TIDMRMG
RNS Number : 7644H
Royal Mail PLC
22 May 2014
Royal Mail plc
Preliminary Results for the year ended 30 March 2014
Thursday 22 May 2014
Highlights
Royal Mail plc (RMG.L) today announced its unaudited results for
the year ended 30 March 2014.
"Our performance was in line with our expectations. We delivered
two per cent revenue growth, controlled operating costs and drove
strong free cash flow.
"We are facing a couple of headwinds. The competitive
environment on the parcels side is more intense. We are taking
steps to remain the leader in this growing market.
"On the letters side, the headwind is direct delivery and we
have strategies in place to counter its adverse financial impact.
However, without timely regulatory action, direct delivery could
undermine the economics of the Universal Service and our ability to
generate sustainably a five to ten per cent EBIT margin in our
reported business(1) .
"Our key value drivers of single digit revenue growth, margin
expansion and underlying free cash flow growth remain the
objectives for the Group for the 2014-15 financial year."
Moya Greene, Chief Executive Officer, Royal Mail plc
Financial highlights
Reported(2) Adjusted(3)
52 weeks 52 weeks
Group 2014 2013 Change
===================================================== ============ ============ ========
Revenue (GBPm)(4) 9,456 9,146 2%
Operating profit before transformation costs (GBPm) 671 598
Transformation costs (GBPm) (241) (195)
Operating profit after transformation costs (GBPm) 430 403
Operating profit margin after transformation costs
(%)
* Like-for-like 4.2 4.4 (20bps)
* Reported 4.5 4.4
Profit before taxation (GBPm)
* Excluding specific items 363 304
* Reported 1,666 283
Notional earnings per share (pence)
* Excluding specific items 26.3 21.0
* Reported 127.7 52.5
EBITDA before transformation costs (GBPm) 942 915
Free cash flow (GBPm) 398 334 GBP64m
Net debt (GBPm) (555) (906) GBP351m
Recommended final dividend per share (pence) 13.3
===================================================== ============ ============ ========
(1) The reported business is a subset of UKPIL including network
access, and excluding Parcelforce Worldwide and the Royal Mail
Property unit. The reported business, as defined by Ofcom, is the
entity which provides the Universal Service and takes account of
all the costs of both the regulated and unregulated products that
depend on the core Universal Service activities.
(2) Reported - prepared in accordance with International
Financial Reporting Standards (IFRSs).
(3) Adjusted - reported 2012-13 results adjusted to exclude the
consolidation of POL up to 1 April 2012 and the 53rd week's
additional revenue and costs. In addition, GBP32 million POL
separation costs, taken directly to equity in the Reported basis,
were taken through the income statement in the Adjusted basis. See
note 1 'Basis of Preparation' for further details.
(4) Throughout this document, growth/decline rates and margins
are stated on a like-for-like basis, unless otherwise indicated.
Like-for-like changes in revenue and costs and like-for-like
margins are calculated after adjusting for movements in foreign
exchange 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) Movement compared with prior year relating to:
========= ===================================================
Foreign exchange Working days Total
========= ======================= ================= =======
Revenue 52 36 88
========= ======================= ================= =======
Costs 48 N/A 48
========= ======================= ================= =======
The cumulative average translation rates for the year ended 30
March 2014 were GBP1 = EUR1.185, compared with GBP1 = EUR1.226 for
the year ended 31 March 2013.
Operating profit
after transformation
Revenue costs
=========================== ======================================== ========= ==========================
Reported Adjusted Reported Adjusted
52 weeks 52 weeks Like-for-like 52 weeks 52 weeks
Business unit (GBPm) 2014 2013 change 2014 2013
=========================== ========== ========== ================ ===== ====== ========== ==========
UK Parcels, International
& Letters (UKPIL) 7,787 7,633 2% 309 294
General Logistics Systems
(GLS) 1,651 1,498 7% 108 101
Other businesses 18 15 n/m 13 8
Group 9,456 9,146 2% 430 403
=========================== ========== ========== ================ ===== ====== ========== ==========
Revenue and volume
-- Group revenue increased by two per cent, due to parcel
revenue growth in both UKPIL and GLS. Parcels are the largest
contributor to Group revenue, accounting for 51 per cent.
-- UKPIL revenue was GBP7,787 million, up two per cent. UKPIL
parcel revenue increased by seven per cent. As expected, parcel
volumes (1,068 million items) were flat compared with 2012-13.
-- UKPIL letter revenue (including marketing mail) declined to
GBP4,625 million, a two per cent reduction. The four per cent
decline in addressed letter volumes for the full year was at the
better end of our forecast range of four to six per cent per annum.
Marketing mail revenue, part of letter revenue, was GBP1,111
million.
-- GLS revenue was GBP1,651 million, up seven per cent. Volumes
increased six per cent, with growth in both domestic and
international volumes.
Profit and margins
-- Group operating profit before transformation costs grew to GBP671 million.
-- Transformation costs of GBP241 million for the year include a
provision of GBP104 million in relation to the management
reorganisation programme, announced on 25 March 2014, which will be
implemented in 2014-15.
-- Group operating profit after transformation costs increased
to GBP430 million. The operating profit margin reduced from 4.4 per
cent to 4.2 per cent, as a result of the provision for the
management reorganisation programme.
-- UKPIL generated operating profit after transformation costs
of GBP309 million. The operating profit margin decreased from 3.9
per cent to 3.5 per cent, again as a result of the provision for
the management reorganisation programme.
-- GLS operating profit was GBP108 million. The operating profit
margin decreased from 6.7 per cent to 6.5 per cent due to the full
year effect of further increases in sub-contractor rates in
Germany.
-- Profit before taxation (excluding specific items) of GBP363
million reflects the trading performance of the Group. Accounting
standards require us to include a one-time, non-cash benefit of
GBP1,350 million as a result of the Pensions Reform in reported
profit before taxation and reported notional earnings per
share.
Notional earnings per share (EPS)
-- Notional EPS excluding specific items was 26.3 pence.
Cash flow and balance sheet
-- EBITDA before transformation costs grew to GBP942 million,
due to improved trading performance.
-- Net cash investment of GBP581 million represents GBP617
million investment after cash from asset disposals of GBP36
million.
-- Free cash flow increased to GBP398 million. This has driven a
reduction in net debt to GBP555 million.
Dividends
-- As previously indicated, the Board has recommended a final
dividend of 13.3 pence per share, subject to shareholder approval
at the Annual General Meeting, to be held on 24 July 2014.
Transformation and cost control
-- Collections, processing and delivery productivity improved by
1.7 per cent, as we reduced the number of frontline hours at a
faster rate than the reduction in the level of workload.
-- Eight Mail Centres closed this financial year, taking the
total number of Mail Centres remaining to 40. We have completed or
commenced modernisation in 94 per cent of our Delivery Offices.
-- Tight cost control meant non-people costs in UKPIL reduced by three per cent.
Regulation
-- The Ofcom investigation into changes to access(5) pricing
puts this commercial response to changing market conditions on
hold.
-- Based on our estimates of the impact of TNT Post UK's
publicly-stated plans, direct delivery could reduce Royal Mail
revenue by over GBP200 million in 2017-18. See regulation section
of Chief Executive's Review for more information.
-- With our proposed access price changes suspended and
unfettered direct delivery rollout, there is a reasonable prospect
that Ofcom's indicative EBIT margin range of between five and ten
per cent for Royal Mail's reported business may never sustainably
be achieved.
-- We are preparing a regulatory submission calling on Ofcom to
take action now and carry out a full review of direct delivery.
Summary outlook
-- We are facing increasing challenges in the parcels and
letters markets in the UK. However, our key value drivers of single
digit revenue growth, margin expansion and underlying free cash
flow growth remain the objectives for the Group for 2014-15.
-- The Board's intention remains to pursue a progressive
dividend policy, having regard to the normalised earnings
progression of the Group.
(5) As the Universal Service provider, Royal Mail is required to
provide access at Inward Mail Centres for final mile
deliveries.
Chief Executive Officer's review
I am pleased to report another good performance. We have built a
foundation for sustained, steady performance against a backdrop of
significant structural and operational change.
The Group's operating profit after transformation costs
increased to GBP430 million from GBP403 million. This was due to
parcel revenue growth more than offsetting letter volume declines.
Operating profit margin declined from 4.4 to 4.2 per cent, due to
the provision for our management reorganisation programme. Profit
before taxation excluding specific items increased to GBP363
million and our notional earnings per share was 26.3 pence. Free
cash flow increased to GBP398 million, primarily due to an improved
trading performance and reduced investment spend.
UKPIL revenue was up two per cent at GBP7,787 million. Parcel
revenue increased by seven per cent to GBP3,162 million while
volumes were flat, mainly due to the impact of size-based pricing
on consumers and small and medium-sized enterprises (SMEs) and the
industrial relations environment at the end of 2013. The operating
profit margin before transformation costs increased, as costs grew
at a slower rate than revenue. However, the provision for the
management reorganisation programme reduced the operating profit
margin after transformation costs, to 3.5 per cent.
GLS delivered revenue growth across all its markets. Total
revenue was GBP1,651 million and operating profits were GBP108
million. The operating profit margin was slightly lower than last
year at 6.5 per cent. Despite increasing revenue in Germany,
significant competitor investment in capacity and increasing
sub-contractor rates put pressure on margins. Revenue growth was
driven by a strong performance in Italy due to our network of owned
and franchised operations. We are making progress with our
turnaround programme in France.
Our vision
Our vision is to be recognised as the best delivery company in
the UK and across Europe.
We are the leading provider of postal and delivery services in
the UK. GLS operates one of the largest ground-based, deferred
parcel delivery networks in Europe.
A clear strategy
Our strategy is based on three priorities:
1) being a successful parcels business;
2) managing the decline in letters;
3) being customer focused.
We are focused on delivering efficiency and productivity
improvements as our mail mix changes. We must increase the pace at
which we deliver change - whether large or small - if we are to
succeed. Our strategy is also underpinned by a focus on managing
our business successfully, which includes people, customer and
financial measures.
Parcels
Our parcels strategy: key points
- Getting the basics right: improving our first time delivery
rates through initiatives like Delivery to Neighbour.
- Getting the technology right: including making it easier for
our customers to access our networks and rolling out FlexDelivery
in GLS.
- Expanding and automating our networks: detailed planning for
parcels systems upgrades and automation in the core Royal Mail
network; expanding the geographic footprint of GLS through organic
growth and selective acquisitions.
UKPIL collects and delivers parcels and letters predominantly
through the Royal Mail core network and Parcelforce Worldwide. We
offer deferred, express and courier services across a number of
segments. Over recent years, e-retailing has driven parcel volume
increases in the UK. Competition is intense and capacity is
increasing. We are focused on maintaining our leading position by
becoming increasingly flexible and efficient, and offering
additional service features and options. While our volumes are
driven largely by growth in e-commerce, we do not benefit from
growth in all areas of e-retailing. For example, we do not operate
in all online segments and are under-represented in some areas,
such as returns for clothing and shoes. We are now focusing on
faster growing market segments. We are increasing the proportion of
items we can carry cost-effectively on foot, enabled by
trolleys.
Our parcel customer base is large and diverse. Around a quarter
of our domestic parcel revenue, excluding Parcelforce Worldwide, is
generated by large and medium-sized companies, whilst approximately
three quarters is generated by consumers, micro-SMEs and SMEs. Our
single largest parcel customer accounts for approximately six per
cent of UKPIL parcel revenue. Changes to its minimum order for free
delivery and the expansion of its own delivery capabilities are
expected to reduce available volume. However, we believe the
breadth of our customer base and our strategy of supporting SMEs to
grow through e-commerce means we are not as exposed to the actions
of our largest customers as some of our competitors.
In April 2013, we introduced size-based pricing for consumers
and SMEs to ensure that parcels are delivered through the most
appropriate UK network. This approach has driven significant growth
in revenue, while parcel volumes were flat. Declines in consumer
volumes were greater than expected. We recognised this quickly and
took action to fix it - expanding small parcels dimensions in
October 2013.
We are also making it easier for customers to receive and return
parcels. Royal Mail is to pilot Sunday afternoon opening at around
100 of its delivery offices across the UK later this summer. We
will also trial Sunday parcel deliveries later this summer to
addresses within the M25 motorway. Parcelforce Worldwide will also
launch a Sunday delivery service in June for online shoppers
through participating e-retailers.
We have added tracking to all contract returns services, so
customers can check whether items have gone back to the seller and
the seller can see when an item is coming. Working with the Post
Office, Royal Mail has launched Local Collect - the UK's largest
click and collect network. Receiving a parcel at home is still the
UK consumer's preferred method of delivery. If this is not
convenient, customers can choose one of around 10,500 participating
post offices as a parcel collection point. We have completed the
expansion of the capacity of Parcelforce Worldwide, with a domestic
hub opened in Chorley in 2013 and eleven depots newly opened or
upgraded across the UK in the financial year.
Delivery companies are increasingly technology companies, as
they seek to provide improved tracking and delivery solutions. In
2011, UKPIL began a five year IT transformation programme, one
objective of which was to support the delivery of our parcels
strategy. We completed the issue of more than 74,000 handheld
scanners to our postmen and women in time for Christmas 2013.
Looking forward, key areas of investment will provide additional
tracking systems, including expanding barcoding and SMS
messaging.
GLS is a strategically important part of Royal Mail Group. It
provides geographical diversification of our earnings. Its
experience and focus on parcel delivery means it is a core
component of Royal Mail's vision of being recognised as the best
delivery company in the UK and across Europe.
Business-to-business (B2B) parcel customers form GLS' core
market, representing more than 70 per cent of all parcel volumes it
delivered in the year. It is mainly active in the deferred parcels
segment - the least time-sensitive type of delivery. 94 per cent of
GLS' revenue came from deferred parcels.
GLS continued its introduction and enhancement of FlexDelivery.
This is a monitoring and tracking service that allows customers to
change the delivery time and location of parcels. FlexDelivery is
currently available in ten markets, with plans to roll it out to
more countries. It is also available for cross-border traffic in
selected markets.
GLS operates through wholly-owned and partner companies, in 37
countries and nation states across Europe, with strategies
developed based on the dynamics of each local market. However,
every business focuses on reliable quality with a strong customer
emphasis, optimising the use of technology to provide the services
and flexibility customers expect.
Letters
Our letters strategy: key points
- Managing the structural decline in the letters market by
adding value to customer mailings: rolling out Mailmark(TM)
barcoding technology and promoting the value of marketing mail.
- Calling on Ofcom to address the potential threat to the
economics of the Universal Service created by the uncertainty
caused by its Competition Act investigation, access pricing policy
review and the unfettered growth of direct delivery
competition.
- Leveraging the benefits of our investments in letter
automation by increasing the number of letters sorted into delivery
order and optimising mail handling techniques.
Our letters performance was at the better end of our
expectations. Revenue was down two per cent. Addressed letter
volumes declined by four per cent during the year. The decline in
addressed letter volumes moderated in the second half. This was due
to strengthening economic conditions, alongside one-off impacts
such as energy companies writing to customers about price rises in
October 2013, and an increase in stamped mail volumes in December
2013, including Christmas cards.
In March 2014, we began the rollout of Mailmark(TM), which
provides barcode technology and online reporting for
machine-readable business, advertising and publishing mail.
Mailmark(TM) will deliver a number of additional benefits for
customers, including timely reporting on performance and predicted
delivery times, and more accurate and transparent billing.
