TIDMRMG
RNS Number : 3889X
Royal Mail PLC
19 November 2014
ROYAL MAIL PLC
FINANCIAL REPORT FOR THE HALF YEAR ENDED
28 SEPTEMBER 2014
Royal Mail plc (RMG.L) today announced its results for the half
year ended 28 September 2014.
Moya Greene, Chief Executive Officer, Royal Mail plc, said:
"I am pleased with our overall performance. We have delivered
two per cent revenue growth together with margin expansion, in line
with our expectations. Our tight cost control meant that UK costs
were flat on an underlying basis and we are expecting a similar
performance for the full year. Looking further ahead, we are
targeting a flat or better underlying UKPIL cost performance in
2015-16.
"The UK parcels market remains challenging. As the pre-eminent
UK parcels delivery company, we are targeting a number of new,
growing areas, and delivered two per cent volume growth in a
competitive market. We had a better than expected performance in UK
letters. GLS, our European parcels business, demonstrated a strong
performance with better than expected volumes in domestic and
export parcels.
"Our performance remains in line with our expectations for the
full year. But, as always, this depends on us delivering another
great Christmas, for which we are fully prepared."
Group financial highlights
------------------------------------------------------------------------- -----------
Half year Half year Underlying
ended ended change(1)
28 Sept 29 Sept 2013
2014
---------------------------------------- --------------- -------------- -----------
Revenue (GBPm) 4,525 4,520 2%
Operating costs before transformation
costs (GBPm) (4,246) (4,167) 1%
---------------------------------------- --------------- -------------- -----------
People costs (GBPm) (2,627) (2,546) 2%
Non-people costs (GBPm) (1,619) (1,621) Flat
---------------------------------------- --------------- -------------- -----------
Operating profit before transformation
costs (GBPm) 279 353
Operating profit margin before
transformation costs (%)
6.0 20bps
* Underlying(1)
* Reported(2) 6.2 7.8
Transformation costs (GBPm) (47) (70)
Operating profit after transformation
costs (GBPm) 232 283
Operating profit margin after
transformation costs (%)
4.4 70bps
* Underlying
* Reported 5.1 6.3
Profit before taxation (GBPm)
* Excluding specific items 218 233
* Reported 167 1,580
Earnings per share (pence)
* Excluding specific items 16.3 16.8
* Reported 12.5 122.0
Free cash flow (GBPm) 117 183
Net debt (GBPm) 570
Interim dividend per share (pence) 6.7
Business performance
Revenue (GBPm) Operating profit Operating profit margin
after transformation after transformation
costs (GBPm) costs (%)
------- ----------------------------------- ------------------------ -------------------------------------
Half year Half year Underlying Half year Half year Reported Underlying Underlying
ended ended change(1) ended ended Half year Half year change(1)
28 Sept 29 Sept 28 Sept 29 Sept ended ended
2014 2013 2014 2013 28 Sept 29 Sept
2014 2013
------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
UKPIL 3,703 3,711 Flat 172 224 4.6 3.8 80bps
GLS 813 801 7% 56 53 6.9 6.6 30bps
Other 9 8 n/m 4 6
------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
4,525 4,520 2% 232 283 5.1 4.4 70bps
------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Revenue and volume
-- We delivered revenue growth of two per cent, in line with our expectations.
-- UKPIL revenue was flat at GBP3,703 million. Letter revenue of
GBP2,242 million was up one per cent, primarily due to election
mailings. Addressed letter volumes decreased by three per cent(3) .
This was better than our expected range of a 4-6 per cent decline
per annum(3) , mainly due to the improvement in UK economic
conditions.
-- At GBP1,461 million, UKPIL parcel revenue was down one per
cent. This was primarily due to the impact of a change in the mix
of the parcels we carry and the highly competitive environment in
the UK parcels market. We estimate Amazon's own delivery network
will reduce the annual rate of growth in the UK addressable
market(4) to 1-2 per cent(5) for approximately two years. UKPIL
parcel volume grew by two per cent.
-- GLS delivered a good performance, ahead of our expectations.
Revenue was up seven per cent, in line with volumes.
Profits and margins
-- Reported Group operating profit before transformation costs
was GBP279 million (H1 2013-14 GBP353 million). This represents an
increase of GBP13 million on an underlying basis.
-- Tight cost control meant that UKPIL operating costs before
transformation costs, which included the pay increase for frontline
employees, were flat.
-- Group operating profit margin before transformation costs
increased by 20 basis points to 6.2 per cent.
-- Group operating profit margin after transformation costs
increased by 70 basis points to 5.1 per cent.
Cash flow and balance sheet
-- In-year trading cash inflow was GBP69 million (H1 2013-14
GBP118 million), including the cost of the management
reorganisation programme of GBP39 million.
-- In July 2014, we issued a EUR500 million ten-year Eurobond
with a coupon of 2.375%. GBP350 million of the proceeds were used
to pay down short-term debt.
-- Net debt increased to GBP570 million from GBP555 million at 30 March 2014.
-- In October 2014, we announced that contracts have been
exchanged for the sale of our former Paddington Mail Centre site
for GBP111 million in cash.
Dividend
-- In line with our previously disclosed dividend policy, the
Board announces that it has declared and approved an interim
dividend of 6.7 pence per share for the half year to 28 September
2014.
Transformation
-- The management reorganisation programme is expected to
deliver cost savings of around GBP70 million per annum from 2015-16
- more than originally anticipated - with at least GBP25 million of
cost benefits expected in the second half of this year.
-- Productivity improved by 2.1 per cent, within our target range of 2-3 per cent per annum.
Regulation
-- In October 2014, we welcomed the High Court's decision that
HM Revenue & Customs (HMRC) is right to exempt Royal Mail's
mandated access services from VAT. This decision may, however, be
subject to a further appeals process.
-- In October 2014, Royal Mail announced that it had entered
into a settlement agreement with the French competition authority
in respect of alleged breaches of antitrust laws by GLS France,
during the period before the end of 2010. A provision of GBP18
million has been made.
Summary outlook for 2014-15
-- Our performance remains in line with our expectations for the full year.
-- Tight cost control expected to deliver flat underlying costs
before transformation costs in UKPIL.
-- Full year outcome dependent on our performance over the Christmas period.
NOTES
(1) Movements in revenue, costs and margins are shown on an
underlying basis, unless otherwise stated. A more detailed
explanation of underlying performance can be found in the paragraph
entitled, "Presentation of results" in the section "Group Financial
Performance".
Movements in revenue and costs and underlying margins are
calculated after adjusting for foreign exchange movements in GLS'
revenue and costs and working days in UKPIL revenue, as well as any
non-recurring or distorting items that have impacted the reporting
periods. For comparison purposes all underlying adjustments are
made to the prior period.
Non-recurring or distorting items in the first half were:
a) The increase in the non-cash IAS 19 pension service charge in
relation to RMPP of GBP34 million
b) The difference between the VAT credit of GBP35 million in the
first half of 2013-14 and a GBP5 million credit in the first half
of 2014-15.
For volumes, underlying movements are adjusted for working days
in UKPIL.
(GBPm) Reported Working Foreign IAS 19 VAT credit Total Underlying
2013-14 days exchange pension (UKPIL) underlying 2013-14
(UKPIL) (GLS) service adjustments
charge
increase
(UKPIL)
----------------- --------- --------- ----------- ---------- ----------- ------------- -----------
Revenue 4,520 (20) (44) n/a n/a (64) 4,456
----------------- --------- --------- ----------- ---------- ----------- ------------- -----------
Operating
costs
before
transformation
costs (4,167) n/a 41 (34) (30) (23) (4,190)
----------------- --------- --------- ----------- ---------- ----------- ------------- -----------
Operating
profit
before
transformation
costs 353 (20) (3) (34) (30) (87) 266
----------------- --------- --------- ----------- ---------- ----------- ------------- -----------
The cumulative average translation rate for the half year ended
28 September 2014 was GBP1 = EUR1.24 (H1 2013-14 GBP1 =
EUR1.17).
(2) In accordance with accounting standards (IFRS), including
specific items.
(3) Excluding election mailings.
(4) Royal Mail's definition of the addressable market captures
that segment of the UK domestic parcels market which we, and other
independent parcel delivery companies, can compete for. It includes
the vast majority of individually addressed B2B, B2C and C2X parcel
traffic weighing up to 30kg delivered by independent parcel
carriers. For click and collect, it includes all items that are
delivered to post offices or parcel shops or when retailers use
parcel carriers to deliver items to their stores. Our definition
excludes parcels delivered by retailers' own delivery networks as
they carry their own items either to their own stores for click and
collect services or customers' homes. Bulky (e.g. over 30kg) or
specialist items requiring two-man delivery or specially-equipped
vans are also excluded.
(5) Internal estimate based on Triangle Management Services/RMG
Fulfilment Market Measure (July 2014), Verdict UK E-retail survey
and RMG market insight. B2C/C2X market growth of circa 4.5-5.5 per
cent and B2B market growth broadly tracking GDP. Estimated impact
of own-delivery reduces B2C/C2X market volume growth by circa 4-5
per cent.
