ===== ============== ============= =============
Cash and cash equivalents at the end
of the period 554 268 268
============================================= ===== ============== ============= =============
(1) Items included in total investment in note 9.
Condensed consolidated balance sheet
At 29 September At 31 March
2013 2013
Reported Reported
Notes GBPm GBPm
====================================================== ===== =============== ===========
Non-current assets
Property, plant and equipment 1,899 1,916
Leasehold land payment 3 3
Goodwill (mainly investment in GLS) 197 196
Intangible assets (mainly software) 156 139
Investments in associates 3 3
Financial assets - pension escrow investment 7 20 20
- derivatives - 3
Retirement benefit asset 10(b) 1,862 825
Other receivables 8 8
Deferred taxation assets 9 112
====================================================== ===== =============== ===========
4,157 3,225
Non-current assets held for sale - 2
====================================================== ===== =============== ===========
Current assets
Inventories 23 24
Trade and other receivables 962 1,004
Financial assets - derivatives 2 9
- short-term deposits 7 1 1
Cash and cash equivalents 7 554 351
====================================================== ===== =============== ===========
1,542 1,389
====================================================== ===== =============== ===========
Total assets 5,699 4,616
====================================================== ===== =============== ===========
Current liabilities
Trade and other payables (1,520) (1,611)
Financial liabilities - obligations under
finance leases 7 (82) (79)
- derivatives (8) (2)
Income taxation payable (13) (14)
Provisions (107) (119)
====================================================== ===== =============== ===========
(1,730) (1,825)
Non-current liabilities
Financial liabilities - interest bearing
loans and borrowings 7 (973) (973)
- obligations under finance leases 7 (243) (226)
- derivatives (4) (1)
Provisions (111) (127)
Other payables (65) (36)
Deferred taxation liabilities (179) (23)
====================================================== ===== =============== ===========
(1,575) (1,386)
====================================================== ===== =============== ===========
Total liabilities (3,305) (3,211)
====================================================== ===== =============== ===========
Net assets 2,394 1,405
====================================================== ===== =============== ===========
Equity
Share capital 13 10 -
Retained earnings - all distributable 2,315 1,318
Other reserves 64 83
====================================================== ===== =============== ===========
Equity attributable to equity holder of
the parent company 2,389 1,401
Non-controlling interest (other partner
interest in Romec Limited and NDC 2000
Limited) 5 4
====================================================== ===== =============== ===========
Total equity 2,394 1,405
====================================================== ===== =============== ===========
Moya Greene Matthew Lester
Chief Executive Officer Chief Finance Officer
Condensed consolidated statement of changes in equity
Reported
=================================================================================================================
Equity
Foreign holder
Financial currency of Non-
Share Share Retained assets translation Hedging Other the controlling Total
premium capital earnings reserve reserve reserve reserves parent interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============== ========= ======== ========= ========== ============ ========= ========= ======== ============ =========
At 25 March
2012 3,784 - (6,442) 22 78 8 47 (2,503) - (2,503)
=============== ========= ======== ========= ========== ============ ========= ========= ======== ============ =========
Profit for the
period - - 379 - - - - 379 2 381
Other
comprehensive
expense for
the period - - (586) (22) (35) (16) - (659) - (659)
Capital
reduction (3,784) - 3,784 - - - - - - -
Pension
deficit
transfer
to HM
Government on
1 April 2012 - - 4,012 - - - - 4,012 - 4,012
Loss on
transfer of
Post Office
Limited
subsidiary to
parent
company - - (161) - - - (47) (208) - (208)
=============== ========= ======== ========= ========== ============ ========= ========= ======== ============ =========
At 23
September
2012 - - 986 - 43 (8) - 1,021 2 1,023
=============== ========= ======== ========= ========== ============ ========= ========= ======== ============ =========
Profit for the
period - - 215 - - - - 215 2 217
Other
comprehensive
income for
the period - - 147 - 30 18 - 195 - 195
Loss on
transfer of
Post Office
Limited
subsidiary to
parent
company - - (30) - - - - (30) - (30)
=============== ========= ======== ========= ========== ============ ========= ========= ======== ============ =========
At 31 March
2013 - - 1,318 - 73 10 - 1,401 4 1,405
=============== ========= ======== ========= ========== ============ ========= ========= ======== ============ =========
Profit for the
period - - 1,220 - - - - 1,220 1 1,221
Other
comprehensive
expense for
the period - - (219) - (4) (15) - (238) - (238)
Share capital
issue
(see note 13) - 10 (10) - - - - - - -
Employee Free
Shares
issue (see
note 14) - - 6 - - - - 6 - 6
At 29
September
2013 - 10 2,315 - 69 (5) - 2,389 5 2,394
=============== ========= ======== ========= ========== ============ ========= ========= ======== ============ =========
Notes to the condensed consolidated financial statements
1. Authorisation of financial statements
The condensed consolidated Interim financial statements of Royal
Mail plc Group for the half year ended 29 September 2013 were
authorised for issue by the Board on 26 November 2013 and the
balance sheet was signed on the Board's behalf by Moya Greene and
Matthew Lester. Royal Mail plc is a listed company whose parent
company at the balance sheet date, Postal Services Holding Company
plc, was owned by HM Government, domiciled in the United
Kingdom.
2. Accounting policies
Basis of preparation and accounting
The incorporation of Royal Mail Limited on 6 September 2013,
subsequently re-registered as Royal Mail plc on 19 September 2013,
has resulted in Royal Mail plc becoming the immediate and ultimate
parent of Royal Mail Group Limited (see note 13 for further
details). These Interim condensed consolidated financial statements
are therefore presented for the Royal Mail plc Group ('the Group'),
whereas the 2012-13 Annual Report and special purpose Financial
Statements ('Annual Report') were in respect of consolidated Royal
Mail Group Limited. Accordingly, all references to the 2012-13
Annual Report and 2012-13 Interim financial statements in this
document relate to the consolidated Royal Mail Group Limited
entity.
The condensed consolidated Interim financial statements for the
half year ended 29 September 2013 (2012 half year ended 23
September 2012) do not constitute statutory financial information
as defined in section 434 of the Companies Act 2006. The condensed
consolidated Interim financial statements are unaudited but have
been reviewed by the auditor, Ernst & Young LLP, and their
report is shown at the end of this document. The Royal Mail Group
Limited Annual Report for the year ended 31 March 2013 did not
constitute statutory financial statements as defined in section 434
and 435 of the Companies Act 2006, but were prepared in accordance
with applicable International Financial Reporting Standards (IFRS)
as issued by the IASB, except for the non-consolidation of the
Group's Post Office Limited subsidiary up until its transfer to
Royal Mail Holdings plc on 1 April 2012.
The condensed consolidated Interim financial statements for the
half year ended 29 September 2013 have been prepared in accordance
with the Disclosure and Transparency Rules (DTR) of the Financial
Conduct Authority and with IAS 34 'Interim Financial Reporting' as
adopted by the European Union (EU). These condensed consolidated
Interim financial statements should be read in conjunction with the
Annual Report for the year ended 31 March 2013 which was prepared
in accordance with IFRS as adopted by the EU, except for the
non-consolidation of the Group's Post Office Limited subsidiary up
until its transfer to Royal Mail Holdings plc on 1 April 2012.