Marketing mail revenue was GBP1,111 million. Research has
demonstrated that using marketing mail in combination with other
media significantly increases communications effectiveness. Our
MarketReach business aims to prove and promote the commercial value
of mail and enables customers to realise that value within their
own businesses. These additional services complement the extensive
UK delivery network, which Royal Mail uses for the distribution of
customers' marketing mail.
As we seek to win business, we are flexing our services to
provide what customers want. During March 2014, we were awarded a
significant contract to collect and deliver mail for 14 councils
across London. This collaborative agreement, where mail services
have been procured centrally in order to gain efficiencies, is the
first of its kind for Royal Mail and the councils.
Regulation
We are proud to deliver the Universal Service. But, the
sustainability of the Universal Service depends on Royal Mail being
able to use revenue from easy-to-serve urban areas to cover the
cost of a nationwide network capable of serving all addresses at a
uniform price.
On 10 January 2014, we announced a number of changes to Royal
Mail's access contracts. The changes were intended to help secure
the provision of the Universal Service, against the backdrop of a
continuing decline in letter volumes. Following a complaint by TNT
Post UK, Ofcom opened an investigation into some of the access
contract changes on 21 February 2014. The price changes subject to
Ofcom's investigation are suspended until the outcome of this
investigation. On 9 April 2014, Ofcom confirmed that it would use
its powers under the Competition Act 1998 to investigate the
complaint.
The planned changes to access contracts are an important part of
our commercial response to changing market conditions, including
the expansion of direct delivery(6) competition. We believe TNT
Post UK's complaint is unfounded. We believe the changes are fair,
reasonable and fully within the guidance provided by Ofcom(7) . We
are cooperating fully with Ofcom to ensure the investigation is
completed as quickly as possible, so that our planned changes can
be put into effect.
On 9 April 2014, following the end of the reporting period,
Ofcom also announced a policy review of the access conditions
imposed on Royal Mail in March 2012, and Ofcom's guidance on those
conditions. Ofcom has said it will complete this by the end of
2014. We are proactively engaging with Ofcom on this review.
TNT Post UK now has direct delivery operations in much of London
and in Manchester and in Liverpool. It has stated its intention to
take its own direct delivery service to a number of other cities,
with the aim of covering around 42 per cent of addresses by 2017.
TNT Post UK can cherry-pick easy-to-serve urban areas; delivering
easy-to-handle post to homes less frequently than Royal Mail and to
no defined quality standard. Royal Mail is required to deliver
six-days-a-week, overnight, throughout the whole country, to
stringent quality standards and at a uniform, affordable tariff.
Moreover, we are also required to deliver any items TNT Post UK
does not consider economic to deliver itself. If TNT Post UK is
successful in delivering its stated objectives, this could threaten
the fundamental economics of the Universal Service. Based on our
estimates of the impact of TNT Post UK's publicly-stated plans,
this could reduce Royal Mail revenue by over GBP200 million in
2017-18(8) . At the same time, our ability to reduce costs to
offset this would be limited by our obligations to deliver the
Universal Service.
Our analysis is that, without timely intervention from the
regulator, direct delivery competition will have a serious impact
on the sustainability of the Universal Service. Ofcom has stated
that an EBIT margin range of between five and ten per cent for
Royal Mail's reported business is appropriate and consistent with
the need for Royal Mail to earn a reasonable commercial rate of
return(9) . With our proposed access price changes remaining
suspended and unfettered direct delivery rollout, there is a
reasonable prospect that this level of margin may never sustainably
be achieved.
We do not believe the current situation serves the best
interests of consumers. Ofcom has acknowledged in a recent guidance
document its duty, powers and willingness to act to protect the
Universal Service if required(10) . However, effective regulatory
action could take some time to implement. Meanwhile, the
Competition Act investigation and Ofcom's access policy review may
create a significant period of uncertainty in the UK postal market.
This uncertainty, combined with our Universal Service commitments,
means our ability to respond commercially is constrained. At the
same time, direct delivery operators are continuing to expand their
operations. This is why we are preparing a regulatory submission
calling on Ofcom to take action now and carry out a full review of
direct delivery. Such a review would be in line with Ofcom's
primary duty to secure the provision of the Universal Service. It
would also allow for full consideration of what regulatory
interventions may be necessary. At the same time, we are raising
the issue with HM Government and are seeking a legislative
amendment that would require a review of direct delivery if Ofcom
does not initiate one in a timely manner.
Customers
We have a trusted brand. Our most recent Corporate Image Report,
conducted by Ipsos MORI in November 2013, indicated that 71 per
cent of customers believe Royal Mail's services are good value for
money. Our own research indicates that our mean business customer
satisfaction score is 75. This is an increase on 74 last year, and
70 in 2011-12. It is strategically important that we maintain this
customer loyalty.
Our regulated Quality of Service specifications are amongst the
highest of any major European country. I am delighted to report
that we exceeded our regulatory targets for both First and Second
Class mail in 2013-14. 93.2 per cent of First Class mail was
delivered the following day, and 98.9 per cent of Second Class mail
was delivered within three days of posting. We have delivered a
significant improvement on prior years against our internal
composite parcels measure(11) . We achieved a performance of 95.1
per cent, meeting our target.
Overall, complaints were down six per cent on last year.
Improving our performance in this important area is a key strategic
focus. Four issues account for the majority of complaints:
redirection, misdeliveries, redeliveries and 'Something for You'
cards. Our performance has improved for three of these complaints,
the exception being Something for You cards. Our Delivery to
Neighbour initiative is a key focus as we seek to improve the
effectiveness of our delivery operations and reduce redeliveries.
Recent Ofcom research found that 94 per cent of customers were
satisfied with this service.
Transformation and cost control
Royal Mail is continuing to transform as we seek to mitigate
falling letter volumes and manage increasing parcel volumes in an
increasingly competitive parcels market. As a matter of course, we
look to organise similar tasks into single areas to avoid
unnecessary duplication. Since 2003, more than 50,000 people have
left the UK business, with 12,000 leaving in the last four years.
On 25 March 2014, we launched a consultation with our unions on a
proposal to achieve a net reduction of 1,300 roles, mainly within
our managerial population. We recognise that this change is tough
on our people. But, we must continuously improve our efficiency.
This is a key way to sustain the Universal Service and secure good
quality jobs for our people.
As we have said before, the initial phase of our transformation
is largely complete. Almost all of our Delivery Offices have now
commenced or completed modernisation. We continue to drive
improvements in the network to be more productive and effective. We
are now focusing on standardising processes and embedding examples
of best practice. Relatively small changes, implemented across our
business, can deliver significant efficiency benefits. We will be
launching a nationwide campaign to ensure Delivery to Neighbour is
deployed consistently where appropriate. Improving our rate of
first time delivery is a key strategic focus across our operations.
Our expansion programme in Parcelforce Worldwide is now complete.
We are continuing to plan for automation in the Royal Mail core
network.
The productivity improvement of 1.7 per cent was disappointing.
Whilst we reduced collections, processing and delivery hours by 2.9
per cent, the industrial relations environment meant we were unable
to extract more hours to compensate for the impact on workload
associated with flat parcel volumes. Most of Royal Mail's
non-people costs are subject to inflationary pressures. This year
we were particularly successful in addressing this. Non-people
costs were down by three per cent in UKPIL.
Our people
Following our recent flotation, the overwhelming majority of our
UK employees are also shareholders in our Company. Free Shares gave
our people a direct stake in the Company and its future success.
Each eligible full-time employee who participated in the Free
Shares Offer now has 729 shares. They, along with all shareholders,
will receive a final dividend in July 2014, subject to shareholder
approval.
In December 2013, we announced an agreement in principle with
the Communication Workers' Union (CWU). This was approved by its
members in February 2014. The agreement is wide ranging in its
coverage and focused in its support of the business. It represents
a joint commitment to radically improve industrial relations and
create a can-do culture in the interests of customers, employees
and the Company. We are focused on bedding down this agreement to
ensure that we provide a stable and unique platform for
problem-solving and for jointly moving the business forward at a
faster pace.
Outlook
Our key value drivers of single digit revenue growth, margin
expansion and underlying free cash flow growth remain the
objectives for the Group for the 2014-15 financial year. However,
while we are satisfied with our progress in 2013-14, we are facing
increasing challenges in the parcels and letters markets in the
UK.
We intend to pursue a progressive dividend policy having regard
to the normalised earnings progression of the Group. As the
regulatory position on direct delivery becomes clearer, the Board
would expect to provide more clarity on our dividend policy.
Royal Mail in the private sector
Many of the significant achievements in recent years have been
facilitated by the Government. The Postal Services Act 2011 itself
was a landmark piece of legislation. The transfer of the historic
liabilities and almost all of the assets of the Royal Mail Pension
Plan (RMPP) to the Government, and the reform of the regulatory
landscape were two further essential steps on the road to
privatisation. The Government, including the Shareholder Executive,
Minister of State for Business and Enterprise Michael Fallon and
Secretary of State for Business, Innovation and Skills Vince Cable,
all deserve thanks for the perseverance and drive which they have
displayed during this complicated process.
We must continue to deliver change at an increasing pace to meet
the challenges of the changing mix of mail, the liberalised UK
postal market, intense parcel competition, and a need to become
more productive and efficient. Royal Mail's transformation is being
delivered whilst maintaining our high Quality of Service levels. I
would like to thank all my colleagues for the fortitude and
conscientiousness with which they have embraced these changes. I am
confident that, with their continued diligence and support, we will
be able to make ongoing progress in delivering our strategy.
Moya Greene
Chief Executive Officer
22 May 2014
(6) Direct delivery refers to a situation where other postal
operators convey mail from customer to recipient, entirely using
their own delivery network and not Royal Mail.
(7) Ofcom: End-to-end competition in the postal sector: Final
guidance on Ofcom's approach to assessing the impact on the
Universal Postal Service of 27 March 2013 and 'Securing the
Universal Postal Service: Decision on the new regulatory
framework'. Ofcom statement of 27 March 2012.
(8) Based on: TNT Post UK's stated ambition of 42.3 per cent
delivery point coverage in 2017; expected addressed inland letter
market volumes of approximately 11 billion items in 2017-18, using
Royal Mail's forecast range of a 4-6 per cent per annum decline in
addressed letter market volumes; our estimate that TNT Post UK
achieves a 20 per cent local market share in areas where it
operates in 2017-18; and an annual RPI increase in our Average Unit
Revenue per Downstream Access item.
(9) "Securing the Universal Postal Service: Decision on the new
regulatory framework", Ofcom Statement of 27 March 2012, paragraph
5.47
(10) "Final guidance on Ofcom's approach to assessing end-to-end
competition", Ofcom statement of 27 March 2013.
(11) An internal measure for all retail parcel products in the Royal Mail core network.
UK Parcels, International & Letters (UKPIL)
Trading results
Reported Adjusted
52 weeks 52 weeks Like-for-like
(GBPm) 2014 2013 change
==================================================== ========== ========== ==============
Revenue(12) 7,787 7,633 2%
* Letters & other mail 3,514 3,582 (2%)
* Marketing mail 1,111 1,118 (1%)
Total letters 4,625 4,700 (2%)
* Parcels 3,162 2,933 7%
Operating profit after transformation costs 309 294
Operating profit margin after transformation costs 3.5% 3.9% (40bps)
Volumes (m)
Royal Mail core network parcels 991 994 (1%)
Parcelforce Worldwide 77 70 8%
==================================================== ========== ========== ==============
Total parcels 1,068 1,064 Flat
==================================================== ========== ========== ==============
Addressed letters (including international) 13,342 13,869 (4%)
Unaddressed letters 3,143 3,258 (4%)
==================================================== ========== ========== ==============
About UKPIL
UKPIL is the UK's designated provider of the Universal Service.
Its network is unrivalled in the UK in terms of size, coverage and
geographical reach. UKPIL comprises the core UK and international
parcel and letter delivery businesses operated through the Royal
Mail core network and Parcelforce Worldwide. It has a leading
position in the overall UK parcel market, with an estimated 38(13)
per cent revenue share.
UKPIL also carries out a number of letter-related business
activities, including marketing mail consulting services. It is
responsible for the design and production of the UK's stamps and
philatelic products. It also processes international mail under
reciprocal arrangements with other overseas postal
administrations.
Trading performance
UKPIL revenue increased by two per cent to GBP7,787 million.
Parcel revenue increased by seven per cent. UKPIL parcel volumes
were flat, mainly as a result of the impact of size-based pricing
in the consumer and SME segments over the year. We saw growth in
account parcel volumes, despite some customer reaction to the
threat of industrial action in the run up to Christmas. Parcelforce
Worldwide volumes grew strongly. Parcels accounted for 41 per cent
of UKPIL revenue (2013 38 per cent).
Total letter revenue decreased by two per cent. Addressed letter
volume decline of four per cent was at the better end of our
forecast range, benefiting from strengthening economic conditions,
energy company customer mailings at the end of 2013 and increased
stamped mail volumes in December 2013, including Christmas cards.
Marketing mail revenue, including unaddressed letters, was GBP1,111
million, down one per cent, mainly due to additional marketing
activity in the build up to London 2012 and the Diamond Jubilee in
the prior year.
We did not increase stamp prices in 2013. However, there were
changes to other products, such as access mail. In March 2014, we
announced tariff changes across the portfolio of products,
including First and Second Class stamps. We thought carefully about
the impact of all our tariff increases on our customers and our own
business. Our stamp prices remain among the best value in Europe.
First and Second Class stamp prices for letters up to 100 grams
remain well below the European average(14) .
Operating costs
Reported Adjusted
52 weeks 52 weeks Like-for-like
(GBPm) 2014 2013 change
============================================= ========== ========== ==============
People costs (4,818) (4,641) 4%
Distribution and conveyance costs (855) (850) 1%
Infrastructure costs (946) (951) (1%)
Other operating costs (618) (702) (12%)
Operating costs before transformation costs (7,237) (7,144) 1%
Transformation costs (241) (195)
============================================= ========== ========== ==============
Operating costs after transformation costs (7,478) (7,339) 2%
============================================= ========== ========== ==============
Operating costs before transformation costs increased by one per
cent, below the rate of revenue growth, to GBP7,237 million. A four
per cent increase in people costs was substantially mitigated by a
three per cent decline in non-people costs.
One-off benefits in the first half of GBP42 million in relation
to a VAT credit and lower depreciation and amortisation charge were
offset by a GBP44 million higher pension charge (mainly due to the
IAS 19 pension service charge rate increasing from 18.2 per cent to
20.3 per cent of pensionable pay).
People costs increased by four per cent, mainly due to the three
per cent pay award, higher pension charge, and the move to a
shorter working week. Collections, processing and delivery
operations delivered a productivity improvement of 1.7 per cent,
below our two to three per cent target. Whilst gross hours reduced
by 2.9 per cent, this was not sufficient to compensate for the
reduced workload resulting from flat parcel volumes.
Non-people costs were down three per cent. There continue to be
increases in terminal dues with overseas postal administrations
(distribution and conveyance costs) and IT (infrastructure costs).
However, our cost management and procurement programmes were
particularly successful.