CHIEF EXECUTIVE OFFICER'S REVIEW
We delivered revenue growth of two per cent, in line with our
expectations. Continued tight cost control has helped offset the
impact of changes in the UK parcels market. The Group operating
profit margin after transformation costs improved by 70 basis
points.
Despite a reduction in the rate of growth of the addressable UK
parcels market caused by the impact of Amazon's own-delivery
network, overall UKPIL revenue was flat. Letters revenue increased
by one per cent and the addressed letter volume decline of three
per cent(1) was better than our expected range of a 4-6 per cent
decline per annum. UKPIL parcel revenue was down one per cent,
primarily due to a change in the mix of the parcels we carry and
pressure on average unit revenues (AURs) due to the highly
competitive environment. Volumes increased by two per cent. GLS
performed better than we expected, with revenue and volumes up
seven per cent.
Cost management remains a key focus across the Group. Total
Group operating costs before transformation costs were up one per
cent, below the rate of revenue growth.
Group people costs increased two per cent. We have achieved
productivity improvements of 2.1 per cent, within our target range
of 2-3 per cent per annum. The management reorganisation programme
is on track to deliver cost savings of at least GBP25 million in
the second half of the year, with an annual saving of GBP70 million
per annum thereafter - more than we originally anticipated. Group
non-people costs were flat, reflecting tight cost control in
UKPIL.
We had anticipated that we would be able to mitigate around 1-2
per cent of RPI inflation on UKPIL costs through productivity
improvements and procurement and other cost initiatives. As a
result of current and further planned cost actions, we expect to
hold underlying costs before transformation costs in UKPIL flat for
the current year. Looking further ahead, we are targeting a flat or
better underlying UKPIL cost performance in 2015-16.
In line with our previously stated dividend policy, the Board
has declared and approved a maiden interim dividend of 6.7 pence
per share for the half year to 28 September 2014.
Being a successful parcels business
Royal Mail is the pre-eminent UK parcels delivery company. We
are maintaining that position while targeting higher growth areas,
including clothing and footwear.
UK parcels market volume growth continues to be driven by
e-retailing. We estimate that the total number of parcel deliveries
in the UK - across business-to-consumer (B2C),
consumer-to-any-recipient (C2X) and business-to-business (B2B) -
will increase by approximately four per cent(2) per annum in the
medium term. However, we estimate that the impact of Amazon
delivering an increasing number of its own parcels using its own
delivery network will reduce the annual rate of growth in our
addressable market to 1-2 per cent. We expect this dynamic to
continue for approximately two years. Additional capacity in the
market has contributed to increasing price pressure as other
players seek to fill their networks.
Despite exacting trading conditions, we have put in place a
number of parcels initiatives to maintain our position as the
pre-eminent UK parcels delivery company.
Our parcels strategy is about:
-- maintaining our pre-eminent position, while seeking new areas of growth;
-- being easier to do business with;
-- continually improving our products and services; and
-- increasing the scale of our European parcels network.
Maintaining our pre-eminent position, while seeking new areas of
growth
The UK has one of the most developed e-retail markets in the
world, with around 10 per cent of all retail sales conducted
online. This is estimated to rise to 13 per cent by 2017(3) .
Online retailers and consumers are increasingly focusing on
delivery. They want services that are quick, frequent, reliable and
competitively priced. They also want a reliable returns
service.
We are targeting higher growth areas, including clothing and
footwear. This is helping us to grow business with a number of
large retailers and e-retailers. As we seek to increase our share
of key growth segments, we are working with e-retailers to be more
flexible about the dimensions of parcels, and packaging materials
we will accept. Poly-wrapped clothing and footwear, including
returns, can be delivered cost-effectively on foot using
trolleys.
We are offering more support to eBay sellers - key customers of
ours. Royal Mail and Parcelforce Worldwide are one of the few
delivery providers for eBay's click and collect service with Argos
stores across the UK. We have also strengthened our strategic
partnership with eBay by enabling buyers who want to return items
to track their parcel through to delivery back to the seller.
Being easier to do business with
In May 2014, we introduced later acceptance times and weekend
collections for retailers and e-retailers, allowing them for the
first time to fulfil orders made at the weekend for delivery by
Royal Mail on Monday. We saw extra volume as a result of this. We
have extended access to Local Collect - our click and collect
service - to around 20,000 contract SME customers. Their customers
will have the option to collect their parcels from a network of
around 10,500 Post Offices.
Our retail partner, the Post Office, is undertaking a major
modernisation programme, including introducing longer opening hours
into thousands of its branches. Over 3,000 Post Office branches
have been modernised offering more than 85,000 additional opening
hours each week, with branches open from early in the morning and
into the evening and around 2,000 open on Sundays.
Our new, simple web-shipping tool allows integration of online
traders' eBay accounts for bulk printing of labels and the instant
despatch of sold items. We have launched new parcel shipping and
tracking IT solutions. New shipping and tracking technology allows
large customers to integrate with Royal Mail faster than ever
before and small and medium customers can connect using multiple
browsers and access a wider range of UK and International
services.
Continually improving our products and services
We recently increased the maximum size for our small parcel
format, so customers can put more, or bigger, items into each small
parcel. Along with a seasonal price promotion, this change will
benefit customers sending Christmas presents, marketplace sellers
and smaller businesses selling gifts online over the festive period
and during the New Year sales.
We are expanding our tracking capability and aim to barcode the
majority of the parcels we deliver by Christmas 2015. In October
2014, we confirmed an investment of around GBP130 million over five
years in hand-held technology. The roll-out of approximately 76,000
next generation hand-held scanners is expected to be completed in
2016-17. These new devices will have enhanced functionality,
including the capability to provide interactive alerts and image
capture. We are continuing to develop our new parcels IT platform,
which will enable us to improve customer services. We have issued a
tender for parcels automation equipment to help inform our business
case.
Increasing the scale of our European parcels network
GLS has delivered a good performance with underlying revenue
growth of seven per cent and margin improvement of 30 basis points.
Revenue growth was delivered in all of its major countries,
including Germany, France and Italy, which make up approximately 70
per cent of its revenue. Volume growth was driven by better than
expected volumes in both domestic and export parcels.
In Germany - GLS' largest market - volumes and revenue
increased. Sub-contractor costs have stabilised. GLS Germany has
rolled out evening and Saturday services in selected cities. Our
turnaround plan in France is on track - we are focusing on top line
growth and rolling out our FlexDeliveryService. GLS Italy continued
to deliver a good performance, partly due to our selective
acquisition strategy and the successful integration of new
franchisees. The business is aiming to maintain its competitive
position by focusing on SMEs and increasing exports.
Managing the decline in letters
The three per cent decline in addressed letter volumes(1) was
better than our expected decline of 4-6 per cent per annum(1) , due
to improvements in UK economic conditions. Letter revenue increased
by one per cent to GBP2,242 million, benefiting from the impact of
price increases and the uplift from elections traffic.
Marketing mail revenue, which accounts for around one quarter of
letters revenue, grew by five per cent to GBP571 million. Our
national network means we are well-placed to deliver this mail,
which provides a vital lifeline to the UK's businesses -
particularly SMEs.
We have continued to exceed our Quality of Service regulatory
target of 93.0 per cent for First Class mail. 93.3 per cent of
First Class mail was delivered on the next working day in the first
half. We achieved at least the minimum postcode area standard of
91.5 per cent in 110 of the 118 postcode areas. We have also
continued to exceed our Quality of Service regulatory target of
98.5 per cent for Second Class mail. 98.9 per cent of Second Class
mail was delivered within three working days.
Our letters strategy aims to:
-- secure the future provision of the Universal Service by
addressing the combination of the delay in the implementation of
proposed changes to access pricing and the impact of the unfettered
roll-out of direct delivery competition;
-- leverage the benefits of our transformation programme to
deliver continued efficiency improvements in the core network;
and
-- prove and promote the value of letters to businesses and consumers across the UK.
We are the trusted carrier for election mailings across the UK.
In the first half of the year Royal Mail delivered around 200
million candidate mailings, mainly due to European and local
government elections in May 2014. For the Scottish Independence
Referendum, we delivered over seven million campaign mailings and
over five million poll cards. We are proud to be the chosen partner
across the UK for such important mailings.
In August 2014, as we seek to underpin the sustainability of the
Universal Service and respond to changing customer needs, we
confirmed that our postmen and women would collect from
45,000-50,000 low-volume postboxes as part of their delivery round.
Declining letter volumes have been reflected in a significant fall
in the number of items posted in postboxes, leaving many now not
covering their costs. Rather than decommission uneconomic
postboxes, we are ensuring their sustainability by improving the
efficiency of our collection arrangements. In addition, we are
improving public access to postboxes. Over time, we will add up to
2,000 postboxes to around 115,000 we currently have. We are very
pleased to have received suggestions of new locations for postboxes
from members of the public.
Regulation
We believe the current regulatory framework does not fully
address the problem posed by unfettered direct delivery
competition. We think there is an urgent need for a new framework
that will secure the sustainable provision of the Universal Service
for the future.