These condensed consolidated Interim financial statements
provide an update on the latest complete set of annual financial
statements for the year ended 31 March 2013. Accordingly, they
focus on key areas of the business which were covered by the 'core'
notes in the 2012-13 Annual Report, and any other new activities,
events and circumstances impacting the Group.
The accounting policies applied in the preparation of the
condensed consolidated Interim financial statements are consistent
with those in the Annual Report for the year ended 31 March 2013,
except for the adoption of amended/revised and new accounting
standards with effect from 1 April 2013 and new accounting policies
relating to 'merger accounting' and 'share based payments' as
detailed below:
IAS 1 'Presentation of Items of Other Comprehensive Income'
(amended)
This amendment relates only to disclosure and requires the Group
to present items in other comprehensive income (OCI) based on
whether they can potentially be subsequently classified to profit
or loss. Taxation associated with items presented before taxation
must also be shown separately in OCI, depending on whether or not
they can potentially be subsequently reclassified to profit or
loss.
IAS 19 'Employee Benefits' (revised)
The key impact of this revision has been to replace the separate
assumptions for expected return on plan assets and discounting of
scheme liabilities, and replace them with one single discount rate
for the net surplus or deficit. This net interest income/cost is
measured based on the plans' discount rate. Asset returns greater
or less than the accounting discount rate are recognised in the
Statement of Comprehensive Income (SOCI). The effect of this change
has been to recognise a net pension interest credit of GBP15
million for the half year ended 23 September 2012, compared with
the amount previously recognised of GBP17 million. A corresponding
adjustment applies to other comprehensive income, resulting in no
overall change to total equity.
IFRS 13 'Fair Value Measurement'
This new standard applies to existing IFRSs that require or
permit fair value measurements or disclosures. This standard does
not have a significant impact on the financial performance or
position of the Group.
Merger transaction of Royal Mail plc and Royal Mail Group
Limited
As part of the Group reorganisation prior to the Initial Public
Offering, Royal Mail plc acquired the entire share capital of Royal
Mail Group Limited through issuance of its shares to the then
parent company, Royal Mail Holdings plc (subsequently renamed
Postal Services Holding Company plc on 11 September 2013). As there
were no changes to the shareholder group at the time of this
transaction and Royal Mail plc is not a business, this transaction
did not classify as a business combination as defined under IFRS 3
'Business Combinations'.
The consolidated financial statements of Royal Mail plc have
therefore been prepared as a continuation of the existing
Group.
Share based payments
Equity-settled transactions
The cost of equity-settled transactions with employees is
measured by reference to the fair value of equity instruments at
the date on which they are granted and is recognised as an expense
over the vesting period, which ends on the date on which the
relevant employees become fully entitled to the award.
No expense is recognised for awards that do not ultimately vest.
At each balance sheet date before vesting, the cumulative expense
is calculated, representing the extent to which the vesting period
has expired and management's best estimate of the achievement or
otherwise of service conditions and of the number of equity
instruments that will ultimately vest. The movement in cumulative
expense since the previous balance sheet date is recognised in the
income statement, with a corresponding entry in equity.
Presentation of results
The results in the income statement have been disclosed in a
number of ways as explained below:
Specific items (non-GAAP items)
The Group previously disclosed items that in management's
judgement needed to be shown separately by virtue of their size,
nature or incidence as 'exceptional items'. There are, however,
other items of income/expense, after 'operating profit after
transformation costs', that management now discloses separately,
which do not ordinarily meet the definition of 'exceptional items'
e.g. finance income on the sale of pension escrow gilts, pension
interest and elements of taxation. The Group has decided,
therefore, not to continue using the 'exceptional items' definition
and instead refer to such items of income/expense as 'specific
items'.
This new definition has been introduced on the basis that the
financial results excluding these specific items are consistent
with how financial and operational performance is measured by
management in providing a meaningful analysis of the Group's
trading results and cash flows respectively. These specific items
may not be comparable to similarly termed measures used by other
companies.
Items which are classified as specific are: RMPP plan amendment
credit, transaction related costs, Employee Free Shares costs,
historical employment costs, potential industrial diseases costs,
certain property impairments, all profits from disposals of
property and associate undertakings, net pension interest, the gain
created when the pension escrow investments were sold, plus the
related taxation effects of these items. Furthermore, in the half
year ended 23 September 2012, the initial recognition of a deferred
taxation asset relating to the Group's change in taxable profits,
which permitted the Group to utilise accelerated capital allowances
and trading losses, is treated as a specific item. In the half year
ended 29 September 2013, the effect of the corporation tax rate
change on the value of deferred tax balances is treated as a
specific item.
Transfer of Post Office Limited (April 2012) disclosed in
comparative information
These condensed consolidated Interim financial statements for
the half year ended 29 September 2013 and 23 September 2012 have
been prepared in line with IAS 34 'Interim Reporting' and include
the full consolidated results of Royal Mail plc Group. The
comparative information in the consolidated statement of cash flows
for the half year ended 23 September 2012 includes an additional
analysis which excludes the cash flows of the Group's former Post
Office Limited (POL) subsidiary for the period 26 March 2012 up to
1 April 2012, at which point POL was transferred to Royal Mail
Holdings plc. The Directors believe that this presentation provides
meaningful comparisons of cash flows and is consistent with how the
published 2012-13 Annual and Interim financial statements were
presented.
Like-for-like revenue and cost growth calculations
Like-for-like percentage changes for revenue and costs have been
calculated adjusting for the impact of the following:
-- the number of working days in UKPIL revenue and;
-- the impact of the weakening of Sterling with respect to the Euro for revenue and costs.
Significant accounting judgements, estimates and assumptions
The preparation of the condensed consolidated Interim financial
statements requires management to make various judgements,
estimates and assumptions when determining the carrying value of
certain assets and liabilities. The significant judgements and
estimates applied by the Group in these condensed consolidated
Interim financial statements have been applied on a consistent
basis with the Annual Report for the year ended 31 March 2013.
Restatement of 2012-13 taxation disclosure
The 2012-13 half year comparative taxation position has been
restated for an additional GBP43 million deferred taxation
liability, on the basis that the RMPP surplus at that date would be
recoverable through reduced future contributions. Note 8 covers
this in more detail.
Going concern
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the half year financial statements.
Accounting standards issued but not yet applied
The following new and revised accounting standards are relevant
to the Group and are in issue but were not effective (and in some
instances have not yet been adopted by the EU) at the balance sheet
date:
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 10 Consolidated Financial Statements, IAS 27 Separate
Financial Statements
IFRS 10, IFRS 12 and IAS 27 Investment Entities (amendments)
IFRS 11 Joint Arrangements, IAS 28 Investments in Associates and
Joint Ventures
IFRS 12 Disclosures of Interests in Other Entities
IAS 36 (amended) Impairment of Assets
IAS 39 (amended) Financial Instruments: Recognition and
Measurement
The Directors do not expect that the adoption of the standards
listed above will have a material impact on the financial
performance or position of the Group in future periods.