Transformation costs
Reported Adjusted(15)
52 weeks 52 weeks
(GBPm) 2014 2013
=========================================================== =========== =============
Voluntary redundancy - management reorganisation
programme (102) -
Voluntary redundancy - other (14) (78)
Project and property costs (including GBP2m of management
reorganisation programme costs) (108) (95)
Business transformation payments (17) (22)
=========================================================== =========== =============
Total (241) (195)
=========================================================== =========== =============
Transformation costs increased to GBP241 million, due to a
provision for the management reorganisation programme of GBP104
million, mainly relating to voluntary redundancy costs. The
programme is expected to generate annual cost savings of
approximately GBP50 million, of which approximately GBP25 million
is expected to be realised in 2014-15.
Other voluntary redundancy costs were lower than the prior year
due to the timing of announcements with respect to Mail Centre
closures, the majority of which were provided for in 2012-13.
Project and property costs mainly relate to Mail Centre closures
and Delivery Office revisions.
The GBP17 million business transformation payments relate to the
Business Transformation 2010 Agreement, under which colleagues
receive payments of up to GBP1,000 based on specific milestones and
specific bonuses with respect to transforming the network.
Remaining payments of around GBP10 million are expected to be made
in 2014-15 as the Delivery Office modernisation process is
completed.
Operating profit after transformation costs
Operating profit after transformation costs was GBP309 million,
up GBP15 million on an adjusted basis including the increased
transformation costs as a result of the management reorganisation
programme. Operating profit margin after transformation costs
reduced to 3.5 per cent (2013 3.9 per cent).
(12) 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.
(13) Triangle estimates at December 2013 based on latest
competitor data and market insight and Royal Mail 2013-14 financial
year end revenue. Excludes international traffic.
(14) European average is 63 pence for inland stamp prices up to
100 grams, first and second class combined.
(15) Transformation costs are the same on both a Reported and an Adjusted basis.
General Logistics Systems (GLS)
Trading results
Reported Adjusted
52 weeks 52 weeks Like-for-like
2014 2013 change
============================= ========== ========== ==============
Revenue (GBPm) 1,651 1,498
Operating profit (GBPm) 108 101
Revenue (EURm) 1,957 1,837 7%
Operating profit (EURm) 128 123 4%
Operating profit margin (%) 6.5 6.7 (20bps)
Volumes (m) 404 380 6%
============================= ========== ========== ==============
About GLS
GLS is one of the largest ground-based, deferred parcel delivery
companies in Europe. Its reach across Europe spans 37 countries and
nation states through a combination of wholly-owned and partner
companies. Germany, France and Italy, GLS' main markets, accounted
for around 70 per cent of GLS' revenue. Approximately 94 per cent
of GLS' revenue came from deferred parcels. The remainder was split
between logistics (four per cent) and express parcels (two per
cent).
Trading performance
GLS' revenue was GBP1,651 million, with all countries delivering
year-on-year revenue growth. Excluding the positive impact of
foreign exchange of GBP52 million, revenue increased by seven per
cent. Parcel volumes increased by six per cent, with growth in both
domestic and international volumes.
Operating costs
Reported Adjusted
52 weeks 52 weeks Like-for-like
(GBPm) 2014 2013 change
=================================== ========== ========== ==============
People costs (367) (337) 5%
Distribution and conveyance costs (1,015) (920) 7%
Infrastructure costs (108) (100) 4%
Other operating costs (53) (40) 29%
Total operating costs (1,543) (1,397) 7%
=================================== ========== ========== ==============
Operating costs rose by seven per cent, driven by the increase
in distribution and conveyance costs as a result of higher volumes
and a full year impact of increased sub-contractor rates in
Germany. Infrastructure costs increased, largely due to a higher
depreciation charge. Other operating costs were higher due to a
non-recurring indirect taxation charge, higher IT costs and
restructuring costs in France.
Operating profit increased to GBP108 million, representing a
margin of 6.5 per cent (2013 6.7 per cent).
Germany
The competitive environment, coupled with a challenging labour
market, has had a continued impact on the GLS Germany business. GLS
Germany saw revenue growth of three per cent and remains the
largest market for GLS by revenue. The initiative to consolidate
sub-contractors to address increasing costs was not sufficient to
offset further increases in costs caused by low unemployment rates
and high demand for drivers, associated with increased competitor
capacity. As a result, margins remain under pressure.
France
The turnaround programme in GLS France is making progress. While
loss-making overall, performance for the year was slightly ahead of
the restructuring plan, with operating losses reducing by EUR3
million to EUR27 million. The cost reduction element of the
turnaround has progressed well during the year. Over the past few
years, GLS France has undertaken an operational overhaul, changing
from an 'express' delivery service provider to a deferred delivery
service provider. This included the sale of its 'In Night'
business, an overnight courier service, in 2011-12. GLS France will
focus on improving quality, achieving greater operational
efficiency and growing volumes from new and existing customers.
Italy
Despite an unfavourable economic environment, GLS Italy achieved
strong organic growth, which has led to a strengthening of its
market position. Performance was further enhanced by the
acquisition of three franchise areas as well as competitor
disruption, leading to an overall increase in revenue of 16 per
cent. The GLS network in Italy is partially wholly-owned, with the
rest of the operations covered by franchisees. The franchise system
remains stable and represents a good platform for future
growth.
Other developed European markets (includes Austria, Belgium,
Netherlands, Denmark, Ireland, Spain and Portugal)
Revenue increased across other developed European markets which
represent 21 per cent (2013 21 per cent) of total GLS revenue.
Whilst all countries saw revenue growth, the strongest was seen in
Spain and Portugal.
Developing/emerging European markets (includes Hungary,
Slovenia, Slovakia, Czech Republic, Romania, Poland and
Croatia)
Performance throughout the rest of Europe has been strong, with
a good increase in revenue from developing/emerging European
markets. The largest growth was in Slovakia and Czech Republic in
addition to the new business launched in Croatia in August 2013,
where we have been pleased with the progress.
Financial review
Revenue
Reported Adjusted
52 weeks 52 weeks Like-for-like
(GBPm) 2014 2013 change
===================== ========== ========== ==============
UKPIL
* Letters 4,625 4,700 (2%)
* Parcels 3,162 2,933 7%
GLS 1,651 1,498 7%
Other 18 15 n/m
===================== ========== ========== ==============
Group 9,456 9,146 2%
===================== ========== ========== ==============
Group revenue increased by two per cent, due to parcel revenue
growth in UKPIL and in GLS. Parcel revenue accounted for 51 per
cent of Group revenue (2013 48 per cent).
Group operating costs
Reported Adjusted
52 weeks 52 weeks Like-for-like
(GBPm) 2014 2013 change
============================================ ========== ========== ==============
People costs (5,282) (5,077) 4%
Distribution and conveyance costs (1,869) (1,771) 4%
Infrastructure costs (1,051) (1,047) flat
Other operating costs (583) (653) (11%)
============================================ ========== ========== ==============
Operating costs before transformation
costs (8,785) (8,548) 2%
Transformation costs (241) (195)
Group operating costs after transformation
costs (9,026) (8,743) 3%
============================================ ========== ========== ==============
Operating costs before transformation costs increased by two per
cent. The business continues to exercise tight cost control, which
particularly benefited other operating costs. Operating costs also
benefited from a one-off VAT credit of GBP35 million and lower
year-on-year depreciation and amortisation of GBP7 million, due to
a different mix in depreciable assets. The VAT credit arose as a
result of a change in regulation, which increased the scope of
products attracting VAT from April 2012, leading to an increased
recovery rate. The one-off benefits were offset by a GBP45 million
higher pension charge (mainly due to the IAS 19 service charge rate
increasing from 18.2 per cent to 20.3 per cent of pensionable
pay).
People costs increased by four per cent, driven by an increase
in UKPIL people costs. Tight cost control in non-people costs in
UKPIL, which reduced by three per cent, mitigated the impact of
increased volumes in GLS and higher sub-contractor rates in GLS
Germany in distribution and conveyance costs. Infrastructure costs
were flat, with lower property and depreciation and amortisation
costs being offset by higher IT costs. Other operating costs
decreased by 11 per cent due to tight cost control, predominantly
in UKPIL.
Operating profit before transformation costs
All the business segments generated increased operating profit
before transformation costs, resulting in a Group operating profit
before transformation costs of GBP671 million (2013 GBP598
million), with the margin increasing by 20 basis points.
Operating profit after transformation costs
Transformation costs were GBP241 million (2013 GBP195 million)
and are described in the 'UK Parcels, International & Letters
(UKPIL)' section of this report.
Reported Adjusted
52 weeks 52 weeks
(GBPm) 2014 2013
============================================= ========== ==========
UKPIL 309 294
GLS 108 101
Other 13 8
Group operating profit after transformation
costs 430 403
============================================= ========== ==========
The Group reported operating profit after transformation costs
of GBP430 million (2013 GBP403 million), with UKPIL contributing
around 72 per cent (2013 73 per cent) to the Group total. The
operating profit margin after transformation costs declined to 4.2
per cent (2013 4.4 per cent) due to the recognition of a GBP104
million provision relating to the management reorganisation
programme, which impacted margins by approximately one percentage
point.
Specific items
Reported Adjusted(16)
52 weeks 52 weeks
(GBPm) 2014 2013
=============================================== ========== =============
Operating specific items:
Royal Mail Pension Plan amendment (non-cash) 1,350 -
Transaction-related costs (28) (10)
Employee Free Shares costs (non-cash)(17) (94) -
Business-related costs (15) (67)
=============================================== ========== =============
Total operating specific items 1,213 (77)
Non-operating specific items:
Profit on disposal of property, plant
and equipment 19 4
Profit on disposal of associate undertaking 2 -
Release of gains held in equity on disposal
of pension escrow gilts - 22
Net pension interest (non-cash) 69 30
=============================================== ========== =============
Total specific items 1,303 (21)
=============================================== ========== =============
There were a number of specific items recognised during the
year. The accounting impact of the Pensions Reform 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 GBP28 million
(2013 GBP10 million) and the charge associated with the Employee
Free Shares Offer of GBP94 million. The Employee Free Shares Offer
charge represents the charge to the income statement relating to
the issuing of Free Shares, which is calculated from the start of
the period when employees become eligible for the shares and is
based on the mid-market closing price on the day of admission to
the London Stock Exchange. In 2014-15 the charge is expected to be
around GBP170 million.
Business-related costs of GBP15 million (2013 GBP67 million)
largely comprise GBP15 million historical employment costs, a GBP7
million release (2013 GBP28 million charge) of the industrial
diseases claims provision and GBP5 million of POL separation costs
(2013 GBP20 million) relating to facilities management. The prior
year also included GBP20 million of asset impairments (mainly
property).
Non-operating specific items comprise property disposal gains of
GBP19 million (2013 GBP4 million) and GBP2 million from the sale of
the Group's associate investment in G3 Worldwide Mail N.V. (Spring)
and net pension interest. Net pension interest is non-cash and is
calculated by applying the discount rate at the beginning of the
year for the schemes' liabilities to the net pension surplus. Due
to the substantial change in the RMPP surplus resulting from the
Pensions Reform, the net pension interest was recalculated to GBP69
million (2013 GBP30 million) for the full year. The net pension
interest for 2014-15 based on the discount rate for the schemes'
liabilities and net pension surplus is expected to be around GBP75
million.
Net finance costs (excluding specific items)
The net finance costs of GBP67 million (2013 GBP99 million)
comprise finance costs of GBP71 million (2013 GBP104 million),
offset by finance income of GBP4 million (2013 GBP5 million).
2014-15 will see the full year benefit of refinancing our
Government funding in 2013-14. The blended interest rate on the
Group's borrowings, including finance leases, is expected to be 3.5
per cent in 2014-15.
Taxation
The effective tax rate on the reported profit before taxation
was 23 per cent, comprising the current tax charge of GBP37 million
(2013 GBP38 million), mainly in respect of GLS, and a deferred tax
charge of GBP349 million (2013 GBP284 million credit), principally
in relation to the Pensions Reform. The UK current tax charge is
minimal, primarily as a result of the statutory treatment of the
HMRC-approved Employee Free Shares Offer as well as utilisation of
some brought forward tax reliefs, including losses and capital
allowances. GLS' current tax rate was 34 per cent reflecting higher
European corporation tax rates on profits and losses, primarily in
France, for which no deferred taxation credit has been recognised.
The deferred tax charge is principally due to the effect of the
Pensions Reform. The deferred tax credit in the prior year arose as
a result of the recognition of a deferred tax asset in respect of
carried forward tax reliefs in the UK, including losses and capital
allowances.
Excluding specific items, the Group tax charge was GBP97
million, representing an effective tax rate of 27 per cent.
Notional earnings per share (EPS)
Notional EPS, excluding specific items was 26.3 pence (Reported
127.7 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 assumes that the
one billion ordinary shares in issue at the date of the Company's
flotation had been in existence throughout the current reporting
year. Going forward, EPS will be calculated using the weighted
average number of shares in issue over the relevant period.
Dividends
The Board is recommending a final dividend of 13.3 pence per
share, payable on 31 July 2014 to shareholders on the register on 4
July 2014, subject to shareholder approval at the AGM on 24 July
2014.
Summary free cash flow
Reported Non-GAAP(18)
52 weeks 53 weeks
(GBPm) 2014 2013
======================================================= ========== =============
EBITDA before transformation costs 942 915
Trading working capital movements (57) (60)
Difference between pension costs charged in operating
profit and pension cash flows 58 (3)
Total investment (617) (665)
Other - taxation, net finance costs, dividend from
associate undertaking (69) (81)
======================================================= ========== =============
Underlying cash flow 257 106
One-off working capital movements 140 202
Cash cost of operating specific items (35) (26)
Proceeds from disposal of assets and associate
undertaking (non-operating specific items) 36 52
Free cash flow 398 334
======================================================= ========== =============
Free cash flow increased to GBP398 million (2013 GBP334 million)
primarily due to trading performance and reduced investment
spend.
EBITDA before transformation costs of GBP942 million (2013
GBP915 million) increased due to the improved trading performance
explained above. Trading working capital movements generated an
outflow of GBP57 million (2013 GBP60 million outflow) due to a
number of factors including the level of VAT payments. Both years
benefited from one-off working capital items. In 2013-14, there was
a one-off benefit of GBP150 million in respect of the March 2012
pension prepayment and GBP20 million relating to the buy forward of
stamps partially offset by a GBP30 million unwinding of the prior
year buy forward. In 2012-13, working capital benefited from the
buy forward of stamps of GBP87 million, an increase in the VAT
creditor of GBP75 million, due to an increase in the number of
products that have become subject to the standard rate of VAT since
April 2012, and the unwinding of the pension prepayment of GBP40
million. In 2014-15, there will be a one-off benefit to working
capital of approximately GBP45 million due to the timing of payroll
payments in respect of monthly paid staff.
Payments in respect of transformation operating expenditure of
GBP201 million (2013 GBP230 million) comprised GBP111 million (2013
GBP100 million) project and property costs, GBP71 million (2013
GBP75 million) voluntary redundancy payments and GBP19 million
(2013 GBP55 million) business transformation payments.
Transformation capital expenditure was GBP83 million (2013 GBP177
million). Non-transformation capital expenditure was GBP333 million
(2013 GBP258 million) primarily in respect of GLS, Parcelforce
Worldwide expansion and Mailmark(TM) .
The level of investment in the year is the amount of cash EBITDA
that needs to be re-invested back into the business to sustain its
operations and enable future growth. It comprises both operating
expenditure (including voluntary redundancy payments) and capital
expenditure, which is currently running well ahead of depreciation.
This investment is needed to transform the operations of the UK
business to meet the changing mix of traffic and to drive
efficiencies in people costs. Net investment totalled GBP581
million in 2013-14, reflecting total investment of GBP617 million
offset by the re-investment of operating property and business
disposals of GBP36 million.