We made an evidence-based regulatory submission to Ofcom in June
2014, showing the real and growing threat to the Universal Service
from direct delivery. The submission asked Ofcom to accelerate its
review of direct delivery competition, which is currently planned
for late 2015. The submission showed that:
-- there is a structural cost advantage for direct delivery entrants;
-- the UK has a unique economic geography that enables entrants
to the market to cherry-pick the services they offer, putting the
Universal Service at risk; and
-- the UK's highly developed access market provides a bridgehead
for direct delivery entrants to grow market share quickly.
Taken together, this provides an environment that could
facilitate rapid growth of direct delivery competition unless the
regulator takes action now. We estimate that the impact of Whistl's
(formerly TNT Post UK) stated plans for expansion could reduce
Royal Mail's revenue by over GBP200 million in 2017-18(4) . This
amounts to a potential material threat to the Universal Service -
which is Ofcom's published threshold for advancing its planned
review.
Ofcom announced in April 2014 that it would undertake a policy
review of the access pricing regime (Access Pricing Policy Review)
and we await an announcement of when this will commence. Ofcom
continues to investigate, under its Competition Act 1998 powers, a
complaint from Whistl into the proposed access changes Royal Mail
announced in January 2014. A decision as to whether to proceed is
expected in Autumn/Winter 2014. Royal Mail believes its proposals
are fair, reasonable and fully within the guidance provided by
Ofcom's March 2013 document on end-to-end competition(5) .
These issues are all interrelated. Some of our January 2014
price changes remain suspended while Ofcom continues its
investigation. We await a response to our regulatory submission of
June 2014. We believe these matters need to be resolved quickly in
order to create a regulatory environment that supports the
sustainability of the Universal Service.
In September 2014, the BIS Select Committee announced it will
conduct an inquiry into competition in the UK postal sector and the
Universal Service. We will play our full part in this inquiry. In
October 2014, after the reporting period, we welcomed the High
Court's decision that HMRC is right to exempt Royal Mail's mandated
access services from VAT. This decision may, however, be subject to
a further appeals process.
Being customer focused
We are one of the UK's most trusted and respected brands. This
year, we were ranked in the top 10 most reputable companies in the
UK by the Reputation Institute, climbing more than 100 places in
four years. In September 2014, the Group was named as global
sustainability leader of the Transportation and Transportation
Infrastructure Industry in the Dow Jones Sustainability
Indices.
We also exceeded our internal target for composite parcels,
which measures the overall quality of service performance for the
parcel products in our core network. Our performance of 95.4 per
cent in the first half demonstrates the benefits of our operational
focus on first-time delivery(6) , and our modernisation programme
to repurpose our network for more efficient and effective parcel
delivery. First-time delivery of Tracked 24/48 products is around
90 per cent, up from 87 per cent at the start of the year(7) .
Overall, complaints have continued to reduce, with reductions in
three of the four main causes.
Upgrades to customer service points at 45 Enquiry Offices are in
progress this financial year as part of a programme to help ensure
we maintain the highest level of service to our customers. We have
now introduced a new IT system in more than 100 Enquiry Offices,
which will allow us to identify returned items more quickly. More
than 3,000 of our people have undertaken training to ensure we
serve our customers more efficiently, and to a higher standard.
Parcelforce Worldwide, our express parcel delivery business,
began Sunday deliveries in June 2014. We also began a trial of
Sunday deliveries within the M25 for Royal Mail Tracked 24 parcels
posted anywhere in the UK on a Saturday. In September 2014, around
100 of our busiest Royal Mail Enquiry Offices opened on Sundays.
Sunday is now the third busiest day of the week(8) for collections
at Enquiry Offices, with around 12,500 customers visiting open
offices.
Christmas is the most important part of our year. We are
recruiting around 19,000 temporary staff and opening 10 parcel sort
centres to manage increased traffic over this crucial period. We
will be extending opening hours in Enquiry Offices for our 1,400
Delivery Offices during the busiest period.
Our people
We are making good progress on the Agenda for Growth, our
agreement with the CWU. Our "Together for Growth" training
programme aims to provide managers and union representatives with
the knowledge and skills they need to manage our transformation
more effectively. In line with the agreement, we also ran a joint
recruitment programme for 10 mediators across our business. The
appointed mediators undertook training and began their new roles in
September 2014.
As part of the flotation process, eligible full-time employees
received 729 Free Shares (613 Free Shares at flotation and 116 Free
Shares on 9 April 2014), which they are required to hold for a
minimum of three years. In January 2015, these employees will each
receive their maiden interim dividend of over GBP48, in addition to
the final dividend of over GBP96 they received on 31 July 2014.
We have also launched a Save As You Earn scheme. This three-year
scheme allows employees to save for the opportunity to purchase
Royal Mail shares at a discounted price in the future. More than
35,000 employees, approximately one quarter of those who were
eligible, applied to join the scheme, providing further alignment
between the interests of our employees, the Company and its
shareholders.
Outlook for 2014-15
Our performance remains in line with our expectations for the
full year. We expect tight cost control to deliver flat underlying
costs before transformation costs in UKPIL. The full year outcome
is dependent on our performance over the Christmas period.
NOTES
(1) Excluding election mailings.
2 Internal estimate based on historic growth trends (Triangle
Management Services/RMG Fulfilment Market Measure, July 2014) and
forecast data (Verdict UK E-retail Survey).
3 Euromonitor Passport Data 2013. Retail values exclude sales
tax, current prices.
4 Based on: Whistl'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 Whistl 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.
5 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.
6 Based on the total number of Tracked 24/48 products.
7 As at week 26, based on proportion of Tracked 24/48 parcels
delivered on expected day.
8 Based on study in 34 offices regarding footfall analysis
identifying numbers of items collected per hour.
NOTE TO THE "CHIEF EXECUTIVE OFFICER'S REVIEW" AND "BUSINESS AND
FINANCIAL REVIEW"
Movements in revenue, costs and margins are shown on an
underlying basis, unless otherwise stated. A more detailed
explanation of underlying performance can be found in the paragraph
entitled, "Presentation of results" in the section "Group Financial
Performance".
Movements in revenue and costs and underlying margins are
calculated after adjusting for foreign exchange movements in GLS'
revenue and costs and working days in UKPIL revenue, as well as any
non-recurring or distorting items that have impacted the reporting
periods. For comparison purposes all underlying adjustments are
made to the prior period.
BUSINESS AND FINANCIAL REVIEW
UK Parcels, International & Letters (UKPIL)
Trading results (GBPm)
---------------------------------------- -------------- -------------- -----------
Half year Half year Underlying
ended ended change
28 Sept 2014 29 Sept 2013
---------------------------------------- -------------- -------------- -----------
Revenue 3,703 3,711 Flat
Operating costs before transformation
costs (3,484) (3,417) Flat
-------------- -------------- -----------
Operating profit before transformation
costs 219 294
Operating profit margin before
transformation costs 5.9% 5.7% 20bps
Transformation costs (47) (70)
-------------- -------------- -----------
Operating profit after transformation
costs 172 224
Operating profit margin after
transformation costs 4.6% 3.8% 80bps
Revenue (GBPm)
---------------------------------------- -------------------------------------------
Letters 1,671 1,685 Flat
Marketing mail 571 545 5%
-------------- -------------- -----------
Total letters 2,242 2,230 1%
Parcels 1,461 1,481 (1%)
-------------- -------------- -----------
Total 3,703 3,711 Flat
-------------- -------------- -----------
Volumes (m)
Letters
---------------------------------------- -------------- -------------- -----------
Addressed letters 6,466 6,477 (3%)
Unaddressed letters 1,560 1,513 4%
Parcels
----------------------- ---- ---- ---
Core network 459 454 2%
Parcelforce Worldwide 39 36 9%
---- ---- ---
Total 498 490 2%
---- ---- ---
Revenue
UKPIL revenue was flat at GBP3,703 million, as a one per cent
increase in total letter revenue offset a one per cent decline in
parcel revenue.
Parcel volumes were up two per cent, with growth in lower AUR
import volumes more than offsetting a decline in higher AUR
consumer/SME volumes. Parcel revenue declined by one per cent to
GBP1,461 million, largely as a result of this change in mix and
pricing pressure due to the highly competitive environment. Export
parcel growth was lower than expected due to increasing competition
in the export parcel market and the impact of the stronger
Pound.
Parcelforce Worldwide has seen good volume growth of nine per
cent. However the competitive marketplace has put pressure on
pricing such that revenue growth has been impacted.
Addressed letter volumes declined by three per cent (excluding
the impact of election mailings). Overall letter revenue (including
marketing mail) of GBP2,242 million increased by one per cent,
benefiting from the impact of price increases and the uplift from
elections, the impact of which is expected to diminish over the
year.
Marketing mail revenue of GBP571 million increased by five per
cent as a result of the improvement in UK economic conditions and
the impact of MarketReach, which works with customers to help them
improve return on investment from multimedia campaigns.