3. Segment information
Business unit Main statutory entities
==================================== =====================================
UK Parcels, International & Letters Royal Mail Group Limited
(UKPIL) - UK operations Royal Mail Estates Limited
Royal Mail Investments Limited
==================================== =====================================
General Logistics Systems (GLS) GLS Germany GmbH & Co. OHG
- Other European operations GLS France S.A.S.
GLS Italy S.p.A.
==================================== =====================================
Other - UK operations Romec Limited (51% owned subsidiary)
NDC 2000 Limited (51% owned
subsidiary)
Quadrant Catering Ltd (51% owned
associate)
==================================== =====================================
Royal Mail plc Group is structured on a geographic business unit
basis and these business units report into the Chief Executive's
Committee and the Royal Mail plc Board. Each of these units have
discrete revenue, costs, profit, cash flows, assets and people and
therefore full and complete financial information is prepared and
reviewed on a regular basis and compared with both historical and
budget/forecast information as part of a rigorous performance
management process.
In addition to providing segmental disclosures for profit after
taxation, consistent with the requirements of IFRS and how the
Group is managed, the information below also includes details of
free cash flow and EBITDA before transformation costs.
The majority of inter-segment revenue relates to the provision
of facilities management and catering services to UKPIL. Trading
between UKPIL and GLS is not material.
Transfer prices between the segments are set on a basis of
charges reached through commercial negotiation with the respective
business units that form part of the segments.
Seasonality
Mail volumes are subject to seasonal variation. The Group's
busiest period is from September to December, when there is an
increase in marketing mail volumes as businesses seek to maximise
sales in the period leading up to Christmas, an increase in parcel
volumes as a result of online Christmas shopping and an increase in
addressed letter volumes as a result of the delivery of Christmas
cards. During this period the Group would expect to record higher
revenue as greater volumes of letters and parcels are delivered
through its networks. It also incurs higher costs as the Group,
particularly in UKPIL, hires large numbers of temporary workers to
assist in handling the increased workload. Other seasonal factors
that can affect the Group's results of operations include the
Easter period, the number of bank holidays in a reporting period
and weather conditions. Within the year, mail volumes typically
decline in the summer months due to the holiday period, and then
increase during autumn through the peak period at Christmas.
Other
European
Half year ended 29 September 2013 UK operations operations
============================ =========== =====
UK Parcels, General
International Logistics
& Letters Other Total Systems Total
GBPm GBPm GBPm GBPm GBPm
======================================= ============== ===== ===== =========== =====
External revenue 3,711 8 3,719 801 4,520
Inter-segment revenue - 88 88 -(1) 88
======================================= ============== ===== ===== =========== =====
Total segment revenue 3,711 96 3,807 801 4,608
======================================= ============== ===== ===== =========== =====
Operating profit before transformation
costs 294 6 300 53 353
Transformation costs (70) - (70) - (70)
======================================= ============== ===== ===== =========== =====
Operating profit after transformation
costs 224 6 230 53 283
Operating specific items(2) :
Royal Mail Pension Plan (RMPP)
amendment 1,350 - 1,350 - 1,350
Transaction related costs (22) - (22) (4) (26)
Employee Free Shares costs (6) - (6) - (6)
Other (9) - (9) - (9)
======================================= ============== ===== ===== =========== =====
Operating profit 1,537 6 1,543 49 1,592
Profit on disposal of property,
plant and equipment(2) 17 - 17 - 17
Profit on disposal of associate
undertaking(2) 2 - 2 - 2
======================================= ============== ===== ===== =========== =====
Earnings before interest and taxation
(EBIT) 1,556 6 1,562 49 1,611
not reported
Net finance costs at this level (51) 1 (50)
Net pension interest(2) 19 - 19
======================================= ===== =========== =====
Profit from continuing operations
before taxation 1,530 50 1,580
Taxation - non-specific items (44) (20) (64)
- specific items(2) (295) - (295)
======================================= ===================== ===== =========== =====
Profit for the period from continuing
operations 1,191 30 1,221
======================================= ============== ===== ===== =========== =====
EBITDA before transformation costs 409 4 413 70 483
======================================= ============== ===== ===== =========== =====
not reported
Free cash flow at this level 130 53 183
======================================= ===================== ===== =========== =====
(1) Trading between GLS and UKPIL is not material.
(2) Classified as specific items as shown in the income
statement.
Other
European
Half year ended 23 September 2012 UK operations operations
============================ =========== =====
UK Parcels, General
International Logistics
& Letters Other Total Systems Total
GBPm GBPm GBPm GBPm GBPm
======================================= ============== ===== ===== =========== =====
External revenue 3,636 7 3,643 712 4,355
Inter-segment revenue - 70 70 -(1) 70
======================================= ============== ===== ===== =========== =====
Total segment revenue 3,636 77 3,713 712 4,425
======================================= ============== ===== ===== =========== =====
Operating profit before transformation
costs from continuing operations 217 2 219 45 264
Transformation costs (120) - (120) - (120)
======================================= ============== ===== ===== =========== =====
Operating profit after transformation
costs 97 2 99 45 144
Operating specific items(2) :
Transaction related costs (4) - (4) - (4)
Other (17) - (17) - (17)
======================================= ============== ===== ===== =========== =====
Operating profit from continuing
operations 76 2 78 45 123
Profit on disposal of property,
plant and equipment(2) 3 - 3 - 3
===== =========== =====
Earnings before interest and taxation
(EBIT) from continuing operations 79 2 81 45 126
Net finance costs - non-specific not reported
items at this level (54) 4 (50)
- specific items(2) 22 - 22
Net pension interest(2) 15 - 15
======================================= ===== =========== =====
Profit from continuing operations
before taxation 64 49 113
Taxation - non-specific items (13) (18) (31)
- specific items(2) 297 - 297
Profit for the period from continuing
operations 348 31 379
======================================= ===== =========== =====
Profit after taxation for the period
from discontinued operations 2 - 2
======================================= ===== =========== =====
Profit for the period 350 31 381
======================================= ===================== ===== =========== =====
EBITDA before transformation costs 344 1 345 60 405
======================================= ============== ===== ===== =========== =====
not reported
Free cash flow at this level 219 (1) 218
======================================= ===================== ===== =========== =====
(1) Trading between GLS and UKPIL is not material.
(2) Classified as specific items as shown in the income
statement.