Taxation and interest cash costs of GBP71 million (2013 GBP81
million) comprise GBP33 million (2013 GBP44 million) relating to
net interest paid and GBP38 million (2013 GBP37 million) relating
to current taxation payments.
Cash inflows associated with operating property and business
disposals were GBP36 million (2013 GBP52 million).
Net debt
Net debt decreased by GBP351 million to GBP555 million for the
year ended 30 March 2014, mainly due to cash flow generated, offset
by GBP45 million of 2013-14 finance costs settled on early
repayment of HM Government loans and the costs associated with
obtaining new loan facilities. At the date of listing, all
principal and interest on HM Government loans were repaid and
GBP600 million of Syndicated bank loans were drawndown.
Property
The Group's property portfolio can be divided into two classes:
surplus or soon to be surplus sites with the potential for
development ('development properties'); and 'operational
properties', used for the Group's day-to-day operations. The vast
majority of the Group's properties are operational properties.
As set out in the Prospectus(19) , the Group has identified
three potential development sites in London: Nine Elms; Mount
Pleasant; and Paddington (the 'London Development Portfolio').
Depending on future changes to the configuration of the operational
network, some other sites may have the potential to become
development properties, but none would be of similar scale to the
London Development Portfolio.
Additionally, each year there will be lower value disposals
arising from localised changes to the network. The proceeds from
these disposals will be re-invested to fund partially the
modernisation of the Royal Mail Delivery Office network. With new
external facilities now in place, we can seek to optimise the
realisable value of any development properties as they become
surplus, but we will adopt a flexible approach as to the manner in
which this is achieved.
Pensions Reform
On 26 September 2013, the Company agreed with the Royal Mail
Pension Plan Trustee to implement the Pensions Reform with effect
from 1 April 2014. Under this agreement, members' pensionable pay
will increase by RPI (up to a maximum of five per cent), regardless
of whether actual basic pay increases by more or less than this
amount. This change is considered to be a 'plan amendment' which
meets the IAS 19 definition of a past service cost and accordingly
a non-cash GBP1,350 million credit (specific item) has been
recognised in the Group income statement.
Pension balance sheet amounts
The IAS 19 pension position at 30 March 2014 was a surplus of
GBP1,723 million compared with a surplus of GBP825 million at 31
March 2013. The increased surplus reflects the impact of the
Pensions Reform of GBP1,350 million, partially offset by the impact
on liabilities of a lower discount rate. This discount rate is
driven by the estimated real rate of return available on AA
corporate bonds of similar duration to the schemes' liabilities (28
years).
Outlook for 2014-15
We continue to expect to see overall volume growth in the UK
parcel market in 2014-15, with the B2C/C2X segment growing at
around 4.5 per cent to 5.5 per cent and the B2B segment growing at
slightly above GDP. However, we expect that the increased
competitive activity in the market will put pressure on
pricing.
We continue to expect UK addressed letter market volumes to
decline by four to six per cent per annum(20) . For 2014-15, we
expect to be at the better end of this range. The impact of
upcoming European and local elections in May 2014 and forecast
improvement in GDP will more than offset the expected impact from
the increased rollout of direct delivery competition in
2014-15.
GLS experienced good revenue growth in 2013-14, in part helped
by competitor disruption in Italy that is not expected to be
repeated in 2014-15. Therefore, the rate of GLS revenue growth in
2014-15 is expected to be slightly lower than in 2013-14. The
profit improvement resulting from the continued turnaround in
France is expected to be offset by increased IT investment across
the network.
We continue to focus on cost control. The management
reorganisation programme announced in March 2014 is expected to
deliver annualised cost savings of GBP50 million, of which
approximately GBP25 million will be realised in 2014-15. However,
there is expected to be an increase in the pension charge of
GBP70-80 million, mainly driven by the increase in the IAS 19
pension service charge rate from 20.3 per cent to 23.6 per cent as
a result of market conditions. The expected increase is based on
the current pensionable payroll and the final charge will be
dependent on the level and mix of pensionable pay in 2014-15. In
addition, 2014-15 will not benefit from the one-off VAT credit of
GBP35 million in 2013-14. Depreciation and amortisation is expected
to increase by around GBP20 million, reflecting continuing
investment. These items will have an impact on the year-on-year
movements in operating costs, particularly in the first half of the
year.
Excluding the one-off VAT credit and expected increase in the
pension charge, we are targeting around a 50 basis point expansion
in Group operating profit margin before transformation costs for
the full year.
Transformation costs are expected to be in the range of
GBP120-140 million, largely depending on the level of voluntary
redundancies.
We expect the cumulative net cash investment over 2013-14 and
2014-15 to remain at around GBP1.2 billion, as the reduced costs of
implementing certain projects in 2013-14 will help offset the cash
costs of the management reorganisation programme in 2014-15.
Matthew Lester
Chief Finance Officer
22 May 2014
(16) The 'Business-related costs' and 'Profit on disposal of
property, plant and equipment' specific items on an Adjusted basis
are different than on a Reported basis due to the treatment of the
costs of POL separation (see Basis of preparation note in financial
statements for further details).
(17) Includes GBP3 million provision for National Insurance, which will be cash settled.
(18) Cash flows are the same on both a Reported and Adjusted
basis. This non-GAAP presentation excludes GBP820 million cash
flows relating to POL on its transfer to Royal Mail Holdings plc on
1 April 2012.
(19) Prospectus in relation to the Initial Public Offering,
dated 27 September 2013.
(20) Excluding election mail.
Consolidated income statement
For the 52 weeks ended 30 March 2014, 52 weeks ended 24 March
2013 and 53 weeks ended 31 March 2013
53 weeks
ended
52 weeks ended 30 March 52 weeks ended 24 31 March
2014 March 2013 2013
============================================ ============================================ ====================
Specific Excluding Specific
Excluding
specific specific
Reported(1) items(2) items Adjusted(3) items(2) items
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Reported(1)
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================ ============= ============= ============== ============== ============= ============= ============
Continuing operations:
Revenue 2 9,456 - 9,456 9,146 - 9,146 9,279
Operating costs (8,785) - (8,785) (8,548) - (8,548) (8,644)
======================== ============= ============= ============== ============== ============= ============= ============
People costs (5,282) - (5,282) (5,077) - (5,077) (5,147)
Distribution and
conveyance costs (1,869) - (1,869) (1,771) - (1,771) (1,785)
Infrastructure costs (1,051) - (1,051) (1,047) - (1,047) (1,052)
Other operating
costs (583) - (583) (653) - (653) (660)
======================== ============= ============= ============== ============== ============= ============= ============
Operating profit
before transformation
costs 671 - 671 598 - 598 635
Transformation costs 3 (241) - (241) (195) - (195) (195)
======================== ============= ============= ============== ============== ============= ============= ============
Operating profit
after transformation
costs 430 - 430 403 403 440
Operating specific
items:
Royal Mail Pension
Plan amendment 4 1,350 1,350 - - - - -
Transaction-related
costs 4 (28) (28) - (10) (10) - (10)
Employee Free Shares
costs 4 (94) (94) - - - - -
Business-related
costs 4 (15) (15) - (67) (67) - (47)
======================== ============= ============= ============== ============== ============= ============= ============
Operating profit/(loss) 1,643 1,213 430 326 (77) 403 383
Non-operating specific
items:
Profit on disposal
of property, plant
and equipment 19 19 - 4 4 - 16
Profit on disposal
of associate
undertaking 2 2 - - - - -
======================== ============= ============= ============== ============== ============= ============= ============
Earnings before
interest
and taxation 1,664 1,234 430 330 (73) 403 399
Finance costs 5 (71) - (71) (104) - (104) (104)
Finance income 5 4 - 4 27 22 5 27
Net pension interest
(non-operating
specific
item) 8 69 69 - 30 30 - 30
======================== ============= ============= ============== ============== ============= ============= ============
Profit/(loss) from
continuing operations
before taxation 1,666 1,303 363 283 (21) 304 352
Taxation
(charge)/credit 6 (386) (289) (97) 246 336 (90) 246
Profit for the period
from continuing
operations 1,280 1,014 266 529 315 214 598
Discontinued
operations:
Profit after taxation
for the period from
Post Office Limited - - - - - - 2
======================== ============= ============= ============== ============== ============= ============= ============
Profit for the period 1,280 1,014 266 529 315 214 600
======================== ============= ============= ============== ============== ============= ============= ============
Profit for the period
attributable to:
Equity holders of
the parent company 1,277 1,014 263 525 315 210 596
Non-controlling
interests 3 - 3 4 - 4 4
======================== ============= ============= ============== ============== ============= ============= ============
Notional earnings
per share: 9
======================== ============= ============= ============== ============== ============= ============= ============
Basic and diluted
- continuing
operations 127.7p 101.4p 26.3p 52.5p 31.5p 21.0p 59.4p
======================== ============= ============= ============== ============== ============= ============= ============
Basic and diluted
- total Group 127.7p 101.4p 26.3p 52.5p 31.5p 21.0p 59.6p
======================== ============= ============= ============== ============== ============= ============= ============
(1) Reported - prepared in accordance with International
Financial Reporting Standards (IFRSs), requiring Post Office
Limited (POL) to be consolidated up until its transfer to Royal
Mail Holdings plc on 1 April 2012.
(2) Specific items - see note 1 to the financial statements.
(3) Adjusted - Reported 2012-13 results adjusted to exclude the
consolidation of POL up to 1 April 2012 and the 53rd week's
additional revenue and costs. In addition, GBP32 million of POL
separation costs taken to equity in the Reported basis are taken
through the income statement in the Adjusted basis. See note 1
'Basis of Preparation' for further details.
Consolidated statement of comprehensive income
For the 52 weeks ended 30 March 2014 and 53 weeks ended 31 March
2013
52 weeks
2014 53 weeks
Reported 2013
(unaudited) Reported
Notes GBPm GBPm
======================================================== ====== ============= ==========
Profit for the period from continuing operations 1,280 598
Other comprehensive (expense)/income for the period:
Items that will not be subsequently reclassified to
profit or loss:
Amounts relating to pensions accounting (344) (439)
======================================================== ====== ============= ==========
IFRIC 14 adjustment relating to pension surplus 8 (8) (5)
Changes in long-term assumptions - defined benefit
schemes' assets/liabilities 8 (453) (246)
Taxation on above items 6 117 (188)
======================================================== ====== ============= ==========
Items that may be subsequently reclassified to profit
or loss:
Foreign exchange translation differences (12) (5)
Designated cash flow hedges (19) 2
======================================================== ====== ============= ==========
Losses on cash flow hedges deferred into equity (24) (1)
Losses on cash flow hedges released from equity to
income 4 2
Gains on cash flow hedges released from equity to
the carrying amount of non-financial assets - (1)
Taxation on above items 6 1 2
======================================================== ====== ============= ==========
Release of gains held in equity on disposal of pension
escrow gilts 5 - (22)
======================================================== ====== ============= ==========
Total comprehensive income for the period 905 134
======================================================== ====== ============= ==========
Total comprehensive income for the period attributable
to:
Equity holders of the parent company 902 130
Non-controlling interests 3 4
======================================================== ====== ============= ==========
Consolidated statement of cash flows
For the 52 weeks ended 30 March 2014 and 53 weeks ended 31 March
2013
The consolidated statement of cash flows for the 52 weeks ended
30 March 2014 and 53 weeks ended 31 March 2013 has been prepared on
a Reported basis in accordance with IFRSs. The comparative
information for 2012-13 is also presented on a non-GAAP basis which
excludes the Group's former POL subsidiary. The only difference
between the Reported and non-GAAP presentation is the GBP820
million cash which belonged to POL, transferred to Royal Mail
Holdings plc (subsequently renamed Postal Services Holding Company
Limited) on 1 April 2012.
52 weeks 53 weeks
2014 2013 53 weeks
Reported Non-GAAP 2013
(unaudited) (unaudited) Reported
GBPm GBPm GBPm
======================================================== ============= ============= ==========
Cash flow from operating activities
Operating profit before transformation costs 671 635 635
Adjustment for:
Depreciation 241 238 238
Amortisation 33 43 43
Share of post-tax profit from associates (3) (1) (1)
======================================================== ============= ============= ==========
EBITDA before transformation costs 942 915 915
Working capital movements 83 142 142
======================================================== ============= ============= ==========
Decrease in inventories 2 8 8
Decrease in receivables 81 25 25
Increase in payables 19 136 136
Net increase in derivative assets (2) (15) (15)
Decrease in provisions (17) (12) (12)
======================================================== ============= ============= ==========
Difference between pension costs charged in
operating profit and pension cash flows 58 (3) (3)
Cash cost of transformation operating expenditure(1) (201) (230) (230)
Cash cost of operating specific items (35) (26) (26)
======================================================== ============= ============= ==========
Cash inflow from operations 847 798 798
Income taxation paid (38) (37) (37)
======================================================== ============= ============= ==========
Net cash inflow from operating activities 809 761 761
======================================================== ============= ============= ==========
Cash flows from investing activities:
Dividend received from associate undertaking 2 - -
Finance income received 4 5 5
Proceeds from sale of property, plant and equipment
(non-operating specific item) 33 52 52
Proceeds from sale of associate undertaking
(non-operating specific item) 3 - -
Purchase of property, plant and equipment(1) (341) (388) (388)
======================================================== ============= ============= ==========
Transformation investment - capital expenditure (83) (177) (177)
Non-transformation investment - capital expenditure (258) (211) (211)
======================================================== ============= ============= ==========
Acquisition of business(1) (2) (3) (3)
Purchase of intangible assets (software)(1) (69) (41) (41)
Payment of deferred consideration in respect
of prior years' acquisitions(1) (4) (3) (3)
Net outflow from transfer of Post Office Limited
to Royal Mail Holdings plc - - (820)
Net sale of financial assets investments (non-current) - 129 129
Net sale of financial assets investments (current) - 30 30
======================================================== ============= ============= ==========
Net cash outflow from investing activities (374) (219) (1,039)
======================================================== ============= ============= ==========
Net cash inflow/(outflow) before financing activities 435 542 (278)
======================================================== ============= ============= ==========
Cash flows from financing activities:
Finance costs paid on refinancing of loan facilities (45) - -
Other finance costs paid (37) (49) (49)
Payment of capital element of obligations under
finance lease contracts (73) (74) (74)
Cash received on sale and leasebacks 109 58 58
New loans 600 - -
Repayment of borrowings (973) (600) (600)
======================================================== ============= ============= ==========
Net cash outflow from financing activities (419) (665) (665)
======================================================== ============= ============= ==========
Net decrease in cash and cash equivalents 16 (123) (943)
Effect of foreign currency exchange rates on
cash and cash equivalents (1) 1 1
Cash and cash equivalents at the beginning of
the period 351 473 1,293
Cash and cash equivalents at the end of the
period 366 351 351
======================================================== ============= ============= ==========
(1) Items included in total investment - see note 7.