Operating costs
Half year Half year Underlying
(GBPm) ended ended change
28 Sept 2014 29 Sept 2013
--------------------------------------- -------------- -------------- -----------
People costs (2,400) (2,320) 2%
Distribution & conveyance
costs (367) (387) (8%)
Infrastructure costs (440) (452) (5%)
Other operating costs (277) (258) 6%
-------------- -------------- -----------
Non-people costs (1,084) (1,097) (4%)
-------------- -------------- -----------
Operating costs before transformation
costs (3,484) (3,417) Flat
-------------- -------------- -----------
Total operating costs before transformation costs were flat.
People costs increased by two per cent as a result of increased
pay costs, due to the three per cent frontline pay award, the
additional cost of delivering election mail and the investments
made in headcount expansion in Parcelforce Worldwide and IT. The
increase was partially offset by a 2.1 per cent improvement in
collections, processing and delivery productivity in the core
network, in line with our target of a 2-3 per cent improvement per
annum. The second half will benefit from expected savings from the
management reorganisation programme of at least GBP25 million.
Non-people costs declined by four per cent. Distribution and
conveyance costs reduced by eight per cent due partly to a
reduction in terminal dues as a result of lower export volumes and
the geographic mix of export parcels in the period. Savings were
also achieved on vehicle and fuel costs through improved fleet
management. Infrastructure costs were five per cent lower, mainly
due to cost savings on property, with reduced spend in relation to
facilities management. Depreciation was up GBP6 million in the
first half of the year. Other operating costs increased by six per
cent, partly due to ceased cost recovery from Post Office Limited
for certain services following separation.
For the full year, operating costs before transformation costs
in UKPIL are expected to be flat.
Transformation costs
Transformation costs of GBP47 million were GBP23 million lower
than the prior period. This was due to lower project and property
costs, partly offset by higher voluntary redundancy costs. We
continue to expect ongoing transformation costs of around
GBP120-140 million per annum, however the outcome for 2014-15 will
depend on the timing of a number of projects in the second half of
the year.
General Logistics Systems (GLS)
Trading results (EURm)
-------------------------- -------------- -------------- -----------
Half year Half year Underlying
ended ended change
28 Sept 2014 29 Sept 2013
-------------------------- -------------- -------------- -----------
Revenue 1,008 940 7%
Operating costs (939) (878) 7%
-------------- -------------- -----------
Operating profit 69 62
Operating profit margin 6.9% 6.6% 30bps
Trading results (GBPm)
-------------- -------------- -----------
Revenue 813 801
Operating costs (757) (748)
-------------- -------------- -----------
Operating profit 56 53
Volumes (m) 208 193 7%
-------------------------- -------------- -------------- -----------
Revenue
GLS delivered a good revenue performance with seven per cent
growth, which was better than our expectations. This was driven by
a seven per cent increase in parcel volumes, with particularly
strong growth in Italy. GLS continues to grow revenue in both
developed and emerging European markets.
Operating costs
Half year Half year Underlying
(EURm) ended ended change
28 Sept 2014 29 Sept 2013
----------------------------------------- -------------- -------------- -----------
People costs (226) (209) 8%
Distribution & conveyance costs (620) (580) 7%
Infrastructure costs (65) (62) 4%
Other operating costs (28) (27) 3%
-------------- -------------- -----------
Non-people costs (713) (669) 7%
-------------- -------------- -----------
Total operating costs (939) (878) 7%
-------------- -------------- -----------
Total operating costs were up seven per cent, in line with
volume growth.
People costs increased by eight per cent as a result of
increased labour requirements in operations and the impact of
acquisitions in Italy. Non-people costs were up seven per cent.
Distribution and conveyance costs were up seven per cent,
reflecting higher volumes. Although sub-contractor rates in Germany
have now stabilised, going forward these are likely to be impacted
by the introduction of minimum wage rates in Germany, which take
effect from 1 January 2015. Infrastructure costs increased by four
per cent due to higher depreciation and amortisation charges. Other
operating costs were up three per cent, mainly due to accelerated
IT projects.
Operating profit margin increased by 30 basis points to 6.9 per
cent, partly due to a reduction in losses in France of EUR4 million
to EUR9 million.
GROUP FINANCIAL PERFORMANCE
The main drivers of revenue and cost performance have been
described in the sections entitled "UKPIL" and "GLS" above.
Operating profit and margins
Operating profit before transformation costs was GBP279 million
(H1 2013-14 GBP353 million). Operating profit margin before
transformation costs increased by 20 basis points to 6.2 per
cent.
Operating profit after transformation costs was GBP232 million
(H1 2013-14 GBP283 million). Operating profit margin after
transformation costs increased by 70 basis points to 5.1 per
cent.
Operating specific items
Operating specific items in the period relate mainly to the
charge associated with the Employee Free Shares Offer of GBP91
million (including GBP3 million National Insurance). The total
charge for the full year is now expected to be approximately GBP180
million, due to the accelerated charges for good leavers. Business
related costs of GBP25 million comprised an GBP18 million provision
for GLS France competition authority investigation costs and a GBP7
million movement in the provision for potential industrial disease
claims as a result of a reduction in the discount rate.
Profit on disposal of assets
Profit on disposal of property plant and equipment of GBP27
million arose mainly from the sale of the Islington Delivery Office
and a local depot in Charlton.
Net finance costs
Net finance costs were GBP14 million compared with GBP50 million
in the prior period. The decrease was largely due to the new loans
and borrowings being at lower rates than the previous HM Government
facilities.
The interest on the 2.375% EUR500m Senior Fixed Rate Notes Due
July 2024 is EUR12 million per annum, payable annually in July.
The blended interest rate on gross debt for the second half of
the year is expected to be approximately three per cent.
Net pension interest
Net pension interest credit, which is non-cash and treated as a
non-operating specific item, was GBP38 million. The net pension
interest credit is calculated using the net pension surplus at the
start of the financial year multiplied by the discount rate of the
defined benefit schemes. The credit for the full year is expected
to be around GBP75 million.
Taxation
Excluding specific items
The effective tax rate on profits excluding specific items was
25 per cent (H1 2013-14 27 per cent). The rate has reduced broadly
in line with the reduction in the UK statutory tax rate.
Reported
The effective tax rate on reported profit before tax was 25 per
cent, comprising the current tax charge of GBP19 million and a
deferred tax charge of GBP23 million.
The UK current tax charge of GBP1 million represents a tax rate
on profit before tax of one per cent (H1 2013-14 one per cent).
Taxable profits in the UK are expected to be largely covered by a
combination of losses and capital allowance claims as well as the
treatment of the HMRC-approved Employee Free Shares Offer.
GLS' effective tax rate on reported profit was 49 per cent,
reflecting a range of tax rates across different territories, some
of which are higher than in the UK, and losses (primarily in
France) for which no deferred tax credit has been recognised.
Specific items include a one-off provision for costs, some of which
are expected to attract no tax relief.
The deferred tax charge was GBP23 million (H1 2013-14 GBP342
million). The deferred tax charge in the prior period was
principally due to the effect of capital allowance claims and
utilisation of brought forward losses, which are largely offset by
pension and other short term timing differences.
Earnings per share (EPS)
EPS excluding specific items was 16.3 pence (Reported 12.5
pence) on a basic and diluted basis.
Dividends
The final dividend of 13.3 pence per share in respect of the
2013-14 financial year was paid on 31 July 2014, following
shareholder approval.
The Board announces it has declared and approved an interim
dividend of 6.7 pence per share, which will be paid on 14 January
2015 to shareholders on the register at the close of business on 28
November 2014. This represents one third of the notional 2013-14
full year dividend of 20 pence per share.
Cash flow
Free cash flow for the period was an inflow of GBP117 million
(H1 2013-14 GBP183 million). EBITDA before transformation costs was
GBP416 million (H1 2013-14 GBP483 million).
Trading working capital movements were in line with normal
trends, generating an outflow of GBP152 million, compared with an
outflow of GBP155 million in the prior period. For the full year,
trading working capital movements are expected to be broadly
flat.
The pensions cash outflow, including the GBP5 million deficit
payment in respect of RMSEPP, was GBP69 million lower than the IAS
19 pension charge.
Total investment increased from GBP212 million to GBP249
million, including the expenditure relating to the management
reorganisation programme of GBP39 million. The principal
investments were in relation to vehicles and IT. Proceeds from the
disposal of operating properties were GBP34 million (H1 2013-14
GBP28 million, including GBP3 million from disposal of associate
undertaking) giving a net investment of GBP215 million (H1 2013-14
GBP184 million). Cumulative cash investment over 2013-14 and
2014-15 is still expected to remain at around GBP1.2 billion, net
of proceeds from operational asset disposals. This includes the
remaining expenditure relating to the management reorganisation
programme of approximately GBP60 million. Going forward net cash
investment is expected to be in the range of GBP550-600
million.
In-year trading cash flow was GBP69 million compared with GBP118
million in the prior period. Excluding the cost of the management
reorganisation programme of GBP39 million in the first half and the
impact of the VAT credits in both periods, in-year trading cash
flow increased by GBP20 million.
Other working capital movements resulted in a GBP16 million
inflow in the first half and a GBP50 million inflow in the prior
period. In both periods there was a negative impact due to stamps
being used that were purchased in a previous period, with an impact
of GBP29 million in the first half and GBP15 million in the prior
period. In the first half there was also a benefit of GBP45 million
due to the timing of payroll payments in respect of monthly paid
staff. The first half of last year benefitted from the timing of
payments in relation to the frontline pay award of GBP65
million.