4. Revenue and like-for-like revenue and cost
growth/(decline)
Half year Half year
ended ended
29 September 23 September
2013 2012
Revenue GBPm GBPm
=================== ============== ==============
UKPIL 3,711 3,636
=================== ============== ==============
Letters 1,685 1,741
Marketing mail 545 552
Parcels 1,481 1,343
GLS - Parcels 801 712
Other 8 7
=================== ============== ==============
Total 4,520 4,355
=================== ============== ==============
Group:
Parcels 2,282 2,055
Letters and other 1,693 1,748
Marketing mail 545 552
Total 4,520 4,355
=================== ============== ==============
Within UKPIL, stamped, metered and other prepaid revenue
channels are subject to statistical sampling surveys to derive the
revenue relating to parcels, marketing mail and letters. These
surveys are subject to continuous refinement, which may over time
reallocate revenue between the products above, and which may
occasionally lead to a consequent change to this estimate.
Half year Half year
ended Year ended ended
29 September 31 March 23 September
2013 2013 2012
Like-for-like growth rates % % %
==================================== ============== =========== ==============
Group revenue 2 5 5
==================================== ============== =========== ==============
- UKPIL parcels 9 13 13
==================================== ============== =========== ==============
- UKPIL letters and marketing mail (4) 3 2
==================================== ============== =========== ==============
- GLS parcels 6 2 flat
==================================== ============== =========== ==============
Group costs flat 2 2
==================================== ============== =========== ==============
- People 3 4 3
==================================== ============== =========== ==============
- Distribution and conveyance 6 4 2
==================================== ============== =========== ==============
- Infrastructure (1) (1) 1
==================================== ============== =========== ==============
- Other (26) 1 (4)
==================================== ============== =========== ==============
- Transformation (42) (15) (43)
==================================== ============== =========== ==============
The cumulative average translation rates for the half year ended
29 September 2013 are GBP1 = EUR1.1729, compared with GBP1 =
EUR1.2445 for the half year ended 23 September 2012 and GBP1 =
EUR1.2262 for the year ended 31 March 2013.
5. Transformation costs
Half year Half year
ended ended
29 September 23 September
2013 2012
GBPm GBPm
================================== ============== ==============
Transformation costs:
Business transformation payments (9) (10)
Restructuring costs:
- Voluntary redundancy (7) (63)
- Project and property costs (54) (47)
================================== ============== ==============
(70) (120)
================================== ============== ==============
Business transformation payments represent payments linked to
the achievement of key modernisation milestones, as part of the
2010 pay deal with the Communication Workers Union.
6. Specific items before taxation
The disclosure of specific items, separate from other items of
income and expense, is explained in note 2.
Half year Half year
ended ended
29 September 23 September
2013 2012
GBPm GBPm
===================================================== ============== ==============
Operating specific items:
Royal Mail Pension Plan (RMPP) amendment (see 1,350 -
note 10)
Transaction related costs (26) (4)
Employee Free Shares costs (see note 14) (6) -
Other (9) (17)
===================================================== ============== ==============
Potential industrial diseases claims 6 -
Historical employment costs (15) -
Impairments - (17)
===================================================== ============== ==============
Total operating specific items 1,309 (21)
Profit on disposal of property, plant and equipment 17 3
Profit on disposal of associate undertaking 2 -
Finance income - release of gains held in equity
on disposal of RMPP escrow investments - 22
Net pension interest 19 15
===================================================== ============== ==============
Total specific items before taxation 1,347 19
===================================================== ============== ==============
7. Net finance costs and net debt
The following table provides details of interest payable on
loans and finance lease obligations, interest received from
investments and loans relating to the facilities existing at 29
September 2013.
This analysis excludes net pension interest which is a non-cash
item and is derived to comply with the requirements of the relevant
accounting standard IAS 19.
Half year Half year
ended ended
29 September 23 September
2013 2012
GBPm GBPm
==================================================== ============== ==============
Unwinding of discount relating to industrial
diseases provision (1) (1)
Interest payable on financial liabilities (51) (51)
==================================================== ============== ==============
Loans and borrowings (43) (41)
Finance leases (5) (7)
Unused facility fees (2) (2)
Other facility fees (1) (1)
==================================================== ============== ==============
Finance costs (52) (52)
==================================================== ============== ==============
Release of gains held in equity on disposal
of RMPP escrow investments - 22
Interest receivable on other financial assets 2 2
==================================================== ============== ==============
Finance income 2 24
==================================================== ============== ==============
Net finance costs (excluding net pension interest) (50) (28)
==================================================== ============== ==============
Net debt is a metric which shows the Group's overall debt
position, by netting the value of financial liabilities (excluding
derivatives) against its cash and other liquid assets. The
consolidated balance sheet shows these items gross within the
different categories of assets and liabilities.
A summary of the Group's net debt position is shown below:
At At
29 September 31 March
2013 2013
Balance sheet category GBPm GBPm
==================================== ========================= ============== ==========
Pension escrow investments Non-current assets 20 20
Short-term deposits Current assets 1 1
Cash and cash equivalents:
- cash at bank and in hand Current assets 119 136
- cash equivalent investments:
short-term bank and local
authority deposits/money market
fund investments Current assets 435 215
Obligations under finance
leases Current liabilities (82) (79)
Interest bearing loans and
borrowings Non-current liabilities (973) (973)
Obligations under finance
leases Non-current liabilities (243) (226)
==================================== ========================= ============== ==========
Net debt (723) (906)
=============================================================== ============== ==========
On 25 March 2013, the Group placed GBP20 million in a money
market fund investment established to provide security to the Royal
Mail Senior Executives Pension Plan (RMSEPP) as part of a funding
agreement with the RMSEPP Trustee. This is treated as an investment
in the Group's balance sheet. RMSEPP was closed to future accruals
on 31 December 2012.
Net debt has decreased overall by GBP183 million at the half
year ended 29 September 2013 and by GBP280 million during the year
ended 31 March 2013 as shown below:
At 29 September At 31 March
2013 2013
GBPm GBPm
===================================================== =============== ===========
Net debt brought forward (906) (1,186)
Free cash flow 183 334
Increase in loans and borrowings (roll-up of
interest on 12.0 per cent facility)(1) - (51)
Increase in new finance lease obligations (non-cash) - (4)
Foreign currency exchange impact on cash and
cash equivalents - 1
===================================================== =============== ===========
Net debt carried forward (723) (906)
===================================================== =============== ===========
(1) In the normal course of business the interest charge of
GBP30 million incurred on the 12.0 per cent Subordinated Loan to 29
September 2013, is held in non-current other payables until March
2014, when it would be capitalised against the facility. Following
the replacement of this facility (see below) this was repaid on 15
October 2013.
The table below shows details of the new facilities as at 15
October 2013:
Drawn
Basis of balance
Average interest at Average
Average interest rate - 15 October loan
balance rate LIBOR plus Facility Facility 2013 maturity
Facility GBPm % % end date GBPm GBPm date
========================== ======== ========= =========== ========= ======== =========== =========
12 Sep 12 Sep
Term Loan A 50 1.5 1.00 2018 300 50 2018
12 Sep 12 Sep
Term Loan B 300 1.4 0.90 2016 300 300 2016
Revolving loan facility 12 Sep 15 Nov
C 250 1.3 0.85 2018 800 250 2013
Total facility/facilities
utilised 600 1.4 1,400 600
========================== ======== ========= =========== ========= ======== =========== =========
The Group's blended interest rate on loans and finance leases
over the next five years is forecast to be as follows:
Forecast interest
rate
at 15 October
2013
%
=========================================================== =================
Current average interest rate on drawn down loans (see
table above) 1.4
Market expectation of interest rate rises over the next
five years 1.2
----------------------------------------------------------- -----------------
2.6
Add arrangement and commitment fees 0.9
Forecast blended interest rate on loans and finance leases
over the next five years 3.5
=========================================================== =================
As finance leases are currently at a similar interest rate to
loans, the impact of finance leases on the blended interest rate is
not material.