Consolidated balance sheet
At 30 March 2014 and 31 March 2013
At 30 March At 31
2014 March
Reported 2013
(unaudited) Reported
Notes GBPm GBPm
================================================================== ====== ============= ==========
Non-current assets
Property, plant and equipment 1,989 1,916
Leasehold land payment 3 3
Goodwill (mainly investment in GLS) 197 196
Intangible assets (mainly software) 195 139
Investments in associates 4 3
Financial assets - pension escrow investments 20 20
- derivatives 3 3
Retirement benefit
asset - net of IFRIC 14 adjustment 8 1,723 825
Other receivables 13 8
Deferred taxation assets 6 9 112
================================================================== ====== ============= ==========
4,156 3,225
Non-current assets held for sale 3 2
================================================================== ====== ============= ==========
Current assets
Inventories 22 24
Trade and other receivables 926 1,004
Financial assets - derivatives 2 9
- short-term deposits 1 1
Cash and cash equivalents 366 351
================================================================== ====== ============= ==========
1,317 1,389
================================================================== ====== ============= ==========
Total assets 5,476 4,616
================================================================== ====== ============= ==========
Current liabilities
Trade and other payables (1,652) (1,611)
Financial liabilities - obligations under finance leases (87) (79)
- derivatives (12) (2)
Income taxation payable (14) (14)
Provisions (173) (119)
================================================================== ====== ============= ==========
(1,938) (1,825)
Non-current liabilities
Financial liabilities - interest bearing loans and borrowings (600) (973)
- obligations under finance leases (255) (226)
- derivatives (5) (1)
Provisions (95) (127)
Other payables (31) (36)
Deferred taxation liabilities 6 (151) (23)
================================================================== ====== ============= ==========
(1,137) (1,386)
================================================================== ====== ============= ==========
Total liabilities (3,075) (3,211)
================================================================== ====== ============= ==========
Net assets 2,401 1,405
================================================================== ====== ============= ==========
Equity
Share capital 10 -
Retained earnings 2,332 1,318
Other reserves 52 83
================================================================== ====== ============= ==========
Equity attributable to parent company 2,394 1,401
Non-controlling interests 7 4
Total equity 2,401 1,405
================================================================== ====== ============= ==========
Consolidated statement of changes in equity
For the 52 weeks ended 30 March 2014 and 53 weeks ended 31 March
2013
Equity
Foreign holders
Financial currency of Non-
Share Share Retained assets translation Hedging Other the controlling Total
premium capital earnings reserve reserve reserve reserves parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ======== ======== ========= ========== ============ ======== ========= ======== =========================================================== ========
Reported at 26
March
2012 3,784 - (6,442) 22 78 8 47 (2,503) - (2,503)
================== ======== ======== ========= ========== ============ ======== ========= ======== =========================================================== ========
Profit for the
period
from continuing
operations - - 594 - - - - 594 4 598
Other
comprehensive
income/(expense)
for the period - - (439) (22) (5) 2 - (464) - (464)
Capital reduction (3,784) 3,784 - - - - - - -
Pension deficit
transfer to HM
Government
on 1 April 2012
(note 8(c)) - - 4,012 - - - - 4,012 - 4,012
Loss on transfer
of subsidiary to
parent company
(discontinued
operation) - - (191) - - - (47) (238) - (238)
================== ======== ======== ========= ========== ============ ======== ========= ======== =========================================================== ========
Reported at 31
March
2013 - - 1,318 - 73 10 - 1,401 4 1,405
================== ======== ======== ========= ========== ============ ======== ========= ======== =========================================================== ========
Profit for the
period
from continuing
operations - - 1,277 - - - - 1,277 3 1,280
Other
comprehensive
income/(expense)
for the period - - (344) - (12) (19) - (375) - (375)
Share capital
issue
(note 10) - 10 (10) - - - - - - -
Employee Free
Shares
issue(1) (note
11) - - 91 - - - - 91 - 91
Reported at 30
March
2014 (unaudited) - 10 2,332 - 61 (9) - 2,394 7 2,401
================== ======== ======== ========= ========== ============ ======== ========= ======== =========================================================== ========
(1) Excludes GBP3 million National Insurance, charged to the
income statement, included in provisions on the balance sheet.
Notes to the Preliminary consolidated financial statements
1. Basis of preparation
This note explains how these Royal Mail plc Group ('the Group') Preliminary
consolidated financial statements have been prepared, including details
of the incorporation of Royal Mail plc ('the Company'), specific items,
the adjustment to the comparative year relating to the transfer of Post
Office Limited (POL) to Royal Mail Holdings plc on 1 April 2012, and
the adjustment for the 53(rd) week in 2012-13.
===========================================================================
Introduction
The Group's Preliminary consolidated financial statements have
been prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and as they
apply to the financial statements of the Group for the 52 weeks
ended 30 March 2014 (2013 53 weeks ended 31 March 2013). To date,
no audit opinion has been provided on these financial
statements.
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 the Company becoming the immediate and ultimate
parent of Royal Mail Group Limited (see note 10for further
details). The Preliminary consolidated financial statements are
therefore presented for the Royal Mail plc Group and its
subsidiaries, whereas the 2012-13 Annual Report and Special Purpose
Financial Statements (Annual Report) and Prospectus in relation to
the Initial Public Offering of Royal Mail plc, dated 27 September
2013 ('the Prospectus') were in respect of consolidated Royal Mail
Group Limited. Accordingly, all references to the 2012-13 Annual
Report and Prospectus in this document relate to the consolidated
Royal Mail Group Limited entity.
The Company is incorporated in the United Kingdom (UK) and the
financial statements are produced in accordance with the Companies
Act 2006 and applicable IFRSs. The UK is the Company's country of
domicile.
The Group Preliminary consolidated financial statements are
presented in Sterling, as that is the currency of the primary
economic environment in which the Group operates, and all values
are rounded to the nearest whole million except where otherwise
indicated. The consolidated financial statements have been prepared
on an historic cost basis, except for pension assets and derivative
financial instruments, which have been measured at fair value.
The results of POL have been consolidated and disclosed as a
'discontinued operation' in the income statement for the period 26
March 2012 up to 1 April 2012, at which point POL was transferred
to Royal Mail Holdings plc (subsequently renamed Postal Services
Holding Company Limited).
Presentation of results
The Preliminary consolidated financial statements have been
prepared in accordance with IFRSs i.e. on a Reported basis. The
income statement and cash flow statement also include non-GAAP
adjustments in respect of the following:
Specific items
The Group previously disclosed items that in management's
judgment needed to be shown separately by virtue of their nature 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, net pension interest and elements
of taxation. The Group has decided therefore, not to continue using
the 'exceptional items' definition and instead to 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. These specific items may not be
comparable with similarly termed measures used by other
companies.
Items which are classified as specific are: RMPP (Royal Mail
(RM) section - see note 8) amendment credit, transaction-related
costs, Employee Free Shares costs, certain costs not associated
with the transformation of the operational network, historical
employment costs, potential industrial diseases claims costs,
certain property impairments, all profits from disposals of
property and associate undertakings, net pension interest, the gain
created on the sale of pension escrow investments, plus the related
taxation effects of these items. Taxation specific items include
the impact of the pension transfer pursuant to the Postal Services
Act 2011 and the impact of changes in taxation law.
Impact of 53(rd) week in 2013
The 2012-13 comparative year was a 53 week year and, to provide
meaningful comparisons of revenues and costs, the income statement
also includes comparative results on an Adjusted 52 week basis. The
adjustment eliminates the 53(rd) week's revenue and incremental
operating costs associated with that revenue.
GLS reports results for a 52 week year ending 31 March. No
adjustments have therefore been made for GLS.
Transfer of Post Office Limited (POL)
The 2012-13 comparative Reported results in these Preliminary
financial statements relate to the 53 week year ended 31 March 2013
and include the full consolidated results of the Group, including
the Group's former subsidiary, POL, for the period 26 March 2012 to
31 March 2012. POL was subsequently transferred to Royal Mail
Holdings plc on 1 April 2012.
The 2012-13 comparative Adjusted results in the income statement
exclude POL, and are consistent with those presented in the
Prospectus, with an adjustment to eliminate the 53(rd) week's
revenue and costs (GBP37 million profit impact - see above and page
F66 in the Prospectus). In excluding POL from these comparative
results, costs incurred by the Group relating to the transfer of
POL (GBP20 million IT separation costs and GBP12 million loss on
transfer of properties) were deemed, for the purpose of providing
Royal Mail Group excluding POL financial information, to be
external, third party costs and were taken directly to the income
statement.
On a Reported basis, these GBP32 million costs of POL separation
have been treated, as required by IFRSs, as transactions with the
parent (at the time Royal Mail Holdings plc) and taken directly
through equity (included in 'Loss on transfer of subsidiary to
parent company (discontinued operation)' in the Consolidated
statement of changes in equity), not through the income statement.
Consequently, the Reported 'profit for the period from continuing
operations' is GBP32 million higher than that in the Adjusted
results, in addition to the GBP37 million higher profit impact of
the 53(rd) week as explained above.
The comparative information in the consolidated statement of
cash flows also includes non-GAAP disclosures which exclude the
cash position of POL up to the date of its transfer to Royal Mail
Holdings plc. The Directors believe that this presentation provides
meaningful comparisons of cash flows and is consistent with how the
cash flow statement was presented in the 2012-13 Annual Report and
Prospectus.
Other than the 'discontinued operation' disclosure in the income
statement and the Reported cash flows in the cash flow statement,
on the basis of materiality, no other disclosures (e.g. segment
reporting) in respect of POL have been made in these financial
statements, for the period that it was still part 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 of shares, the Company 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 Limited). 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.
Estimation and accounting judgments
The preparation of the Group consolidated financial statements
requires management to make various judgements, estimates and
assumptions when determining the carrying value of certain assets
and liabilities. Actual results may differ from the estimates.
2. Segment information
The Group's revenue, certain costs and profit before financing and taxation
are segmented in this note, aligned with how the business is managed.
======================================================================================================
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)
=================================== =================================================================
The Company 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 has
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 accounting standards
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.
Reported 52 weeks ended 30 March 2014
Other
European
UK operations operations
============================================== ================= =============== ======
UKPIL Other Total GLS Total
Continuing operations GBPm GBPm GBPm GBPm GBPm
============================================== ======== ======= ====== ======= ======
External revenue 7,787 18 7,805 1,651 9,456
Inter-segment revenue - 176 176 -(1) 176
============================================== ======== ======= ====== ======= ======
Total segment revenue 7,787 194 7,981 1,651 9,632
Operating profit before transformation
costs 550 13 563 108 671
Transformation costs (241) - (241) - (241)
============================================== ======== ======= ====== ======= ======
Operating profit after transformation
costs 309 13 322 108 430
Operating specific items:
Royal Mail Pension Plan amendment 1,350 - 1,350 - 1,350
Transaction-related
costs (24) - (24) (4) (28)
Employee Free Shares costs (94) - (94) - (94)
Business-related costs (15) - (15) - (15)
============================================== ======== ======= ====== ======= ======
Operating profit 1,526 13 1,539 104 1,643
Non-operating specific items:
Profit on disposal of property,
plant and equipment 19 - 19 - 19
Profit on disposal of associate
undertaking 2 - 2 - 2
============================================== ======== ======= ====== ======= ======
Earnings before interest and taxation 1,547 13 1,560 104 1,664
======== =======
not reported
Net finance costs at this level (70) 3 (67)
Net pension interest (non-operating
specific item) 69 - 69
============================================== ====== ======= ======
Profit before taxation 1,559 107 1,666
Taxation - specific items (289) - (289)
- other (56) (41) (97)
================================ ====== ======= ======
Profit for the period after taxation 1,214 66 1,280
============================================== ================= ====== ======= ======
EBITDA before transformation costs 791 10 801 141 942
======== =======
not reported
Free cash flow(2) at this level 338 60 398
============================================== ================= ====== ======= ======
Reported 53 weeks ended 31 March 2013
Other
European
UK operations operations
============================================== ================= =============== ======
UKPIL Other Total GLS Total
Continuing operations GBPm GBPm GBPm GBPm GBPm
============================================== ======== ======= ====== ======= ======
External revenue 7,766 15 7,781 1,498 9,279
Inter-segment revenue - 148 148 -(1) 148
============================================== ======== ======= ====== ======= ======
Total segment revenue 7,766 163 7,929 1,498 9,427
============================================== ======== ======= ====== ======= ======
Operating profit before transformation
costs 526 8 534 101 635
Transformation costs (195) - (195) - (195)
============================================== ======== ======= ====== ======= ======
Operating profit after transformation
costs 331 8 339 101 440
Operating specific items:
Transaction-related
costs (10) - (10) - (10)
Business-related costs (47) - (47) - (47)
============================================== ======== ======= ====== ======= ======
Operating profit 274 8 282 101 383
Non-operating specific items:
Profit on disposal of property,
plant and equipment 16 - 16 - 16
============================================== ======== ======= ====== ======= ======
Earnings before interest and taxation 290 8 298 101 399
======== =======
not reported
Net finance costs at this level (82) 5 (77)
Net pension interest (non-operating
specific item) 30 - 30
============================================== ====== ======= ======
Profit before taxation 246 106 352
Taxation - specific items 336 - 336
- other (57) (33) (90)
================================ ====== ======= ======
Profit for the period after taxation 525 73 598
============================================== ================= ====== ======= ======
EBITDA before transformation costs 775 8 783 132 915
======== =======
not reported
Free cash flow(2) at this level 309 25 334
============================================== ================= ====== ======= ======
(1) Trading between GLS and UKPIL is not material.
(2) Free cash flow is a non-GAAP measure used by management.
The total UK costs before transformation costs were GBP7,242
million (2013 GBP7,247 million).
The following amounts are included within operating profit
before transformation costs:
Reported 52 weeks ended 30 March 2014
Other
European
UK operations operations
=============================== =========== ======================= === ============ ===========
UKPIL Other Total GLS Total
GBPm GBPm GBPm GBPm GBPm
=============================== ==== ========= ========= ======== === ============ === ======
Depreciation (212) - (212) (29) (241)
Amortisation of intangible
assets (mainly software) (29) - (29) (4) (33)
Share of post-tax profit from
associates - 3 3 - 3
===================================== ========= ========= ======== === ============ === ======
Reported 53 weeks ended 31 March 2013
Other
European
UK operations operations
=================================== ======== =============================== ====== ============ ========
UKPIL Other Total GLS Total
GBPm GBPm GBPm GBPm GBPm
=================================== ==== ============ ============ ======== ===== =========== ========
Depreciation (210) (1) (211) (27) (238)
Amortisation of intangible assets
(mainly software) (39) - (39) (4) (43)
Share of post-tax profit from
associates - 1 1 - 1
========================================= ============ ============ ======== ===== =========== ========
3. Transformation costs
Transformation costs are included within the cost base and profit that
management monitors to assess financial and trading performance. They
relate directly to the transformation programme that has spanned several
years and which therefore warrant separate disclosure as shown below.
=========================================================================
52 weeks 53 weeks
2014 2013
Reported Reported
GBPm GBPm
================================================== ========== ==========
Voluntary redundancy - management reorganisation
programme (MRP) (102) -
Voluntary redundancy - other (14) (78)
Project and property costs (including GBP2m of
MRP costs) (108) (95)
Business transformation payments (17) (22)
Total transformation costs (241) (195)
================================================== ========== ==========
The GBP17 million business transformation payments represent
payments linked to the achievement of key milestones in
transforming the network, as part of the Business Transformation
Agreement 2010.
4. Specific items
These are costs which fall outside the Group's normal trading activity
and which in management's view need to be disclosed separately to provide
greater visibility of the trading results of the business. This note
also includes Adjusted (non-GAAP) comparative information which includes
the costs of POL separation (see note 1 for further details).