In the second half there will also be a benefit of approximately
GBP45 million from the timing of March 2015 payroll payments in
respect of monthly paid staff.
Property held for sale
The Group's property portfolio includes three sites in London,
which have been identified for potential sale or development.
During the reporting period, the Group's former Paddington Mail
Centre site was reclassified from 'property, plant and equipment'
category to 'property assets held for sale' on the Group balance
sheet.
Net debt
Net debt was GBP570 million at 28 September 2014, GBP15 million
higher than at 30 March 2014. The movement reflects the free cash
inflow in the period less the 2013-14 final dividend paid in July
2014 of GBP133 million.
In July 2014, Royal Mail issued EUR500m 2.375% Senior Fixed Rate
Notes Due July 2024 with a fixed annual interest coupon of 2.375%.
GBP350 million of existing term loans were repaid from the proceeds
of the bond issue.
Pensions
The IAS 19 pension position at 28 September 2014 was a surplus
of GBP2,068 million compared with a surplus of GBP1,723 million at
30 March 2014. The increase in the surplus was driven largely by
the return on assets, in particular due to the increase in the
market value of gilts and derivative assets principally held to
hedge inflation and interest rate risk. An important part of the
Trustee's investment strategy is to reduce the impact of movements
in these rates on the fund. To support the Company's commitment
that, subject to certain conditions, the Royal Mail Pension Plan
(RMPP) will remain open to accrual until at least March 2018, the
Trustee has hedged a large proportion of this future interest and
inflation exposure. On an actuarial basis the return on assets
relating to the liabilities hedged in advance of those accrued as
at September 2014 was approximately GBP250 million, which will
unwind over time.
The IAS 19 accounting position and key assumptions for the
liability valuation are provided in note 9.
If the market conditions remain unchanged from September 2014,
then the estimated pension service rate for 2015-16 would be around
25.5 per cent, equivalent to a further increase in the RMPP IAS 19
non-cash pension service charge of around GBP40-45 million over the
charge for 2014-15. The actual rate for 2015-16 will be determined
by the discount rate at the end of March 2015 (based on long term
RPI and appropriate AA corporate bond rates at that time).
Post balance sheet event
On 14 October 2014, the Company announced that contracts had
been exchanged for the sale of its former Paddington Mail Centre
site to Great Western Developments Limited for GBP111 million in
cash.
Presentation of results
The reported profit and loss figures in this financial report
are presented in accordance with IFRS, as adopted by the European
Union.
The commentary in this financial report, unless otherwise
indicated, focuses on the trading results before specific items and
on movements in revenue, costs and margins on an underlying basis.
This is consistent with the way that financial performance is
measured by management and reported to the Board and assists in
providing a meaningful analysis of the trading results of the
Group. Underlying movements take into account differences in
working days in UKPIL and movements in foreign exchange in GLS'
revenue and costs. In addition, adjustments are made for
non-recurring or distorting items. By their nature, non-recurring
or distorting items may be unpredictable, exceptionally large or,
in the case of IAS 19 pension accounting, represent a material
non-cash movement. The adjustments to revenue, costs, profits and
margins for this half year are set out below. For volumes,
underlying movements are adjusted for working days in UKPIL. For
the full year, we would also expect to make adjustments for the
GBP28 million one-off bonus paid to staff and the GBP104 million
provision in respect of the management reorganisation programme,
both recognised in the second half of 2013-14.
We intend to move to a presentation of profit and loss figures
on an 'underlying' basis that will exclude both specific items and
any relevant underlying adjustments. In addition, we will report
underlying operating profit and earnings figures with the IAS 19
non-cash pension charge replaced by the actual cash cost of
pensions. We will continue to present reported figures in
accordance with IFRS with equal prominence to the underlying
figures.
Underlying adjustments to reported 2013-14 figures
----------------------------------------------------------------------------------------------------------------
IAS
19 pension
service Underlying
Working Foreign charge VAT growth
Reported days exchange increase credit Underlying / (decline)
(GBPm) 2013-14 (UKPIL) (GLS) (UKPIL) (UKPIL) 2013-14 2014-15
------------------------ --------- --------- ---------- ------------ --------- ----------- -------------
Revenue
Group 4,520 (20) (44) - - 4,456 2%
UKPIL 3,711 (20) - - - 3,691 Flat
Costs
Group
People (2,546) - 10 (34) (2) (2,572) 2%
Distribution and
conveyance costs (880) - 27 - (13) (866) Flat
Infrastructure costs (504) - 3 - (12) (513) (4%)
Other operating
costs (237) - 1 - (3) (239) 9%
--------- --------- ---------- ------------ --------- ----------- -------------
Non-people costs (1,621) - 31 - (28) (1,618) Flat
--------- --------- ---------- ------------ --------- ----------- -------------
Operating costs before
transformation costs (4,167) - 41 (34) (30) (4,190) 1%
--------- --------- ---------- ------------ --------- ----------- -------------
UKPIL
People (2,320) - - (34) (2) (2,356) 2%
Distribution and
conveyance costs (387) - - - (13) (400) (8%)
Infrastructure costs (452) - - - (12) (464) (5%)
Other operating
costs (258) - - - (3) (261) 6%
--------- --------- ---------- ------------ --------- ----------- -------------
Non-people costs (1,097) - - - (28) (1,125) (4%)
--------- --------- ---------- ------------ --------- ----------- -------------
Operating costs before
transformation costs (3,417) - - (34) (30) (3,481) Flat
--------- --------- ---------- ------------ --------- ----------- -------------
Profit and margins
Group
Operating profit
before transformation
costs 353 (20) (3) (34) (30) 266
Margin 7.8% 6.0% 20bps
Transformation costs (70) - - - - (70)
Operating profit
after transformation
costs 283 (20) (3) (34) (30) 196
Margin 6.3% 4.4% 70bps
UKPIL
Operating profit
before transformation
costs 294 (20) - (34) (30) 210
Margin 7.9% 5.7% 20bps
Transformation costs (70) - - - - (70)
Operating profit
after transformation
costs 224 (20) - (34) (30) 140
Margin 6.0% 3.8% 80bps
The cumulative average translation rates for the half year ended
28 September 2014 are GBP1 = EUR1.24, compared with GBP1 = EUR1.17
for the half year ended 29 September 2013.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers that the principal risks and uncertainties
faced by the Group for the remaining six months of the year are
unchanged from those set out in the Annual Report and Financial
Statements 2013-14. In summary these are:
Changes in customer preferences
-- We might not adequately respond to evolving customer behaviours or market changes;
-- Economic conditions in the UK or Europe, where the recovery
remains fragile, could adversely impact letter and parcels
revenues.
Cost management and business transformation
-- We might not deliver efficiency and other benefits enabled by
our transformation programme and pay deal with CWU;
-- We may fail to retain or attract Directors and highly skilled personnel;
-- We might not successfully transform our IT estate.
Regulatory and legislative environment
-- The economics of the Universal Service Obligation are put at
risk by the unfettered roll-out of direct delivery;
-- VAT exemption on access services could be lost;
-- Changes to laws and regulations relating to employment
(including the interpretation and enforcement of those laws and
regulations) could, directly or indirectly, increase the Group's
labour costs.
The Board notes that a recent Employment Appeal Tribunal (EAT)
decision was made that relates to this risk. There has been a
challenge as to the correct calculation of holiday pay under the
Working Time Directive and whether non-guaranteed overtime should
be included. The EAT decision means that non-guaranteed overtime
should be included in the calculation of the first 20 days of
holiday pay, per holiday year. The EAT has, however, granted the
parties in this case leave to appeal its decision. If the decision
is upheld, this could have the effect of increasing costs.
Industrial action
-- Material disagreements or disputes could lead to widespread industrial action.