Under the previous HM Government facilities, the equivalent
blended interest rate was eight per cent.
8. Taxation (including non-GAAP information on specific
items)
Half year Half year
ended ended
29 September 23 September
2013 2012
GBPm GBPm
==============
Current income taxation
Current UK income taxation charge - (13)
Foreign taxation charge (16) (13)
=================================================== ============== ==============
Current income taxation charge (16) (26)
Amounts under provided in earlier years (1) -
=================================================== ============== ==============
Total current income taxation (17) (26)
Deferred income taxation
Relating to origination and reversal of temporary
differences (342) 292
=================================================== ============== ==============
Current income taxation (charge)/credit reported
in the consolidated income statement (359) 266
=================================================== ============== ==============
Taxation on non-GAAP, specific items:
=================================================== ============== ==============
Current taxation credit relating to specific
items 8 -
Deferred taxation charge relating to specific
items (307) -
Deferred taxation credit relating to specific
items (one-off factors) 4 297
=================================================== ============== ==============
The taxation (charge)/credit in the income statement is
calculated by applying the forecast effective taxation rates to the
reported interim profit, after adjusting for specific items and
profit after taxation from associates.
Effective taxation rate
The effective taxation rate for the period is 23 per cent and
this comprises an effective rate on profit excluding specific items
of 28 per cent and an effective rate on specific items of 22 per
cent. The effective taxation rate on profit excluding specific
items exceeds the UK statutory rate of 23 per cent due to:
-- Group profits being subject to taxation in a range of
territories with differing rates, some above the UK rate; and
-- Costs attracting no taxation relief and some items where at
present it is not possible to recognise a deferred taxation asset,
mainly within GLS companies (described further below).
The lower effective taxation rate on profit excluding specific
items in this period as compared to the period to September 2012
reflects the increased share of UK profits as a proportion of Group
profits.
Impact of specific items (non-GAAP items)
The RMPP amendment credit explained in note 10 has the most
significant effect on the taxation charge for specific items. Aside
from the taxation effect of the specific items identified in note
6, this charge also includes the effect of the corporation taxation
rate change referred to below.
The RMPP amendment credit primarily attracts an income statement
deferred taxation charge, with an element charged directly to
equity in accordance with the IFRIC 14 adjustment described in note
10(b).
The impact of the specific items (mostly the RMPP amendment
credit) is to reduce the overall effective taxation rate by
increasing the UK share of the profit before taxation. This is due
to the UK statutory corporation taxation rate being generally lower
than elsewhere in the European territories in which GLS is
profitable.
Current taxation
GLS pays taxation in a number of territories, with the majority
of profits in the period to 29 September 2013 earned in territories
where the taxation rate is above the UK statutory taxation rate. A
further significant factor is that certain subsidiaries, notably
GLS France, are not at this stage able to recognise taxation
credits on losses made during the period. These contribute to GLS
having a higher effective taxation rate for the period than the UK
business.
Substantially all of the current taxation due for the Group for
the period is in respect of GLS, although due to deductions for the
amortisation of goodwill, primarily in Germany, the current
taxation rate for GLS was below its effective rate.
Taxable profits in the UK are expected to be fully covered by a
combination of losses and capital allowance claims and a statutory
deduction in respect of shares allocated under an approved share
scheme in the second half of the year to March 2014.
Deferred taxation
In addition to the RMPP amendment credit effects described
above, the decrease in the pension surplus due to actuarial factors
gives rise to a deferred taxation credit of GBP82 million through
equity.
At 23 September 2012, UK deferred taxation assets were
recognised on the balance sheet, producing a significant taxation
credit in the income statement. At 29 September 2013 those deferred
taxation assets are recognised, to the extent that they remain in
existence at the balance sheet date, in accordance with when they
are expected to reverse.
At 31 March 2013 UK deferred taxation was recognised at the
future enacted taxation rate of 23 per cent in accordance with
accounting standards. In July 2013 taxation rates of 21 per cent
for 2014-15 and 20 per cent for subsequent years were enacted.
These interim statements therefore recognise a net UK deferred
taxation liability at those revised future rates, dependent on when
temporary differences are expected to reverse.
2012-13 half year (comparative) disclosures
The 2012-13 half year comparative taxation position has been
restated for an additional GBP43 million deferred taxation
liability, on the basis that the Royal Mail Pension Plan (RMPP)
surplus at that date would be recoverable through reduced future
contributions. This amount comprises a charge to equity of GBP138
million in respect of deferred taxation on the pension surplus and
a credit of GBP95 million to income in relation to additional
deferred taxation assets recognisable by reference to the pensions
surplus. This is in contrast to the treatment at the 2012-13 half
year, when the surplus was regarded as recoverable by a refund of
contributions subject to withholding taxation per IFRIC 14, which
would have resulted in no further taxation liability on the net
amount refunded.
9. Cash flow information (including non-GAAP information on
specific items)
The Group uses the following analysis of free cash flow (a non
IFRS measure) to monitor its cash performance. This measure
eliminates inflows/(outflows) between net debt items (see note 7)
and includes finance cash costs paid.
The half year ended 23 September 2012 additional non-GAAP
analysis represents comparative information which excludes the
Group's former Post Office Limited subsidiary, as reported in the
statement of cash flows in the 2012-13 Annual and Interim financial
statements.
A reconciliation of 'net cash inflow/(outflow) before financing
activities' in the consolidated statement of cash flows to 'free
cash inflow/(outflow)' is included within this note.
Half year Half year Half year
ended ended ended
29 September 23 September 23 September
2013 2012 2012
Reported Non-GAAP Reported
GBPm GBPm GBPm
================================================ ============== ============== ==============
EBITDA before transformation costs (see
consolidated statement of cash flows) 483 405 405
Trading working capital movements (170) (94) (94)
Difference between pension costs charged
in operating profit and pension cash
flows 36 9 9
================================================ ============== ============== ==============
Pension costs recorded in the income
statement 245 218 218
Cash payment relating to pensions (204) (205) (205)
Deficit correction payments (5) (4) (4)
================================================ ============== ============== ==============
Total investment(1) (212) (270) (270)
================================================ ============== ============== ==============
Voluntary redundancy (30) (45) (45)
Business transformation payments (11) (40) (40)
One-off project and property costs (55) (46) (46)
================================================ ============== ============== ==============
Total payments in respect of transformation
costs (96) (131) (131)
Transformation investment - capital
expenditure (21) (75) (75)
================================================ ============== ============== ==============
Total transformation investment in UKPIL (117) (206) (206)
Other non-transformation spend (IT (incl.
software), GLS and business as usual
UKPIL spend) (95) (64) (64)
================================================ ============== ============== ==============
Taxation paid (13) (13) (13)
Net finance costs paid (23) (23) (23)
Dividends from associates 2 - -
Underlying cash inflow 103 14 14
Transfer of Post Office Limited (discontinued
operation) to Royal Mail Holdings plc - - (820)
One-off working capital movements 65 215 215
Operating specific items (mainly transaction
related payments) (13) (18) (18)
Disposal of property and associate undertaking 28 7 7
================================================ ============== ============== ==============
Free cash inflow/(outflow) 183 218 (602)
================================================ ============== ============== ==============
(1) Total investment is represented by several different line
items in the consolidated statement of cash flows.