==========================================================================
Specific items before taxation
52 weeks 52 weeks 53 weeks
2014 2013 2013
Reported Adjusted Reported
GBPm GBPm GBPm
================================================= ========== ========== ==========
Operating specific items:
Royal Mail Pension Plan amendment 1,350 - -
Transaction-related costs (28) (10) (10)
Employee Free Shares costs (94) - -
Business-related costs (15) (67) (47)
================================================= ========== ========== ==========
Potential industrial diseases claims 7 (28) (28)
Impairments - (20) (20)
Other (22) (19) 1
================================================= ========== ========== ==========
Total operating specific items 1,213 (77) (57)
================================================= ========== ========== ==========
Non-operating specific items:
Profit on disposal of property, plant and
equipment 19 4 16
Profit on disposal of associate undertaking 2 - -
Finance income - release of gains held in
equity on disposal of RMPP
(RM section) escrow investments - 22 22
Net pension interest 69 30 30
================================================= ========== ========== ==========
Total non-operating specific items 90 56 68
================================================= ========== ========== ==========
Total specific items before taxation 1,303 (21) 11
================================================= ========== ========== ==========
Other operating specific items of GBP22 million (2013 Adjusted
GBP19 million) mainly comprise historical employment costs of GBP15
million (2013 Adjusted GBPnil) and GBP5 million POL separation
costs (2013 Adjusted GBP20 million) relating to facilities
management.
Specific items - taxation
52 weeks 52 weeks 53 weeks
2014 2013 2013
Reported Adjusted Reported
GBPm GBPm GBPm
=========================================== ========== ========== ==========
Taxation effect of above items (301) (7) (7)
Taxation specific items 12 343 343
=========================================== ========== ========== ==========
Impact of change in taxation law(1) 12 - -
Impact of Postal Services Act 2011(2) - 343 343
Total (289) 336 336
=========================================== ========== ========== ==========
(1) A taxation credit was recognised for the remeasurement of
deferred taxation balances as a result of the change in UK
statutory corporation taxation rates.
(2) The taxation credit shown in specific items for 2012-13
reflects the benefit of UK taxation attributes (including prior
year taxation losses and deferred capital allowances) not
previously recognised as deferred taxation assets. Deferred
taxation assets are recognised only to the extent that the Group is
expected to have future taxable profits and therefore obtain a real
taxation saving from future taxation deductions. Following the
Postal Services Act 2011 and the transfer of the historic pension
deficit, expectations of future profitability increased and it
became appropriate to recognise a net deferred taxation asset in
the UK. In addition to this one-off material deferred taxation
credit, the Group also reported a one-off benefit from the
utilisation of prior year taxation losses in 2012-13.
5. Net finance costs and net debt
This note provides details of:
* Interest payable on loans and finance lease
obligations and interest received from investments
and loans. 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; and
* Net debt - a non-GAAP measure 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 balance sheet
shows these items gross within the different
categories of assets and liabilities.
============================================================
Net finance costs
52 weeks 53 weeks
2014 2013
Reported Reported
GBPm GBPm
======================================================= ========== ==========
Unwinding of discount relating to industrial diseases
provision (3) (1)
Interest payable on financial liabilities (68) (103)
======================================================= ========== ==========
HM Government facilities:
Loans and borrowings (47) (82)
Unused facility fees (2) (5)
Other facility fees (3) (3)
Syndicated bank loan facility:
Loans and borrowings (3) -
Unused facility fees (1) -
Other facility fees (2) -
Finance leases (10) (13)
======================================================= ========== ==========
Finance costs (71) (104)
======================================================= ========== ==========
Release of gains held in equity on disposal of
pension escrow gilts - specific item - 22
Interest receivable on other financial assets 4 5
======================================================= ========== ==========
Finance income 4 27
======================================================= ========== ==========
Net finance costs (67) (77)
======================================================= ========== ==========
Net debt
At 30 March At 31 March
2014 2013
Balance sheet Reported Reported
category GBPm GBPm
============================================= ========================= ============ ============
Obligations under finance leases Current liabilities (87) (79)
Interest bearing loans and borrowings Non-current liabilities (600) (973)
Obligations under finance leases Non-current liabilities (255) (226)
============================================= ========================= ============ ============
(942) (1,278)
Cash and cash equivalents and
other financial assets:
Cash at bank and in hand Current assets 51 136
Cash equivalent investments (short-term
bank and
local authority deposits/money
market fund
investments) and other financial
assets Current assets 316 216
Pension escrow investments (RMSEPP) Non-current assets 20 20
Total net debt (555) (906)
======================================================================== ============ ============
Excluding the balances relating to POL, transferred to Royal
Mail Holdings plc on 1 April 2012, net debt has decreased by GBP351
million during the year ended 30 March 2014 and by GBP280 million
during the year ended 31 March 2013 as shown below.
2014 2013
Reported Reported
GBPm GBPm
======================================================= ========== ==========
Net debt brought forward at 1 April 2013 and 26
March 2012 (906) (753)
Adjustment for transfer of POL to Royal Mail Holdings
plc on 1 April 2012 - (433)
======================================================= ========== ==========
Net debt brought forward excluding the Post Office
Limited subsidiary (906) (1,186)
Free cash flow 398 334
Finance costs paid on refinancing of loan facilities (45) -
Increase in loans and borrowings (roll-up interest
on 12.0 per cent facility) - (51)
Increase in new finance lease obligations (non-cash) (1) (4)
Foreign currency exchange impact on cash and cash
equivalents (1) 1
Net debt carried forward at 30 March 2014 and 31
March 2013 (555) (906)
======================================================= ========== ==========
At the date of the Company's listing on the London Stock
Exchange, GBP973 million of HM Government loans were repaid and
GBP600 million of Syndicated bank loans were drawn down. Below is a
summary of loans and borrowings at the year end, the respective
average interest rates, and facilities available.
Syndicated bank loan facilities
At 31 March 2014 Reported
Average Basis of Average
interest interest maturity Average
rate rate at date maturity
Loans Further of loan 30 March of loan date
and committed Total drawn 2014 - drawn of loan
borrowings facility facility down LIBOR plus down facility
GBPm GBPm GBPm % % year year
================== ============ =========== ========== ========== ============ ========== ==========
Term Loan A 300 - 300 1.5 1.00 2018 2018
Term Loan B 300 - 300 1.4 0.90 2016 2016
Revolving credit
facilities - 800 800 - 0.85 - 2018
Total 600 800 1,400 1.4 2017 2018
================== ============ =========== ========== ========== ============ ========== ==========
The Group's blended interest rate on loans and finance leases
over the next five years is forecast to be as follows:
Interest rate
%
============================================================ ==============
Current average interest rate on drawn down loans (see
table above) 1.4
Cost of fixing interest rates on GBP150 million of Term
Loan A 0.3
Market expectation of interest rate rises over the next
five years on remaining loans 0.9
============================================================ ==============
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
============================================================ ==============
Interest rates on GBP150 million of Term Loan A have been fixed
over the life of the loan facility by entering into interest rate
swaps as part of the Group's interest rate hedge programme.
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 8.8 per cent.
6. Taxation
This note provides details about current taxation charges/(credits) on
profit and deferred taxation charges/(credits) relating to the impact
of past events on expected future taxation. The note also provides the
taxation impact of specific items.
=======================================================================
52 weeks 53 weeks
2014 2013
Reported Reported
GBPm GBPm
===================================================== ========== ==========
Taxation (charged)/credited in the income statement
Current income taxation:
Current UK income taxation charge (1) (11)
Foreign taxation (34) (28)
===================================================== ========== ==========
Current income taxation charge (35) (39)
Amounts (under)/over provided in earlier years (2) 1
===================================================== ========== ==========
Total current income taxation charge (37) (38)
Deferred income taxation:
Effect of change in taxation rates 12 -
Relating to origination and reversal of temporary
differences (368) 284
Amounts over provided in previous years 7 -
===================================================== ========== ==========
Taxation (charge)/credit in the consolidated income
statement (386) 246
===================================================== ========== ==========
Taxation on non-GAAP, specific items:
Taxation (charge)/credit relating to specific items (289) 336
===================================================== ========== ==========
Taxation relating to items charged or credited
to other comprehensive income
Deferred taxation
Actuarial gains/(losses) on defined benefit pension
schemes 117 (188)
Net gains on revaluation of cash flow hedges 1 2
Total credit/(charge) in the consolidated statement
of other comprehensive income 118 (186)
===================================================== ========== ==========
Reconciliation of the total taxation (charge)/credit
Reconciliations between the taxation charge and the product of
accounting profit multiplied by the UK rate of corporation taxation
for the 52 weeks ended 30 March 2014 and 53 weeks ended 31 March
2013 are as follows:
52 weeks 53 weeks
2014 2013
Reported Reported
GBPm GBPm
======================================================== ========== ==========
Profit before taxation 1,666 352
======================================================== ========== ==========
At UK standard rate of corporation taxation of 23%
(2013 24%) (383) (84)
Effect of higher taxes on overseas earnings (2) (1)
Taxation over provided in prior years 5 1
Non-taxable income - 9
Non-deductible expenses (10) (11)
Associate's profit after taxation charge included
in Group pre-taxation profit 1 -
Net (increase)/decrease in taxation charge resulting
from (derecognition)/recognition of deferred taxation
assets (9) 332
Effect of change in taxation rates 12 -
Taxation (charge)/credit in the income statement (386) 246
======================================================== ========== ==========
Deferred taxation
Balance sheet Income statement
========================== ======================
At 30 March At 31 March 52 weeks 53 weeks
2014 2013 2014 2013
Deferred taxation by balance sheet Reported Reported Reported Reported
category GBPm GBPm GBPm GBPm
=========================================== ============ ============ ========== ==========
Liabilities
Accelerated capital allowances (1) - - 1
Pensions temporary differences (339) (222) (235) (34)
Employee Free Shares Offer (65) - (65) -
Goodwill qualifying for taxation
allowances (28) (23) (5) (6)
=========================================== ============ ============
Deferred taxation liabilities (433) (245)
=========================================== ============ ============
Assets
Deferred capital allowances 169 244 (76) 244
Provisions and other 30 37 (8) 33
Losses available for offset against
future taxable income 90 51 40 46
Hedging derivatives temporary differences 2 2 - -
=========================================== ============ ============
Deferred taxation assets 291 334
=========================================== ============ ============
Net deferred taxation (liability)/asset
(see below) (142) 89
=========================================== ============ ============
Consolidated income statement (349) 284
=========================================== ============ ============ ========== ==========
Balance sheet
====================
At 30 March At 31 March
2014 2013
Reported Reported
Deferred taxation - balance sheet presentation GBPm GBPm
=================================================== ============== ============
Liabilities
GLS group (30) (23)
Net UK position (121) -
=================================================== ============== ============
Deferred taxation liabilities (151) (23)
=================================================== ============== ============
Assets
GLS group 9 7
Net UK position - 105
=================================================== ============== ============
Deferred taxation assets 9 112
=================================================== ============== ============
Net deferred taxation (liability)/asset (142) 89
=================================================== ============== ============
Effective taxation
The effective taxation rate on reported profit for the Group is
23 per cent.
GLS pays taxation in a number of territories, with the majority
of its profits in the period to 30 March 2014 earned in territories
where the taxation rate is above the UK statutory taxation rate.
Certain subsidiaries, notably GLS France, are not at this stage
able to recognise taxation credits on losses made during the period
and this contributes to GLS having a higher effective taxation rate
for the period than the UK business.
Current taxation
Substantially all of the current taxation due for the Group for
the period is in respect of GLS.
UK taxable profits in 2013-14 are almost fully covered by a
combination of brought forward losses, capital allowance claims and
a statutory deduction in respect of shares allocated to employees
under the HM Revenue & Customs (HMRC)-approved Employee Free
Shares Offer.
Owing to the above items and the RMPP (RM section) amendment
credit, which does not give rise to a current taxation charge, the
current taxation rate for the Group is 2 per cent.
Deferred taxation
The UK deferred taxation liability is a net amount comprising a
number of taxation assets and liabilities which will reverse in
future periods. The UK position has changed from a net deferred
taxation asset at 31 March 2013 to a net deferred taxation
liability at 30 March 2014, primarily due to the effects of the
Pensions Reform in the year. The pension surplus created as a
result of the Pensions Reform gives rise to a deferred taxation
liability that is expected to reverse over a much longer period
than the other deferred taxation assets and liabilities. The RMPP
(RM section) amendment credit of GBP1,350 million, included in
profit before taxation, generates the majority of the deferred
taxation charge in the income statement, whilst the decrease in the
pension surplus due to actuarial revaluation gives rise to a
deferred taxation credit of GBP117 million in other comprehensive
income.
A new UK deferred taxation liability arises in 2013-14 in
relation to the HMRC-approved Employee Free Shares Offer. As an
HMRC-approved share incentive plan, a full taxation deduction is
given for the value of the shares in the period in which they are
first allocated to employees, whereas the accounting charge accrues
over the life of the scheme. To the extent that the taxation
deduction exceeds UK taxable profits in the period, the taxation
losses carried forward are increased.
The deferred taxation balances within GLS arise in various
jurisdictions, with reversal at varying times and rates and so
balances in different jurisdictions are not offset against one
another.
Under the Postal Services Act 2011, UK trading losses which
arose due to employer's pension contributions paid which were
unused at 31 March 2013 are extinguished. Losses and deferred
taxation assets carried forward are stated above, net of the
extinguished amount.
At 30 March 2014, the Group had unrecognised deferred taxation
assets of GBP63 million (2013 GBP66 million) comprising GBP63
million (2013 GBP54 million) relating to taxation losses, mainly in
GLS, that are available to offset and GBPnil (2013 GBP12 million)
relating to other temporary differences.
The Group has capital losses carried forward, the taxation
effect of which is GBP5 million (2013 GBP4 million) and temporary
differences relating to capital losses of GBP61 million (2013 GBP73
million). The Group has rolled over capital gains of GBP43 million
(2013 GBP53 million); no taxation liability would be expected to
crystallise should the assets into which the gains have been rolled
be sold at their residual value, as it is anticipated that a
capital loss would arise.
In the 2012 Autumn Statement, the Chancellor of the Exchequer
announced that the main rate of corporation taxation would be 21
per cent for the year commencing 1 April 2014 and in the March 2013
Budget he announced that the rate would be further reduced to 20
per cent with effect from 1 April 2015. Both of these rate changes
were included in Finance Act 2013 which was substantively enacted
on 2 July 2013. In accordance with accounting standards the effect
of these rate reductions on deferred tax balances has been
reflected in these accounts. A net UK deferred taxation liability
is recognised and measured at the future rates, dependent on when
temporary differences are expected to reverse.
Non-GAAP analysis of taxation charge
Below we present current and deferred taxation between the
reported, specific and excluding specific items columns on a 52
week basis only. The break out of taxation between current and
deferred taxation between the specific and excluding specific items
columns requires estimation and assumptions and is non-GAAP
information. Management believe that this provides additional
information on movements relating to one-off items and the
movements relating to the trading results (which the excluding
specific items column represents).