A fuller description of these risks, their potential effect and
mitigation is provided at pages 29-31 of the Annual Report and
Financial Statements 2013-14.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed consolidated income statement
Half year ended Half year ended
28 September 2014 29 September 2013
------------------------------------ ------------------------------------
Excluding Excluding
Specific specific Specific specific
Reported(1) items(2) items Reported(1) items(2) items
Notes GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Revenue 4,525 - 4,525 4,520 - 4,520
Operating costs (4,246) - (4,246) (4,167) - (4,167)
-------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
People costs (2,627) - (2,627) (2,546) - (2,546)
Distribution and conveyance
operating costs (867) - (867) (880) - (880)
Infrastructure costs (491) - (491) (504) - (504)
Other operating costs (261) - (261) (237) - (237)
-------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Operating profit before
transformation costs 279 - 279 353 - 353
Transformation costs 4 (47) - (47) (70) - (70)
-------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Operating profit after
transformation costs 232 - 232 283 - 283
Operating specific items:
Royal Mail Pension Plan
amendment 5 - - - 1,350 1,350 -
Transaction-related costs 5 - - - (26) (26) -
Employee Free Shares costs 5 (91) (91) - (6) (6) -
Business-related costs 5 (25) (25) - (9) (9) -
Operating profit/(loss) 116 (116) 232 1,592 1,309 283
Non-operating specific
items:
Profit on disposal of
property,
plant and equipment 5 27 27 - 17 17 -
Profit on disposal of
associate
undertaking 5 - - - 2 2 -
-------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Earnings before interest
and tax 143 (89) 232 1,611 1,328 283
Finance costs 6 (16) - (16) (52) - (52)
Finance income 6 2 - 2 2 - 2
Net pension interest
(non-operating
specific item) 9b 38 38 - 19 19 -
-------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Profit/(loss) before tax 167 (51) 218 1,580 1,347 233
Tax (charge)/credit 7 (42) 13 (55) (359) (295) (64)
Profit/(loss) for the period 125 (38) 163 1,221 1,052 169
-------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
Profit for the period
attributable
to:
Equity holder of the parent
Company 125 (38) 163 1,220 1,052 168
Non-controlling interests - - - 1 - 1
================================ ====== ============ ========== ========== ============ ========== ==========
Earnings per share:
Basic 10 12.5p (3.8)p 16.3p 122.0p 105.2p 16.8p
Diluted 10 12.5p (3.8)p 16.3p 122.0p 105.2p 16.8p
-------------------------------- ------ ------------ ---------- ---------- ------------ ---------- ----------
(1) Reported - prepared in accordance with International
Financial Reporting Standards (IFRS).
(2) Specific items - see note 5 to the condensed consolidated
financial statements.
Condensed consolidated statement of comprehensive income
Half year Half year
ended ended
28 September 29 September
2014 2013
GBPm GBPm
============= =============
Profit for the period 125 1,221
Other comprehensive income/(expense) for the period:
Items that will not be subsequently reclassified
to profit or loss:
Amounts relating to pensions accounting 299 (219)
============================================================= ============= =============
IFRIC 14 adjustment relating to pension surplus (2) (24)
Actuarial gains/(losses) on defined benefit schemes 376 (277)
Tax on above items (75) 82
============================================================= ============= =============
Items that may be subsequently reclassified to profit
or loss:
Foreign exchange translation differences (38) (4)
------------------------------------------------------------- ------------- -------------
Exchange differences on translation of foreign operations
(GLS) (42) (4)
Net gain on hedge of a net investment (EUR500 million
bond - 2.375% Senior Fixed Rate Notes due July 2024) 4 -
============================================================= ============= =============
Designated cash flow hedges (2) (15)
============================================================= ============= =============
Losses on cash flow hedges deferred into equity (8) (15)
Losses on cash flow hedges released from equity to
income 6 -
Total comprehensive income for the period 384 983
============================================================= ============= =============
Total comprehensive income for the period attributable
to:
Equity holders of the parent company 384 982
Non-controlling interests - 1
============================================================= ============= =============
Condensed consolidated statement of cash flows
Half year Half year
ended ended
28 September 29 September
2014 2013
GBPm GBPm
=============================================================== ============= =============
Cash flow from operating activities
Operating profit before transformation costs 279 353
Adjustment for:
Depreciation and amortisation 138 132
Share of post-tax profit from associates (1) (2)
================================================================ ============= =============
EBITDA before transformation costs 416 483
Working capital movements (136) (105)
================================================================ ============= =============
(Increase)/decrease in inventories (1) 1
Decrease in receivables 40 39
Decrease in payables (164) (148)
Net (increase)/decrease in derivative assets (9) 3
Decrease in provisions (non-specific items) (2) -
=============================================================== ============= =============
Difference between pension costs charged in operating
profit and pension cash flows 69 36
Cash cost of transformation operating expenditure(1) (99) (96)
Cash cost of operating specific items (2) (13)
================================================================ ============= =============
Cash inflow from operations 248 305
Income tax paid (6) (13)
================================================================ ============= =============
Net cash inflow from operating activities 242 292
================================================================ ============= =============
Cash flows from investing activities
Dividends received from associate undertaking - 2
Finance income received 2 2
Proceeds from sale of property, plant and equipment
(non-operating specific item) 34 25
Proceeds from disposal of associate undertaking (non-operating
specific item) - 3
Purchase of property plant and equipment(1) (100) (91)
================================================================ ============= =============
Transformation investment - capital expenditure (22) (21)
Non-transformation investment - capital expenditure (78) (70)
================================================================ ============= =============
Acquisition of business (in GLS)(1) (3) (1)
Purchase of intangible assets (software)(1) (46) (23)
Transformation investment - capital expenditure (3) -
Non-transformation investment - capital expenditure (43) (23)
================================================================ ============= =============
Payment of deferred consideration in respect of prior
years' acquisitions(1) (1) (1)
Net cash outflow from investing activities (114) (84)
================================================================ ============= =============
Net cash inflow before financing activities 128 208
================================================================ ============= =============
Cash flows from financing activities
Finance costs paid (11) (25)
Payment of capital element of obligations under finance
lease contracts (38) (36)
Cash received on sale and leasebacks - 56
New loans 393 -
Repayment of loans and borrowings (350) -
Dividend paid to equity holders (133) -
================================================================ ============= =============
Net cash outflow from financing activities (139) (5)
================================================================ ============= =============
Net (decrease)/increase in cash and cash equivalents (11) 203
Effect of foreign currency exchange rates on cash
and cash equivalents (3) -
Cash and cash equivalents at the beginning of the
period 366 351
================================================================ ============= =============
Cash and cash equivalents at the end of the period 352 554
================================================================ ============= =============
(1) Items included in total investment in note 8.
Condensed consolidated balance sheet
At 28 September
2014 At 30 March 2014
Notes GBPm GBPm
====================================================== ===== =============== ================
Non-current assets
Property, plant and equipment 1,941 1,989
Leasehold land payment 3 3
Goodwill (mainly investment in GLS) 190 197
Intangible assets (mainly software) 221 195
Investments in associates 5 4
Financial assets - pension escrow investment 20 20
- derivatives 2 3
Retirement benefit asset - net of IFRIC
14 adjustment 9b 2,068 1,723
Other receivables 10 13
Deferred tax assets 8 9
====================================================== ===== =============== ================
4,468 4,156
Property assets held for sale 12 5 3
====================================================== ===== =============== ================
Current assets
Inventories 23 22
Trade and other receivables 864 926
Financial assets - derivatives - 2
- short-term deposits 1 1
Cash and cash equivalents 352 366
====================================================== ===== =============== ================
1,240 1,317
====================================================== ===== =============== ================
Total assets 5,713 5,476
====================================================== ===== =============== ================
Current liabilities
Trade and other payables (1,486) (1,652)
Financial liabilities - obligations under
finance leases (95) (87)
- derivatives (14) (12)
Income tax payable (22) (14)
Provisions (98) (173)
====================================================== ===== =============== ================
(1,715) (1,938)
Non-current liabilities
Financial liabilities - interest-bearing
loans and borrowings (639) (600)
- obligations under finance leases (209) (255)
- derivatives (4) (5)
Provisions (122) (95)
Other payables (36) (31)
Deferred tax liabilities (246) (151)
====================================================== ===== =============== ================
(1,256) (1,137)
====================================================== ===== =============== ================
Total liabilities (2,971) (3,075)
====================================================== ===== =============== ================
Net assets 2,742 2,401
====================================================== ===== =============== ================
Equity
Share capital 10 10
Retained earnings 2,713 2,332
Other reserves 12 52
====================================================== ===== =============== ================
Equity attributable to parent Company 2,735 2,394
Non-controlling interests 7 7
====================================================== ===== =============== ================
Total equity 2,742 2,401
====================================================== ===== =============== ================
Condensed consolidated statement of changes in equity
Equity
Foreign holder
currency of Non-
Share Retained translation Hedging the controlling Total
capital earnings reserve reserve parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================= ========= ========== ============= ========== ======== ============= ========
At 31 March 2013 - 1,318 73 10 1,401 4 1,405
========================== ========= ========== ============= ========== ======== ============= ========
Profit for the period - 1,220 - - 1,220 1 1,221
Other comprehensive
expense for the period - (219) (4) (15) (238) - (238)
Share capital issue 10 (10) - - - - -
Employee Free Shares
issue(1) (share-based
payment) - 6 - - 6 - 6
At 29 September 2013 10 2,315 69 (5) 2,389 5 2,394
========================== ========= ========== ============= ========== ======== ============= ========
Profit for the period - 57 - - 57 2 59
Other comprehensive
expense for the period - (125) (8) (4) (137) - (137)
Employee Free Shares
issue(1) (share-based
payment) - 85 - - 85 - 85
========================== ========= ========== ============= ========== ======== ============= ========
At 30 March 2014 10 2,332 61 (9) 2,394 7 2,401
========================== ========= ========== ============= ========== ======== ============= ========
Profit for the period - 125 - - 125 - 125
Other comprehensive
income/(expense) for
the period - 299 (38) (2) 259 - 259
Dividend paid to equity
holders of the parent - (133) - - (133) - (133)
Share-based payments:
- Employee Free Shares
issue(1) - 88 - - 88 - 88
- Long-Term Incentive
Plan (LTIP) - 2 - - 2 - 2
At 28 September 2014 10 2,713 23 (11) 2,735 7 2,742
========================== ========= ========== ============= ========== ======== ============= ========
(1) Employee Free Shares costs exclude GBP3 million (29
September 2013 GBPnil, 30 March 2014 GBP3 million) National
Insurance, charged to the income statement, included in provisions
on the balance sheet.