Working capital movements
Half year (2) Half Half year
ended year ended ended
29 September 23 September 23 September
2013 2012 2012
Reported Non-GAAP Reported
GBPm GBPm GBPm
=========================================== ============== ============== ==============
One-off working capital movements:
Pay deal accrual for 2013-14 65 - -
Buy forward of stamps in April 2012 - 100 100
Impact of applying VAT to postal products
in 2012-13 - 75 75
Unwinding of pension prepayment made
in March 2012 - 40 40
=========================================== ============== ============== ==============
Total one-off working capital movements 65 215 215
Trading working capital movements (170) (94) (94)
Total working capital movements (105) 121 121
=========================================== ============== ============== ==============
Free cash flow
The following analysis provides a reconciliation of 'net cash
inflow/(outflow) before financing activities' in the consolidated
statement of cash flows and free cash inflow/(outflow).
Half year (2) Half Half year
ended year ended ended
29 September 23 September 23 September
2013 2012 2012
Reported Non-GAAP Reported
GBPm GBPm GBPm
============================================== ============== ============== ==============
Net cash inflow/(outflow) before financing
activities in the statement of cash
flows 208 422 (398)
Net sale of gilts and Treasury bills
(financial asset investments - non-current) - (149) (149)
Net sale of bank deposits (financial
asset investments - current) - (30) (30)
Finance costs paid (25) (25) (25)
============================================== ============== ============== ==============
Free cash inflow/(outflow) 183 218 (602)
============================================== ============== ============== ==============
(2) This half year ended 23 September 2012 additional analysis
represents comparative information which excludes the Group's
former Post Office Limited subsidiary, as reported in the statement
of cash flows in the 2012-13 Annual and Interim financial
statements.
10. Employee benefits - pensions under IAS 19
Pensions Reform
In June 2013 Royal Mail Group launched a consultation with Royal
Mail Pension Plan (RMPP) members with the aim of keeping the Plan
open to future accrual, subject to certain conditions, at least
until the next periodic pension review is concluded in March 2018.
The consultation period closed on Sunday 25 August 2013. On 26
September 2013 the Company agreed with the RMPP Trustee to
implement the Pensions Reform with effect from 1 April 2014 and has
announced the agreed changes to the Plan.
Under the Pensions Reform, basic pay elements of members'
pensionable pay (after subtraction of the Lower Earnings Deduction
for Section C members) will increase by RPI (up to five per cent)
each year regardless of whether employees' actual basic pay
increases by more or less, subject to potential additional
increases to take account of certain increments or progressions
within pay groups.
Accounting for the Pensions Reform
The agreed changes due to the Pensions Reform are considered to
be a 'plan amendment' which meets the IAS 19 definition of a past
service cost, and their effect has been recognised in the financial
statements of the Group for the half year ended 29 September
2013.
The defined benefit obligation has initially been calculated on
an accounting basis assuming that increases in basic pensionable
pay will average one per cent above RPI each year over the longer
term, consistent with the assumption made historically. The
resulting actuarial gains or losses have been recorded in the
statement of other comprehensive income.
The impact of the 'plan amendment' has then been calculated with
the financial effect of the change in assumptions arising from the
Pensions Reform - particularly the assumption that basic
pensionable pay under the Plan will increase by RPI up to five per
cent each year - being accounted for as a past service credit,
resulting in a one-off, non-cash, specific adjustment in the income
statement for the half year ended 29 September 2013 of GBP1,350
million.
RMPP cash funding
The equivalent actuarial or cash funding surplus at 29 September
2013 is GBP1,495 million. This surplus will be used to fund the gap
between the existing Company contributions of around GBP380 million
per annum to RMPP and the estimated cost of future accrual for
RMPP. This allows the Plan to remain open for the benefit of the
members over the period up to March 2018, without requiring either
the Company or individuals to make unaffordable increases to their
cash contributions.
a) Major long-term assumptions used for accounting purposes -
RMPP and RMSEPP
The major assumptions were as follows:
At 29 September At 31 March
2013 2013
% pa % pa
======================================================= =============== ===========
Inflation assumption (RPI) 3.3 3.3
Inflation assumption (CPI) 2.3 2.3
Discount rate - nominal 4.6 4.8
- real(1) 1.3 1.5
Rate of increase in salaries RPI RPI + 1%
Rate of increase for deferred pensions - RMSEPP
members transferred from Section A or B of RMPP CPI RPI
Rate of increase for deferred pensions - all
other members CPI CPI
Rate of pension increases - RMPP Sections A/B CPI CPI
Rate of pension increases - RMPP Section C(2) RPI RPI
Rate of pension increases - RMSEPP members transferred
from Section A or B of RMPP CPI RPI
Rate of pension increases - RMSEPP all other RPI RPI
members(2)
======================================================= =============== ===========
(1) The real discount rate selected reflects the long duration
of the schemes.
(2) Section C members (who joined RMPP on or after April 1987)
and RMSEPP all other members, have this increase capped at five per
cent, which results in the average long-
term pension increase assumption being 10 basis points lower
than the RPI long-term assumption.
The following disclosures relate to the gains/losses and surplus
in the schemes recognised for the RMPP and RMSEPP defined benefit
plans in the financial statements of the Group:
The real discount rate has decreased to 1.3 per cent since March
2013 when it was 1.5 per cent.
Demographic assumptions, for example mortality, remain unchanged
from those made in March 2013.
The RMPP liabilities are sensitive to changes in key
assumptions. The potential impact of the largest sensitivities on
the liabilities is as follows:
Potential
increase
in liabilities
Key assumption change GBPm
=================================== ===============
Pension increase of +0.1% p.a. 35
Change in discount rate -0.1% p.a. 35
Additional 1 year life expectancy 30
=================================== ===============
b) Plans' assets and liabilities
The combined plans' assets and liabilities were as follows:
Market value
============================
At 29 September At 31 March
2013 2013
GBPm GBPm
============================================= =============== ===========
Fair value of plans' assets 3,523 3,343
Present value of plans' liabilities (1,632) (2,513)
============================================= =============== ===========
Surplus in schemes (pre IFRIC 14 adjustment) 1,891 830
IFRIC 14 adjustment (29) (5)
============================================= =============== ===========
Surplus in schemes 1,862 825
============================================= =============== ===========
The surplus in RMSEPP is assumed to be available as a refund as
per IFRIC 14 and, as such, is shown net of withholding
taxation.