52 weeks 2014 52 weeks 2013
============================================ =========================================
Excluding Excluding
specific Specific specific
Reported Specific items Adjusted Items items
(unaudited) items(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
GBPm GBPm GBPm GBPm GBPm GBPm
==================== =============== ================= ============ ============= ============ ============
Profit before
taxation 1,666 1,303 363 283 (21) 304
Current taxation (37) 12 (49) (38) - (38)
Deferred taxation (349) (301) (48) 284 336 (52)
==================== =============== ================= ============ ============= ============ ============
Profit for the
period 1,280 1,014 266 529 315 214
==================== =============== ================= ============ ============= ============ ============
The taxation credit shown in the specific items column for
2012-13 reflects the benefit of UK taxation attributes (including
prior year taxation losses and deferred capital allowances) not
previously recognised as deferred taxation assets. Deferred
taxation assets are recognised only to the extent that the Group is
expected to have future taxable profits and therefore obtain a real
taxation saving from future taxation deductions. Following the
Postal Services Act 2011 and the transfer of the historic pension
deficit, expectations of future profitability increased and it
became appropriate to recognise a net deferred taxation asset in
the UK. In addition to this one-off material deferred taxation
credit, the Group also reported a one-off benefit from the
utilisation of prior year taxation losses in 2012-13.
In 2013-14 the current and deferred taxation amounts shown in
the excluding specific items column are based on an assumption of
what the taxation charge and allocation would have been, excluding
the taxation impact of specific items. For example, excluding the
taxation consequences of the specific items in 2013-14, we would
have utilised brought forward losses against taxable profits
arising, to the extent available.
7. Cash flow
The Company uses free cash flow to monitor and manage its cash performance.
This measure eliminates inflows/outflows between net debt items (see
note 5) and includes finance cash costs paid. This note provides a reconciliation
of 'net cash inflow/(outflow) before financing activities' in the consolidated
statement of cash flows to 'free cash inflow/(outflow)' which is a non-GAAP
measure.
This note also includes non-GAAP information for the 2012-13 comparative
year (the only difference between this and the Reported information being
the exclusion of the GBP820 million POL cash balance on its transfer
to Royal Mail Holdings plc - see note 1 Basis of Preparation for further
details) and non-GAAP information relating to specific items.
==================================================================================
52 weeks 53 weeks 53 weeks
2014 2013 2013
Reported Non-GAAP Reported
GBPm GBPm GBPm
========================================================= ========== ========== ==========
EBITDA before transformation costs (see consolidated
statement of cash flows) 942 915 915
Trading working capital movements (57) (60) (60)
Difference between pension costs charged in
operating profit and pension cash flows 58 (3) (3)
========================================================= ========== ========== ==========
Total Group ongoing pension costs in the income
statement 479 434 434
Total Group cash flows relating to ongoing
pension costs (411) (409) (409)
Deficit correction payments (10) (28) (28)
========================================================= ========== ========== ==========
Total investment(1) (617) (665) (665)
========================================================= ========== ========== ==========
Business transformation payments (19) (55) (55)
Voluntary redundancy (71) (75) (75)
One-off project and property costs (111) (100) (100)
========================================================= ========== ========== ==========
Transformation investment - operating expenditure (201) (230) (230)
Transformation investment - capital expenditure (83) (177) (177)
========================================================= ========== ========== ==========
Total transformation investment (284) (407) (407)
Non-transformation investment - capital expenditure (333) (258) (258)
========================================================= ========== ========== ==========
Taxation paid (38) (37) (37)
Net finance costs paid (excluding finance costs
paid on refinancing of loan facilities) (33) (44) (44)
Dividend received from associate undertaking 2 - -
========================================================= ========== ========== ==========
Underlying cash inflow 257 106 106
Transfer of POL (discontinued operation) to
Royal Mail Holdings plc - - (820)
One-off working capital movements 140 202 202
Cash cost of operating specific items (35) (26) (26)
Proceeds from disposal of property, plant and
equipment and associate undertaking (non-operating
specific items) 36 52 52
========================================================= ========== ========== ==========
Free cash inflow/(outflow) 398 334 (486)
========================================================= ========== ========== ==========
(1) Total investment is represented by several different line
items in the consolidated statement of cash flows.
Working capital movements
52 weeks 53 weeks 53 weeks
2014 2013 2013
Reported Non-GAAP Reported
GBPm GBPm GBPm
============================================ ========== ========== ==========
One-off working capital movements:
Buy forward of stamps 20 87 87
Unwind of prior year buy forward of stamps (30) - -
Impact of applying VAT to postal products
in 2012-13 - 75 75
Unwinding of pension prepayment made in
March 2012 150 40 40
============================================ ========== ========== ==========
Total one-off working capital movements 140 202 202
Trading working capital movements (57) (60) (60)
============================================ ========== ========== ==========
Total working capital movements 83 142 142
============================================ ========== ========== ==========
Free cash flow reconciliation
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).
52 weeks 53 weeks 53 weeks
2014 2013 2013
Reported Non-GAAP Reported
GBPm GBPm GBPm
============================================== ========== ========== ==========
Net cash inflow/(outflow) before financing
activities 435 542 (278)
Net sale of gilts and Treasury bills
(financial asset investments - non-current) - (129) (129)
Net sale of bank deposits (financial asset
investments - current) - (30) (30)
Other finance costs paid (37) (49) (49)
============================================== ========== ========== ==========
Free cash inflow/(outflow) 398 334 (486)
============================================== ========== ========== ==========
8. Employee benefits - pensions
At 30 March 2014, a pension asset of GBP1,723 million has been recognised
compared with GBP825 million at 31 March 2013. This increase reflects
the impact of the Pensions Reform as explained further in this note.
----------------------------------------------------------------------------------
Summary pension information
========================================================== ======================
52 weeks 53 weeks
2014 2013
Reported Reported
GBPm GBPm
========================================================== ========== ==========
Pension costs:
Ongoing:
UK defined benefit scheme (income statement rates(1)
20.3%, 18.2%) (448) (412)
UK defined contribution scheme (25) (17)
========================================================== ========== ==========
Total UK ongoing pension costs (473) (429)
Total GLS defined contribution type scheme costs (6) (5)
========================================================== ========== ==========
Total Group ongoing pension costs (479) (434)
========================================================== ========== ==========
Difference between income statement charge and cash
flows (cash flow rates(2) 17.1% for both years) 68 25
========================================================== ========== ==========
Total Group pension cash outflows relating to ongoing
pension costs (411) (409)
========================================================== ========== ==========
At 30 At 31
March March
2014 2013
'000 '000
========================================================== ========== ==========
UK pension schemes - active membership:
UK defined benefit scheme 106 112
UK defined contribution scheme 36 33
========================================================== ========== ==========
Total 142 145
========================================================== ========== ==========
(1) This service cost is charged to the income statement. It
represents the cost (as a percentage of pensionable payroll) of the
increase over the year in the defined benefit obligation due to
members earning one more year of pension benefits. It is calculated
in accordance with IAS 19 and is based on market yields (high
quality corporate bonds and inflation) at the beginning of the
Company's reporting year.
(2) This is the employer contribution rate which forms part of
the payroll expense and is paid into the Royal Mail Pension Plan
(RMPP) (RM section). The contribution rate is set following each
actuarial funding valuation, usually every three years. These
actuarial valuations are required to be carried out on assumptions
determined by the Trustee and agreed by Royal Mail.
UK Defined Contribution Scheme
The Group operates the Royal Mail Defined Contribution Plan,
which was launched in April 2009 and is open to employees who
joined the Company from 31 March 2008 following closure of the
Royal Mail Pension Plan (RMPP) to new members.
UK Defined Benefit schemes
Royal Mail Group Limited had one of the largest defined benefit
pension schemes in the UK (based on membership and assets), called
the RMPP. On 1 April 2012 (one week into the 2012-13 reporting
year) - after the granting of State Aid approval by the European
Commission to HM Government on 21 March 2012 - almost all of the
historic pension liabilities and pension assets of RMPP, built up
until 31 March 2012, were transferred to a new HM Government
pension scheme, the Royal Mail Statutory Pension Scheme
(RMSPS).
On this date, RMPP was also sectionalised, with Royal Mail Group
Limited and POL each responsible for their own sections from 1
April 2012 onwards.
The transfer left the Royal Mail section of the RMPP (RM
section) fully funded on an actuarial basis. This means that, using
long-term actuarial assumptions agreed at that date, it was
predicted the Company would have to make no further cash deficit
correction payments.
Royal Mail Pension Plan (RMPP)
The RMPP (RM section) is funded by the payment of contributions
to separate trustee administered funds. RMPP (RM section) includes
sections A, B, and C, each with different terms and conditions:
Section A is for members (or beneficiaries of members) who
joined before 1 December 1971;
Section B is for members (or beneficiaries of members) who
joined on or after 1 December 1971 and before 1 April 1987 or to
members of Section A who chose to receive Section B benefits;
and
Section C is for members (or beneficiaries of members) who
joined on or after 1 April 1987 and before 1 April 2008.
Benefits provided are based on career salary blocks for years'
service, revalued annually.
Following conclusion of the March 2012 actuarial valuation, the
regular future service contribution rate for RMPP (RM section),
expressed as a percentage of pensionable pay, remained at 17.1 per
cent (2013 17.1 per cent). Following the State Aid clearance
granted on 21 March 2012, and the subsequent transfer of almost all
of the RMPP (RM section) assets and liabilities to HM Government on
1 April 2012, no RMPP (RM section) cash deficit correction payment
was made during the year. The Group expects to contribute around
GBP400 million to the RMPP (RM section) in respect of normal cash
service costs in 2014-15.
Royal Mail Senior Executives Pension Plan (RMSEPP)
The Group also contributes to a smaller defined benefit scheme
for executives, Royal Mail Senior Executives Pension Plan (RMSEPP)
- which closed in December 2012 to future accrual. The 2012-13
contributions were made at 35.9 per cent until 31 December 2012.
The Company and the Trustee have reached agreement over the March
2012 actuarial valuation. As the plan is closed to future accrual
there will be no regular future service contributions. The Company
is required to continue to make deficit correction payments of
GBP10 million per annum until at least the date on which the 2018
valuation is completed (no later than 30 September 2018) as part of
a funding agreement with the Trustee. Deficit correction payments
in 2013-14 were GBP10 million (2013 GBP28 million including a
special one-off payment of GBP19 million).
On 25 March 2013, the Group placed GBP20 million into a money
market fund investment established to provide security to RMSEPP,
as part of a funding agreement with the RMSEPP Trustee. This is
treated as an investment in the Group's balance sheet.
A liability of GBP1 million (2013 GBP1 million) has been
recognised for future payment of pension benefits to a past
Director.
Pensions Reform
In June 2013, the Company began a consultation with RMPP (RM
section) members on a proposal to ensure the RMPP (RM section)
could remain open to future accrual, subject to certain conditions,
at least until the conclusion of the next periodic review in March
2018. Subsequently, on 26 September 2013 the Company agreed with
the RMPP Trustee to implement a Pensions Reform with effect from 1
April 2014.
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.
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 as such GBP1,350 million has been recognised in
the income statement of the Group for the year ended 30 March
2014.
Accounting and actuarial surplus/(deficit) position (RMPP (RM
section) and RMSEPP)
Accounting (IAS Actuarial/cash funding
19)
At 30 At 31 At 31 March At 31 March
March March 2014 2013
2014 2013 Reported Reported
Reported Reported
GBPm GBPm GBPm GBPm
======================================= ========== ========== ============ ============
Fair value of schemes' assets (see
(b) below) 3,833 3,343 3,873 3,343
Present value of schemes' liabilities (2,097) (2,513) (2,451) (3,505)
======================================= ========== ========== ============ ============
Surplus/(deficit) in schemes' (pre
IFRIC 14) 1,736 830 1,422 (162)
IFRIC 14 adjustment (13) (5) n/a n/a
======================================= ========== ========== ============ ============
Surplus/(deficit) 1,723 825 1,422 (162)
======================================= ========== ========== ============ ============
There is no element of the present value of the schemes'
liabilities above that arises from schemes that are wholly
unfunded.
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 (RM section) is assumed to be recoverable as
a reduction to future employer contributions. Therefore, no IFRIC
14 adjustment is required. 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 IFRSs.
The actuarial/cash funding surplus of GBP1,422 million (2013
deficit of GBP162 million) allows the RMPP (RM section) to remain
open for the benefit of the members at least until March 2018,
subject to certain conditions (as part of the Pensions Reform
agreement), without requiring either the Company or individuals to
make unaffordable increases to their cash contributions.
The following disclosures relate to the major assumptions,
sensitivities, gains/losses and surplus/deficit in the RMPP (RM
section) and RMSEPP defined benefit schemes.
IAS 19 Accounting
a) Major long-term assumptions - RMPP (RM section) and
RMSEPP
The major assumptions used to calculate the accounting position
of the pension schemes were as follows:
At 30 March At 31 March
2014 2013
Reported Reported
% p.a. % p.a.
========================================================= ============ ============
Retail Price Index (RPI) 3.4 3.3
Consumer Price Index (CPI) 2.4 2.3
Discount rate
- nominal 4.5 4.8
- real (nominal less RPI)(3) 1.1 1.5
Rate of increase in pensionable salaries(4) RPI-0.1% RPI+1%
Rate of increase for deferred pensions - RMSEPP members
transferred from Section A or B of RMPP(5) CPI RPI
Rate of increase for deferred pensions - all other
members CPI CPI
Rate of pension increases - RMPP (RM section) Sections
A/B CPI CPI
Rate of pension increases - RMPP (RM section) Section
C(4) RPI-0.1% RPI-0.1%
Rate of pension increases - RMSEPP members transferred
from Section A or B of RMPP(5) CPI RPI
Rate of pension increases - RMSEPP all other members(4) RPI-0.1% RPI-0.1%
Life expectancy from age 60 - for a current 40/60 year
old male RMPP (RM section) member 29/27 years 29/26 years
Life expectancy from age 60 - for a current 40/60 year
old female RMPP (RM section) member 32/30 years 32/29 years
========================================================= ============ ============
(3) The real discount rate used reflects the long duration of
the RMPP (RM section) scheme of around 28 years.
(4) The rate of increase in salaries, and the rate of pension
increase for Section C members (who joined RMPP on or after April
1987) and RMSEPP 'all other members', is 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.
(5) This rate of increase is set by reference to CPI, following
a High Court ruling on 11 June 2013.
Mortality
The mortality assumptions for RMPP (RM section) are based on the
latest Self Administered Pension Scheme (SAPS) S1 mortality tables
with appropriate scaling factors (106 per cent for male pensioners
and 101 per cent for female pensioners). Future improvements are
based on the CMI 2012 core projections with a long-term trend of
1.25 per cent per annum.
Sensitivity analysis for RMPP (RM section) liabilities
The RMPP (RM section) liabilities are sensitive to changes in
key assumptions. The potential impact of the largest sensitivities
on the RMPP (RM section) liabilities is shown in the table
below.
Potential increase
in liabilities
Key assumption change GBPm
=============================================== ===================
Additional one year of life expectancy 50
Increase in inflation rate (both RPI and CPI
simultaneously) of 0.1% p.a. 50
Decrease in discount rate of 0.1% p.a. 50
Increase in CPI assumption (assuming RPI kept
constant) of 0.1% p.a. 15
=============================================== ===================
This sensitivity analysis has been determined based on a method
that assesses the impact on the defined benefit obligation,
resulting from reasonable changes in key assumptions occurring at
the end of the reporting year. Changes opposite to those in the
table (e.g. an increase in discount rate) would have the opposite
effect on liabilities.