Notes to the condensed consolidated financial statements
1. Reporting entity
Royal Mail plc (the 'Company') is a company domiciled in the
United Kingdom and its ordinary shares are traded on the London
Stock Exchange. The condensed consolidated financial statements of
the Company for the half year ended 28 September 2014 comprise the
Company and its subsidiaries (together referred to as the 'Group')
and the Group's interest in its associate undertaking.
2. Basis of preparation
Statement of compliance
The comparative financial information for the half year ended 29
September 2013 and the year ended 30 March 2014 have been reported
on by the Group's auditor and delivered to the registrar of
companies. The report of the auditor was unqualified and did not
contain the statements under section 498(2) or (3) of the Companies
Act 2006. The condensed consolidated financial statements for the
half year ended 28 September 2014 (half year ended 29 September
2013) do not constitute statutory financial information as defined
in section 434 of the Companies Act 2006. The condensed
consolidated financial statements are unaudited but have been
reviewed by the auditor, Ernst & Young LLP, and their report is
shown at the end of this document.
The condensed consolidated financial statements have been
prepared in accordance with the Disclosure and Transparency Rules
(DTR) of the Financial Conduct Authority and with IAS 34 Interim
Financial Reporting as adopted by the European Union (EU). The
condensed consolidated financial statements should be read in
conjunction with the Annual Report and Financial Statements 2013-14
('2013-14 Annual Report') for the year ended 30 March 2014 which
was prepared in accordance with IFRS as adopted by the EU.
The condensed consolidated financial statements provide an
update on the latest complete set of annual financial statements
for the year ended 30 March 2014. Accordingly, they focus on key
areas of the business which were covered by the relevant 'core'
notes in the 2013-14 Annual Report, and any other new activities,
events and circumstances impacting the Group.
Significant accounting policies
The accounting policies applied in the preparation of the
condensed consolidated financial statements are consistent with
those in the 2013-14 Annual Report, except for the adoption of
relevant, revised accounting standards with effect from 31 March
2014, detailed below:
Accounting standards adopted in 2014-15
Amendments to IFRS 10 Consolidated Financial Statements; IFRS 11
Joint Arrangements; IFRS 12 Disclosure of Interests in Other
Entities; IAS 27 (Amended) Separate Financial Statements; IAS 28
(Amended) Investments in Associates and Joint Ventures; and IAS 36
(Amended) Impairment of Assets.
The adoption of these standards will not have a material impact
on the financial performance or position of the Group.
Significant accounting judgements, estimates and assumptions
The preparation of the condensed consolidated financial
statements requires management to make various judgements,
estimates and assumptions when determining the carrying value of
certain assets and liabilities. The significant judgements and
estimates applied by the Group in these condensed consolidated
financial statements have been applied on a consistent basis with
the 2013-14 Annual Report.
Going concern
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the half year financial statements.
Accounting standards issued but not yet applied
The following new and revised accounting standards are relevant
to the Group and are in issue but were not effective (and in some
instances have not yet been adopted by the EU) at the balance sheet
date:
IFRS 7 (Amended) Financial Instruments: Disclosures
IFRS 9 (Amended) Financial Instruments
IFRS 15 Revenue from Contracts with Customers
IAS 16 (Amended) Property, Plant and Equipment
IAS 39 (Amended) Financial Instruments: Recognition and
Measurement
The Directors do not expect that the adoption of the standards
listed above will have a material impact on the financial
performance or position of the Group in future periods.
3. Segment information
Business unit Main statutory entities
==================================== =====================================
UK Parcels, International & Letters Royal Mail Group Limited
(UKPIL) - UK operations Royal Mail Estates Limited
Royal Mail Investments Limited
==================================== =====================================
General Logistics Systems (GLS) GLS Germany GmbH & Co. OHG
- Other European operations GLS France S.A.S.
GLS Italy S.p.A.
==================================== =====================================
Other - UK operations Romec Limited (51% owned subsidiary)
NDC 2000 Limited (51% owned
subsidiary)
Quadrant Catering Ltd (51% owned
associate)
==================================== =====================================
The Group is structured on a geographic business unit basis and
these business units report into the Chief Executive's Committee
and the Royal Mail plc Board. Each of these units has discrete
revenue, costs, profit, cash flows, assets and people. 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.
The key measures of segment performance are operating profit
before transformation costs (used internally for the corporate
balanced scorecard) and operating profit after transformation costs
(the external measure of trading performance). These are therefore
the measures of profit or loss for each segment. A reconciliation
of the Group's Earnings Before Interest and Tax (EBIT) by segment
is also disclosed.
The majority of inter-segment revenue relates to the provision
of facilities management and catering services to UKPIL. Trading
between UKPIL and GLS is not material.
Transfer prices between the segments are set on a basis of
charges reached through commercial negotiation with the respective
business units that form part of the segments.
Seasonality
Mail volumes are subject to seasonal variation. The Group's
busiest period is from September to December, when there is an
increase in marketing mail volumes as businesses seek to maximise
sales in the period leading up to Christmas, an increase in parcel
volumes as a result of online Christmas shopping and an increase in
addressed letter volumes as a result of the delivery of Christmas
cards. During this period the Group would expect to record higher
revenue as greater volumes of letters and parcels are delivered
through its networks. It also incurs higher costs as the Group,
particularly in UKPIL, hires large numbers of temporary workers to
assist in handling the increased workload. Other seasonal factors
that can affect the Group's results of operations include the
Easter period, the number of bank holidays in a reporting period
and weather conditions. Within the year, mail volumes typically
decline in the summer months due to the holiday period, and then
increase during autumn through the peak period at Christmas.
Other
European
Half year ended 28 September 2014 UK operations operations
======================= =========== =====
UKPIL Other Total GLS Total
GBPm GBPm GBPm GBPm GBPm
======================================= ======= ======= ===== =========== =====
External revenue 3,703 9 3,712 813 4,525
Inter-segment revenue - 82 82 -(1) 82
======================================= ======= ======= ===== =========== =====
Total segment revenue 3,703 91 3,794 813 4,607
======================================= ======= ======= ===== =========== =====
Operating profit before transformation
costs 219 4 223 56 279
Transformation costs (47) - (47) - (47)
======================================= ======= ======= ===== =========== =====
Operating profit after transformation
costs 172 4 176 56 232
Operating specific items:
Employee Free Shares costs (91) - (91) - (91)
Business-related costs (7) - (7) (18) (25)
======================================= ======= ======= ===== =========== =====
Operating profit 74 4 78 38 116
Non-operating specific items:
Profit on disposal of property,
plant and equipment 27 - 27 - 27
Earnings before interest and tax 101 4 105 38 143
not reported
Net finance costs at this level (15) 1 (14)
Net pension interest (non-operating
specific item) 38 - 38
======================================= ===== =========== =====
Profit from continuing operations
before tax 128 39 167
Tax - specific items 13 - 13
- other (36) (19) (55)
======================================= ================ ===== =========== =====
Profit for the period 105 20 125
======================================= ======= ======= ===== =========== =====
(1) Trading between GLS and UKPIL is not material.
Other
European
Half year ended 29 September 2013 UK operations operations
======================= =========== =====
UKPIL Other Total GLS Total
GBPm GBPm GBPm GBPm GBPm
======================================= ======= ======= ===== =========== =====
External revenue 3,711 8 3,719 801 4,520
Inter-segment revenue - 88 88 -(1) 88
======================================= ======= ======= ===== =========== =====
Total segment revenue 3,711 96 3,807 801 4,608
======================================= ======= ======= ===== =========== =====
Operating profit before transformation
costs 294 6 300 53 353
Transformation costs (70) - (70) - (70)
======================================= ======= ======= ===== =========== =====
Operating profit after transformation
costs 224 6 230 53 283
Operating specific items:
Royal Mail Pension Plan amendment 1,350 - 1,350 - 1,350
Transaction-related costs (22) - (22) (4) (26)
Employee Free Shares costs (6) - (6) - (6)
Business-related costs (9) - (9) - (9)
======================================= ======= ======= ===== =========== =====
Operating profit 1,537 6 1,543 49 1,592
Non-operating specific items:
Profit on disposal of property,
plant and equipment 17 - 17 - 17
Profit on disposal of associate
undertaking 2 - 2 - 2
======================================= ======= ======= ===== =========== =====
Earnings before interest and tax 1,556 6 1,562 49 1,611
not reported
Net finance costs at this level (51) 1 (50)
Net pension interest (non-operating
specific item) 19 - 19
======================================= ===== =========== =====
Profit before tax 1,530 50 1,580
Tax - specific items (44) (20) (64)
- other (295) - (295)
======================================= ======= ===== =========== =====
Profit for the period 1,191 30 1,221
======================================= ================ ===== =========== =====
(1) Trading between GLS and UKPIL is not material.