The surplus in RMPP is assumed to be available partially as a
reduction to contributions and partially as a refund in accordance
with IFRIC 14. The element assumed to be available as a refund is
included net of withholding taxation, which is shown as an IFRIC 14
adjustment. The Directors do not believe that the current excess of
pension scheme assets over the liabilities on an accounting basis
will result in an excess of pension assets on a funding basis.
However, the Directors are required to account for the pension
scheme, based on their legal right to benefit from a surplus, using
long-term actuarial assumptions current at the reporting date, as
required by IFRS.
There were no open equity derivatives within this portfolio at
29 September 2013.
b) Plans' assets and liabilities (continued)
The RMPP Trustee has elected to use interest rate and inflation
rate swaps ('derivatives') to deliver the investment strategy
whilst managing risk as described on page 79 of the 2012-13 Annual
Report. The interest rate and inflation rate swaps are used to
hedge the exposure to movements in interest rates and inflation
(which are key, long-term assumptions used to estimate future
pension liabilities). The economic exposure of these swaps held in
a specific managed portfolio for this purpose at 29 September 2013
is GBP3.3 billion (March 2013 GBP1.53 billion).
c) Movement in plans' assets and liabilities - RMPP and
RMSEPP
Changes in the value of the plans' assets and analysis is as
follows:
Half year
ended Full year
29 September ended
2013 31 March 2013
GBPm GBPm
================================================= ============= ===============
Plans' assets at beginning of period 3,343 28,616
Increase in value of pension assets - 26 to 31
March 2012 - 224
Transfer of pension assets to HM Government - (26,485)
Company contributions paid 204 433
Employee contributions paid 67 136
Finance income(3) 87 159
Actuarial (losses)/gains ((decrease)/increase in
asset market values) (166) 277
Benefits paid to members (12) (17)
================================================= ============= ===============
Plans' assets at end of period 3,523 3,343
================================================= ============= ===============
Changes in the present value of the defined benefit pension
obligations are analysed as follows:
Half year
ended Full year
29 September ended
2013 31 March 2013
GBPm GBPm
======================================================== ============= ===============
Plans' liabilities at beginning of period (2,513) (31,332)
Increase in value of pension liabilities - 26 to
31 March 2012 - (652)
Transfer of pension liabilities to HM Government - 30,211
Current service cost (231) (412)
Pay accruals included in above pension costs 5 -
Past service credit due to Plan amendment 1,350 -
Employee contributions (67) (136)
Curtailment costs(4) (9) (17)
Finance cost(3) (68) (129)
Actuarial losses (net changes in long-term assumptions) (111) (63)
Benefits paid to members 12 17
======================================================== ============= ===============
Plans' liabilities at end of period (1,632) (2,513)
======================================================== ============= ===============
(3) The finance income is the result of applying the Plans'
discount rate as at 31 March 2013 to the Plans' assets at that
date. Similarly, the finance cost results from applying the
Plans' discount rate as at 31 March 2013 to the Plans'
liabilities at that date.
(4) The curtailment costs in the income statement are recognised
on a consistent basis with the associated compensation costs.
Estimates of both are included, for
example, in any redundancy provisions raised. The curtailment
costs above represent the costs associated with those people paid
compensation in respect of redundancy during the accounting period.
Such payments may occur in an accounting period subsequent to the
recognition of costs in the income statement.
11. Notional earnings per share (including non-GAAP information
on specific items)
Half year ended Half year ended
29 September 23 September
2013 2012
===================== =====================
Excluding Excluding
specific Specific
Reported items Reported items
================================================ ========= ========== ========= ==========
Profit from continuing operations attributable
to equity holders of the parent (GBPm) 1,220 168 377 61
Number of shares (million) 1,000 1,000 1,000 1,000
Basic earnings per share (pence) 122.0 16.8 37.7 6.1
================================================ ========= ========== ========= ==========
The notional basic earnings per share assumes that one billion
shares, as at 29 September 2013, existed for the whole of the half
year ending on that date and for the comparative half year ending
23 September 2012.
12. Related party transactions
During the period the Group entered into the following
transactions with related parties:
Half year Half year
ended ended
29 September 23 September
2013 2012
GBPm GBPm
================================================== ============== ==============
Sales/recharges to:
- RMPP 2 3
- Post Office Limited 18 18
Purchases/recharges from:
- Post Office Limited (mainly commission/counter
services) 169 172
- Associates 12 16
================================================== ============== ==============
Amounts owed from:
- Post Office Limited 11 9
Amounts owed to:
- Associates 3 4
================================================== ============== ==============
The Group has taken advantage of the exemption conferred by IAS
24 Related Party Disclosures, whereby transactions between the
Group and other HM Government owned entities and with HM Government
itself are not disclosed unless they are individually or
collectively significant.
The sales to and purchases from related parties are made at
normal market prices. Balances outstanding at the half year are
unsecured, interest free and settlement is made in cash.
On 1 April 2012 Post Office Limited became a related party to
Royal Mail Group Limited and the transactions summarised above are
in respect of trading between the two entities from that date.
Quadrant Catering Limited was an associate company of the Group
throughout the reporting periods above. G3 Worldwide Mail N.V.
('Spring') was an associate company of the Group until its disposal
on 2 April 2013.
Key management compensation
The basis of remuneration of key management personnel remains
consistent with that disclosed in the 2012-13 Annual Report for the
year ended 31 March 2013.
13. Organisation structure and share capital changes
A new company Royal Mail Limited was incorporated on 6 September
2013 with share capital of 100 ordinary shares of GBP1.50 each
(total GBP150) issued to Royal Mail Holdings plc. Royal Mail
Holdings plc was renamed Postal Services Holding Company plc
('PSH') on 11 September 2013. On 12 September 2013, the special
share in Royal Mail Group Limited, held by HM Government, was
redeemed at par value of GBP1.
Subsequently, also on 12 September 2013, share capital of
999,999,900 ordinary shares of GBP1.50 each (total
GBP1,499,999,850) was issued by Royal Mail Limited to PSH in
consideration for the transfer from PSH of the entire issued share
capital of Royal Mail Group Limited.
Following this transfer, and therefore as at 12 September 2013,
the issued share capital of Royal Mail Limited comprised
1,000,000,000 ordinary shares of GBP1.50 each (total
GBP1,500,000,000).
On 17 September 2013, Royal Mail Limited approved a reduction of
capital by way of solvency statement to cancel GBP1.49 from each
issued ordinary share of GBP1.50. This reduction of capital was
registered on 18 September 2013, and reduced share capital from
GBP1,500 million to GBP10 million and increased distributable
reserves by GBP1,490 million.
Following this reduction, and therefore as at 18 September 2013,
the issued share capital of Royal Mail Limited comprised
1,000,000,000 ordinary shares of GBP0.01 each (total
GBP10,000,000).