The average duration of the RMPP (RM section) obligation is 28
years (2013 28 years).
b) Schemes' assets - RMPP (RM section) and RMSEPP
At 30 March 2014 At 31 March 2013(6)
Quoted Unquoted Total Quoted Unquoted Total
GBPm GBPm GBPm GBPm GBPm GBPm
============================== ======= ========= ====== ======= ========= ======
Equities
UK 28 82 110 80 88 168
Overseas 321 - 321 371 - 371
Bonds
Fixed interest - UK 101 8 109 75 - 75
- Overseas 371 - 371 270 - 270
Index linked - UK 156 - 156 287 - 287
- Overseas - - - 3 - 3
Pooled investments
Managed funds 303 - 303 80 - 80
Unit Trusts 1,864 - 1,864 1,298 - 1,298
Property (UK) 250 - 250 218 - 218
Cash and cash equivalents 345 - 345 553 - 553
Other 5 - 5 20 - 20
Derivatives (1) - (1) - - -
============================== ======= ========= ====== ======= ========= ======
Total schemes' assets 3,743 90 3,833 3,255 88 3,343
============================== ======= ========= ====== ======= ========= ======
(6) The categorisation of the schemes' assets at 31 March 2013
has been restated as a result of IAS 19 'Employee Benefits'
(revised).
There were no open equity derivatives within this portfolio at
30 March 2014 (at 31 March 2013 GBPnil). Included within the
pension assets are GBP2.0 billion (2013 GBP1.4 billion) of HM
Government Bonds. The schemes' assets do not include property
occupied by the Group, the Group's own shares, or assets used by
the Group.
Risk exposure and investment strategy
The investment strategy of the RMPP Trustee aims to safeguard
the assets of the scheme and to provide, together with
contributions, the financial resource from which benefits are paid.
Investment is inevitably exposed to risks. The investment risks
inherent in the investment markets are partially mitigated by
pursuing a widely diversified approach across asset classes and
investment managers. The RMPP (RM section) uses derivatives (such
as swaps and futures) to reduce risks whilst maintaining expected
investment returns. The RMPP Trustee recognises that there is a
natural conflict between improving the potential for positive
return and limiting the potential for poor return. The RMPP Trustee
has specified objectives for the investment policy that balance
these requirements.
The RMPP Trustee has elected to use interest rate and inflation
rate swaps ('derivatives') to deliver the investment strategy
whilst managing risk. These derivatives are recorded at market
value within the table above and are commonly used by pension
funds. 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 (full exposure
to the relevant asset class incurred by entering into a derivative
contract) held in a specific managed portfolio for this purpose at
30 March 2014 is GBP3.8 billion (March 2013 GBP1.5 billion).
The spread of investments continues to balance security and
growth in order to pay the RMPP (RM section) benefits when they
become due.
c) Movement in schemes' assets, liabilities and net position -
RMPP (RM section) and RMSEPP
Changes in the present value of the defined benefit pension
liabilities, fair value of the schemes' assets and the net defined
benefit asset/(obligation) are analysed as follows:
Defined benefit Defined benefit Net defined
asset liability benefit asset/(liability)
======================================= ====================== ====================== =============================
At 30 At 31 At 30 At 31 At 30 At 31
March March March March March March
2014 2013 2014 2013 2014 2013
Reported Reported Reported Reported Reported Reported
GBPm GBPm GBPm GBPm GBPm GBPm
======================================= ========== ========== ========== ========== ============== =============
Opening net retirement benefit
surplus/(deficit) - pre IFRIC
14 adjustment 3,343 30,745 (2,513) (33,667) 830 (2,922)
======================================= ========== ========== ========== ========== ============== =============
Amounts included in the income
statement:
Ongoing UK defined benefit
pension scheme costs - - (448) (412) (448) (412)
Royal Mail Pension Plan amendment - - 1,350 - 1,350 -
Pension interest income/(cost)(7) 172 159 (103) (129) 69 30
======================================= ========== ========== ========== ========== ============== =============
Total included in profit
from continuing operations
before taxation 172 159 799 (541) 971 (382)
======================================= ========== ========== ========== ========== ============== =============
Amounts included in other
comprehensive income - remeasurement
gains/(losses):
Actuarial gain/(loss) arising
from:
Demographic assumptions - - 4 - 4 -
Financial assumptions - - (256) (865) (256) (865)
Experience adjustment - - 2 101 2 101
Return on schemes' assets
(excluding interest income)
(8) (203) 518 - - (203) 518
======================================= ========== ========== ========== ========== ============== =============
Total actuarial (losses)/gains
on defined benefit schemes (203) 518 (250) (764) (453) (246)
======================================= ========== ========== ========== ========== ============== =============
Amounts taken directly to
equity:
Transfer of historic pension
deficit to HM Government - (28,438) - 32,450 - 4,012
Transfer of Post Office Limited
subsidiary to parent - (193) - 145 - (48)
======================================= ========== ========== ========== ========== ============== =============
Total included in the statement
of changes in equity - (28,631) - 32,595 - 3,964
======================================= ========== ========== ========== ========== ============== =============
Other:
Employer contributions 407 435 - - 407 435
Employee contributions 136 136 (136) (136) - -
Benefits paid (25) (17) 25 17 - -
Curtailment costs - - (20) (17) (20) (17)
Movement in pension-related
accruals 3 (2) (2) - 1 (2)
======================================= ========== ========== ========== ========== ============== =============
Total other movements 521 552 (133) (136) 388 416
======================================= ========== ========== ========== ========== ============== =============
Closing net retirement benefit
surplus/(deficit) - pre IFRIC
14 adjustment 3,833 3,343 (2,097) (2,513) 1,736 830
======================================= ========== ========== ========== ========== ============== =============
(7) The pension interest income is the result of applying the
schemes' discount rate at 31 March 2013 to the schemes' assets at
that date. Similarly, the pension interest cost results from
applying the schemes' discount rate as at 31 March 2013 to the
schemes' liabilities at that date. The pension interest for the
position at 31 March 2013 has been restated for the effect of IAS
19 'Employee Benefits' (revised) - see 'Significant accounting
policies' section.
(8) Includes asset returns, movements on pension prepayments and
changes to brought forward estimates.
In addition to the above items which affect the defined benefit
asset, additional curtailment costs of GBP34 million (2013 GBP11
million) were recognised in the income statement on a consistent
basis with the associated redundancy costs. Estimates of both are
included in any redundancy provision raised.
9. Notional earnings per share
This note explains the calculation of the Group's earnings per share.
The calculation for both reporting years is based on the 1,000,000,000
shares that were issued in September 2013 and which were subsequently
listed on the London Stock Exchange in October 2013. It is therefore
deemed to be 'notional' earnings per share as the shares were not in
existence for the whole of the reporting years. The note also includes
non-GAAP information relating to specific items.
=======================================================================
52 weeks 53 weeks
2014 52 weeks 2013 2013
================================== =========================== ======================================= ============
Excluding Excluding
specific
Reported(1) specific Adjusted(2) items
items
(unaudited) (unaudited) (unaudited) (unaudited) Reported(1)
================================== ============= ================= ============== ============== ============
Profit from continuing operations
attributable to equity holders
of the parent (GBPm) 1,277 263 525 210 594
Number of shares (million) 1,000 1,000 1,000 1,000 1,000
Basic and diluted notional
earnings
per share (pence)(3) 127.7 26.3 52.5 21.0 59.4
================================== ============= ================= ============== ============== ============
(1) Prepared in accordance with IFRS.
(2) Prepared in accordance with IFRS, except for the
non-consolidation of POL, and excluding the impact of the 53(rd)
week in 2013.
(3) The basic and diluted notional earnings per share have been
calculated based on the one billion shares in issue at 30 March
2014, being in existence for the entirety of both reporting
years.
In future reporting periods, earnings per share will be
calculated using the weighted average number of shares in issue
over the relevant period.
10. Organisation structure and share capital changes
This note explains the incorporation of Royal Mail plc and the subsequent
changes in share capital following the Company's listing on the London
Stock Exchange on 15 October 2013.
=========================================================================
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 on 11
September 2013 (and was subsequently renamed Postal Services
Holding Company Limited ('PSH') on 12 December 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 (50,001 GBP1.00 shares).
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.
11. Share-based payment
This note provides details about the Free Shares allocated to employees,
including the associated accounting charge to the Group's income statement
under IFRS 2, and the number of shares held in the Share Incentive Plan
(SIP) at the end of the reporting year. Details of shares awarded under
the Long Term Incentive Plan (LTIP) are also included.
===========================================================================
Employee Free Shares
Ordinary Shares representing 10 per cent of the value of the
Company were granted free of charge to eligible employees on 15
October 2013, the date of the Initial Public Offering. These Free
Shares are held on behalf of employees in an HM Revenue and Customs
(HMRC) - approved SIP administered by Equiniti Share Plan Trustees
Limited (Equiniti), and it was expected that each eligible
full-time employee would receive a total of 725 Free Shares at the
date of the Initial Public Offering. However, under HMRC rules at
the time of the flotation, employees can only 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 the Company'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 were awarded to each eligible full-time
employee as their 2013 SIP allocation. The Company allocated a
further 116 shares (729 in total - see below) to eligible full-time
employees on 9 April 2014 as a 2014 SIP allocation, subject to them
remaining employees of Royal Mail Group Limited.
The 729 total shares awarded to eligible full-time employees
comprises the 725 initial, expected allocation of shares and an
additional four shares resulting from the reallocation of shares
forfeited by certain employees who left the Group.
Part-time eligible employees have been allocated a pro-rata
number of shares.
All allocated shares will be equity-settled.
The fair value of the award of Free Shares is GBP490 million,
which will be charged to the income statement on a straight line
basis, adjusted for 'good leavers', over the period of vesting
(three years for the 2013 SIP and four years for the 2014 SIP, in
each case from the award date). A charge to the Group income
statement of GBP94 million (including GBP3 million National
Insurance) has been made for the year ended 30 March 2014 for both
SIP allocations as they were granted as one award.
The Free Shares are held in a Trust funded by Royal Mail and may
only be distributed to, or for the benefit of, eligible employees.
The Trust is under the control of the Company and is operating for
its benefit. At March 2014 the Trust has been included in these
consolidated financial statements.
A reconciliation of the Ordinary Shares held in the SIP at 30
March 2014 is shown below.
Number of shares
================================================ =================
Initial shares award on 15 October 2013 84,415,327
Shares transferred out of SIP - 'good leavers' (809,247)
Remaining shares to be allocated 15,744,673
Total shares remaining in SIP at 30 March 2014 99,350,753
================================================ =================
Award of shares under the Long Term Incentive Plan (LTIP)
As a result of the flotation in October 2013, and as permitted
under the rules of the LTIP, the award granted to the Executive
Directors and Senior Leadership Population in 2013 was converted
from a cash award into an award of a total of around 2.2 million
shares, based on a volume weighted average price of 529.14 pence.
These shares are not part of the SIP explained above and will be
acquired separately by the Company from the market. The performance
conditions applying to this award will be measured in 2015-16.
The award will be accounted for as cash-settled, in accordance
with the requirements of IFRS 2 'Share-based payment'.
Shareholder information
Financial calendar
Interim Management Statement - 22 July 2014
Annual General Meeting - 24 July 2014
Dividend dates
Ex-dividend date - 2 July 2014
Record date - 4 July 2014
Payment date - 31 July 2014
Shareholder information online
The Company's registrars, Equiniti, are able to notify
shareholders by email of the availability of an electronic version
of shareholder information.
Whenever new shareholder information becomes available, such as
The Company's interim and full year results, Equiniti will notify
you by email and you will be able to access, read and print
documents at your own convenience.
To take advantage of this service for future communications,
please go to www.shareview.co.uk and select 'Shareholder Centre',
where full details of the shareholder portfolio service are
provided. When registering for this service, you will need to have
your 11-character shareholder reference number to hand, which is
shown on your dividend tax voucher, share certificate or form of
proxy.
Should you change your mind at a later date, you may amend your
request to receive electronic communication by entering your
shareview portfolio online and amending your preferred method of
communication from 'email' to 'post'. If you wish to continue
receiving shareholder information in the current format, there is
no need to take any action.
Advisers
Corporate brokers and financial advisers
Barclays Bank plc, 5 The North Colonnade, London, E14 4BB
Independent Auditor
Ernst & Young LLP, 1 More London Place, London, SE1 2AF
Registrars
Equiniti Share Plan Trustees Limited, Aspect House, Spencer
Road, Lancing, West Sussex, BN99 6DA
www.shareview.co.uk
Tel: 0871 384 2859 (from outside the UK: +44 (0)121 415
7047)
Fax: 0871 384 2100 (from outside the UK: +44 (0)1903 698403)
Calls to this number cost 8p per minute from a BT landline,
other providers' costs may vary. Lines are open 8.30am to 5.30pm UK
time, Monday to Friday.
Information for investors
Information for investors is provided on the internet as part of
the Group's website which can be found at:
www.royalmailgroup.com/investor-centre
Investor enquiries
Equiniti
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA
www.shareview.co.uk
Tel: 0871 384 2859 (from outside the UK: +44 (0)121 415
7047)
Fax: 0871 384 2100 (from outside the UK: +44 (0)1903 698403)
Registered office
Royal Mail plc
100 Victoria Embankment
London EC4Y 0HQ
Registered in England and Wales
Company number 08680755
Corporate websites
Information made available on the Group's websites does not, and
is not intended to, form part of these Preliminary Results.
Royal Mail, the Cruciform and the Parcelforce Worldwide logo are
registered trademarks of Royal Mail Group Limited. The GLS arrow
logo is a registered trade mark of General Logistics Systems
Germany GmbH & Co. OHG. Annual Report 2013-14 (c) Royal Mail
Group Limited 2014. All rights reserved.
Cautionary statement
This document contains certain forward looking statements
concerning the Group's business, financial condition, results of
operations and certain of the Group's plans, objectives,
assumptions, projections, expectations or beliefs with respect to
these items. Forward looking statements are sometimes, but not
always, identified by their use of a date in the future or such
words as 'anticipates', 'aims', 'due', 'could', 'may', 'will',
'should', 'expects', 'believes', 'intends', 'plans', 'potential',
'targets', 'goal' or 'estimates'. Forward looking statements
involve known and unknown risks, uncertainties and other factors,
which may cause the Group's actual financial condition, performance
and results to differ materially from the plans, goals, objectives
and expectations set out in the forward looking statements included
in this document. Accordingly, readers are cautioned not to place
undue reliance on forward looking statements.
By their nature, forward looking statements relate to events and
depend on circumstances that will occur in the future and are
inherently unpredictable. Such forward looking statements should,
therefore, be considered in light of various important factors that
could cause actual results and developments to differ materially
from those expressed or implied by these forward looking
statements. These factors include, among other things: changes in
the economies and markets in which the Group operates; changes in
the regulatory regime within which the Group operates; changes in
interest and exchange rates; the impact of competitive products and
pricing; the occurrence of major operational problems; the loss of
major customers; undertakings and guarantees relating to pension
funds; contingent liabilities; the impact of legal or other
proceedings against, or which otherwise affect, the Group; and
risks associated with the Group's overseas operations. All written
or verbal forward looking statements, made in this document or made
subsequently, which are attributable to the Group or any persons
acting on their behalf are expressly qualified in their entirety by
the factors referred to above. No assurance can be given that the
forward looking statements in this document will be realised;
actual events or results may differ materially as a result of risks
and uncertainties facing the Group. Subject to compliance with
applicable law and regulation, the Company does not intend to
update the forward looking statements in this document to reflect
events or circumstances after the date of this document, and does
not undertake any obligation to do so.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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