On 19 September 2013, Royal Mail Limited was re-registered as
Royal Mail plc.
Royal Mail plc subsequently listed on the premium segment of the
official list and the main market of the London Stock Exchange on
15 October 2013 (see note 15).
14. Employee Free Shares
Ordinary shares representing 10 per cent of the value of Royal
Mail plc were granted free of charge to eligible employees on 15
October 2013, the date of the Initial Public Offering. These free
shares are held in an HMRC-approved Share Incentive Plan (SIP) and
each eligible full-time employee was eligible to receive a total of
725 free shares at the date of the Initial Public Offering.
However, under HMRC rules, employees can be given a maximum of
GBP3,000 worth of free shares in any taxation year.
The initial market value of the award was measured at the
closing mid-price of Royal Mail plc's shares on 15 October 2013
(489 pence per share). This valued an eligible full-time employee's
award at GBP3,545.25, in excess of the GBP3,000 maximum.
Accordingly, 613 shares have been awarded to each eligible
full-time employee as their 2013 SIP allocation. The Company
intends to allocate a further 112 shares to eligible full-time
employees as soon as possible after 6 April 2014 as a 2014 SIP
allocation, subject to them remaining employees of Royal Mail Group
Limited. Part-time eligible employees will be allocated a pro-rata
number of shares. Eligible employees may receive more, or fewer,
further shares than the Company expects, depending on the number of
unallocated shares and the number of eligible employees at that
time.
The fair value of the award of free shares is estimated as
GBP489 million, which will be charged to the income statement on a
straight line basis over the period of vesting (three years for the
2013 SIP and four years for the 2014 SIP). A charge to the Group
income statement of GBP6 million has been made for the half year
ended 29 September 2013 for both SIP allocations as they were
granted as one award.
The free shares will be held in a Trust funded by Royal Mail.
The Trust will be under the control of the Royal Mail and will be
operating for its benefit. At March 2014 the Trust will be included
in Royal Mail's consolidated financial statements.
15. Events after the reporting period
London Stock Exchange listing
Royal Mail plc listed on the premium segment of the official
list and the main market of the London Stock Exchange on 15 October
2013. The Offer comprised 521.7 million existing ordinary shares,
representing 52.2 per cent of Royal Mail plc's share capital on
admission. In addition to the Offer, Royal Mail plc's eligible UK
employees received a total of just over 100 million shares under
the Employee Share Offer, representing 10 per cent of the Company's
existing ordinary shares. Following admission, the Employee Free
Share Offer and the exercise of the over-allotment arrangement
(which accounted for a further 78 million ordinary shares as
described in the Royal Mail plc Prospectus), HM Government held
29.9 per cent of the ordinary shares. The ordinary shares have the
International Security Identification Number (ISIN) GB00BDVZYZ77
and Stock Exchange Daily Official List (SEDOL) number BDVZYZ7. The
ordinary shares are traded on the London Stock Exchange under the
ticker symbol "RMG".
New funding arrangements
On 12 September 2013 Royal Mail plc entered into new debt
facility agreements with its banking syndicate comprising GBP600
million term loan facilities and an GBP800 million revolving credit
facility. On 15 October 2013 these new debt facilities were
utilised as detailed in note 7.
Statement of Directors' responsibilities in relation to the
Interim financial statements
The Directors confirm that to the best of their knowledge:
-- the condensed set of Financial Statements has been prepared
in accordance with IAS 34 as adopted by the European Union;
-- the Interim Management Report includes a fair review of the
important events during the first six months and a description of
the principal risks and uncertainties for the remaining six months
of the year, as required by DTR 4.2.7R; and
-- the Interim Management Report includes a fair review of
related party transactions and changes therein, as required by DTR
4.2.8R.
A list of current Directors is maintained on the Royal Mail plc
website:
http://www.royalmailgroup.com/about-us/management-committees/royal-mail-plc-board.
By order of the Board
Moya Greene Matthew Lester
26 November 2013
Independent review report to Royal Mail plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the interim report for the six months
ended 29 September 2013 which comprises the Interim consolidated
income statement, Interim consolidated statement of comprehensive
income, Interim consolidated statement of changes in equity,
Interim consolidated balance sheet, Interim statement of
consolidated cash flows and the related notes 1 to 15. We have read
the other information contained in the interim report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
(UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the Interim Financial Report in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRS as adopted by the
European Union. The condensed set of financial statements included
in this interim report has been prepared in accordance with
International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the interim report
based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim report for the six months ended 29 September 2013 is
not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
26 November 2013
Corporate information
Registered Office and Group Head Office
Royal Mail plc
100 Victoria Embankment
London
EC4Y 0HQ
Telephone: 020 7250 2888
Registered No: 08680755
Royal Mail, the Cruciform, the colour red, Parcelforce Worldwide
logo are registered trademarks of Royal Mail Group Limited. Group
Interim report(c) Royal Mail plc 2013. All rights reserved.
Corporate website
Additional corporate and other information can be accessed on
the following website (www.royalmailgroup.com). Information made
available on the website is not intended to be, and should not be
regarded as being, part of the Interim Financial Report.
The maintenance and integrity of the Group's websites is the
responsibility of the Directors; the work carried out by the
auditor does not involve consideration of these matters and
accordingly, the auditor accepts no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
Contact information
Investor Relations:
Catherine Nash
Phone: 020 7449 8297
Email: investorrelations@royalmail.com
Media Relations:
Shane O'Riordain
Phone: 020 7449 8105
Email: shane.o'riordain@royalmail.com
Mish Tullar
Phone: 020 7449 8239
Email: mish.tullar@royalmail.com
Beth Longcroft
Phone: 020 7449 8241
Email: beth.longcroft@royalmail.com
Royal Mail press office out of hours: 020 3338 1007
Analysts' presentation
An analysts' presentation will be held in London at 09:30 on 27
November 2013 and a simultaneous webcast will be available at
http://www.royalmailgroup.com/results.
Forward looking statements
Certain statements contained in this document, including any
information as to the Group's strategy, plans or future financial
or operating performance constitute "forward-looking statements".
In some cases, these forward-looking statements can be identified
by the use of forward-looking terminology, including the terms
"believes", "estimates", "forecasts", "plans", "projects",
"predicts", "prepares", "anticipates", "expects", "intends", "may",
"will", "should", "target" or "objective" or, in each case, their
negative or other variations or comparable terminology. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual
results, performance or achievements of the Group or industry
results to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future or are beyond
the Group's control. The Group's actual results of operations,
financial condition and the development of the business sectors in
which the Group operates may differ materially from those suggested
by the forward-looking statements contained in this document, and
persons receiving this document should not place undue reliance on
any forward-looking statements.
The Group disclaims any obligation or undertaking to update or
revise any forward-looking statements contained in this document to
reflect any change in its expectations or any change in events,
conditions or circumstances on which such statements are based
unless required to do so by applicable law, the Prospectus Rules,
the Listing Rules or the Disclosure and Transparency Rules of the
Financial Conduct Authority.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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