4. Transformation costs
Half year Half year
ended ended
28 September 29 September
2014 2013
GBPm GBPm
================================================ ============== ==============
Voluntary redundancy (including pension top-up
amounts) (19) (7)
Project and property costs (21) (54)
Business transformation payments (7) (9)
================================================ ============== ==============
Total transformation costs (47) (70)
================================================ ============== ==============
Business transformation payments represent payments linked to
the achievement of key modernisation milestones in transforming the
network, as part of the Business Transformation Agreement 2010.
5. Specific items
Operating specific items include recurring and non-recurring
items that relate to the operations of the business but not to the
trading results on which performance is measured (operating profit
before and after transformation costs).
Non-operating specific items fall outside of the Group's
definition of operating profit and may be recurring in nature.
Half year Half year
ended ended
28 September 29 September
2014 2013
GBPm GBPm
============================================== ============== ==============
Operating specific items:
Royal Mail Pension Plan amendment (see note
9) - 1,350
Transaction-related costs - (26)
Employee Free Shares costs (91) (6)
Business-related costs (25) (9)
============================================== ============== ==============
Potential industrial diseases claims (7) 6
Historical employment costs - (15)
French competition authority investigation
costs (18) -
============================================== ============== ==============
Total operating specific items (116) 1,309
============================================== ============== ==============
Non-operating specific items:
Profit on disposal of property 27 17
Profit on disposal of associate undertaking - 2
Net pension interest 38 19
============================================== ============== ==============
Total non-operating specific items 65 38
============================================== ============== ==============
Total specific items before tax (51) 1,347
============================================== ============== ==============
On 9 October 2014, the Group announced that it had entered into
a settlement agreement with the French competition authority
(Autorité de la Concurrence) in respect of the alleged breaches of
antitrust laws by one of its subsidiaries, GLS France, during the
period before the end of 2010. The GBP18 million provision
comprises GBP12 million in respect of the current estimate of any
fine and GBP6 million in respect of the estimated associated costs.
Whilst a settlement has been agreed in principle, the French
competition authority is continuing its investigation and the
amount of any fine will not be known until the second half of
2015-16.
Half year Half year
ended ended
28 September 29 September
2014 2013
GBPm GBPm
===================================== ============= =============
Total tax effect of specific items 13 (295)
===================================== ============= =============
6. Net finance costs and net debt
The table below provides details of interest payable on loans
and finance lease obligations and interest received from
investments. This analysis excludes net pension interest which is a
non-cash item and is derived to comply with the requirements of the
relevant accounting standard IAS 19.
Half year Half year
ended ended
28 September 29 September
2014 2013
Net finance costs GBPm GBPm
================================================ ============== ==============
Unwinding of discount relating to industrial
diseases provision (1) (1)
Interest payable on financial liabilities (15) (51)
================================================ ============== ==============
HM Government loan facilities:
Loans and borrowings - (43)
Unused facility fees - (2)
Other facility fees - (1)
Syndicated bank loan facility:
Loans and borrowings (4) -
Unused facility fees (1) -
Other facility fees(1) (3) -
EUR500 million bond - 2.375% Senior Fixed Rate
Notes due July 2024 (2) -
Finance leases (5) (5)
================================================ ============== ==============
Finance costs (16) (52)
================================================ ============== ==============
Interest receivable on other financial assets 2 2
================================================ ============== ==============
Finance income 2 2
================================================ ============== ==============
Total net finance costs (excluding net pension
interest) (14) (50)
================================================ ============== ==============
(1) Other facility fees include GBP2 million arrangement fees
written-off upon repayment of GBP350 million of the term loans,
following the bond issue.
At 28 September At 30 March
2014 2014
Net debt Balance sheet category GBPm GBPm
================================== ========================= ================ ============
Interest-bearing loans and
borrowings Non-current liabilities (639) (600)
Obligations under finance
leases Non-current liabilities (209) (255)
Obligations under finance
leases Current liabilities (95) (87)
================================== ========================= ================ ============
(943) (942)
Cash and cash equivalents
and other financial assets:
Cash at bank and in hand Current assets 122 37
Client cash(2) Current assets 15 14
Cash equivalent investments(3) Current assets 216 316
Pension escrow investments
(RMSEPP) Non-current assets 20 20
================================== ========================= ================ ============
Total net debt (570) (555)
============================================================= ================ ============
(2) Client cash is cash collected from consignees by GLS on
behalf of its posting customers.
(3) Cash equivalent investments include short-term bank and
local authority deposits, money market fund investments and other
financial assets.
Net debt increased by GBP15 million at the half year ended 28
September 2014 and decreased by GBP351 million at the full year
ended 30 March 2014 as follows:
At 28 September At 30 March
2014 2014
GBPm GBPm
===================================================== =============== ===========
Net debt brought forward (555) (906)
Free cash flow 117 398
Dividends paid (133) -
Finance costs paid on refinancing of loan facilities - (45)
Increase in new finance lease obligations (non-cash) - (1)
Foreign currency exchange impact on cash and cash
equivalents (3) (1)
Foreign currency exchange impact on EUR500 million
bond- 2.375% Senior Fixed Rate Notes due July
2024 (non-cash) 4 -
===================================================== =============== ===========
Net debt carried forward (570) (555)
===================================================== =============== ===========
Below is a summary of loans and borrowings as at 28 September
2014, the respective average interest rates and facilities
available.
Basis
of interest Average
rate at maturity
28 September date Average
Further Average interest 2014 - of loan maturity
Loans committed Total rate of loan LIBOR drawn date of loan
and borrowings facility facility drawn down plus down facility
GBPm GBPm GBPm % % Year Year
=================== =============== ========== ========= ================ ============= ========= =============
Syndicated bank
loan
facilities
Term Loan A 250 - 250 1.4 0.90 2018 2018
Revolving loan
facilities - 800 800 - 0.75 - 2018
Bond issue
EUR500 million
2.375%
Senior Fixed Rate
Notes due July
2024 389 - 389 2.5 n/a 2024 2024
Total 639 800 1,439 2.0 2022 2020
=================== =============== ========== ========= ================ ============= ========= =============
The bond, issued in July 2014, is shown net of issue discount
and fees and at a closing spot rate of GBP0.78/EUR. The GBP300
million Term Loan B and GBP50 million of Term Loan A were repaid on
15 August 2014 through proceeds raised from the bond issue. The
bond is designated as a hedge of the net investment in GLS, which
has the Euro as its functional currency. During the six-month
period ended 28 September 2014, a gain of GBP4 million on the
retranslation of this borrowing was transferred to other
comprehensive income to offset the losses on translation of the net
investment in GLS. There is no hedge ineffectiveness in the period
ended 28 September 2014.
The blended interest rate on gross debt for the second half of
the year is forecast to be approximately three per cent.
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.
Under the previous HM Government facilities, the equivalent
blended interest rate was 8.8 per cent.
7. Taxation
Half year Half year
ended ended
28 September 29 September
2014 2013
GBPm GBPm
==============
Current income tax
Current UK income tax charge (1) -
Foreign tax charge (19) (16)
=================================================== ============== ==============
Current income tax charge (20) (16)
Amounts under provided in earlier years 1 (1)
=================================================== ============== ==============
Total current income tax (19) (17)
Deferred income tax
Relating to origination and reversal of temporary
differences (23) (342)
=================================================== ============== ==============
Current income tax charge reported in the
consolidated income statement (42) (359)
=================================================== ============== ==============
The tax charge in the income statement is calculated by applying
the forecast effective tax rates for the year to the reported half
year profit, specific items and profit after tax from
associates.
Effective tax rate
The effective tax rate for the half year ended 28 September 2014
was 25 per cent, comprising an effective rate on profit excluding
specific items of 25 per cent and an effective rate on specific
items of 25 per cent. The effective tax rate on profit excluding
specific items exceeds the UK statutory rate of 21 per cent due
to:
-- Group profits being subject to tax in a range of territories
with differing rates, some above the UK rate; and
-- Costs attracting no tax relief and some items where at
present it is not possible to recognise a deferred tax asset,
mainly within GLS companies (described further below).
The lower effective tax rate of 25 per cent on profit excluding
specific items in the half year ended 28 September 2014, compared
with the half year ended 29 September 2013 of 27 per cent, reflects
the reduction in the statutory rate of corporation tax from 23 per
cent to 21 per cent.
Current tax
GLS pays tax in a number of territories, with the majority of
profits in the half year ended 28 September 2014 earned in
territories where the tax rate is above the UK statutory tax rate.
A further significant factor is that certain subsidiaries, notably
GLS France, are not at this stage able to recognise tax credits on
losses made during this period. These contribute to GLS having a
higher effective tax rate for the period than the UK business.
Substantially all of the current tax due for the Group for the
period is in respect of GLS, although due to deductions for the
amortisation of goodwill, primarily in Germany, the current tax
rate for GLS was below its effective rate.
In the current period, taxable profits in the UK are expected to
be largely covered by a combination of losses and capital allowance
claims and a statutory deduction in respect of shares allocated
under the Employee Free Shares scheme.
Deferred tax
At 28 September 2014, deferred tax assets are recognised, to the
extent that they remain in existence at the balance sheet date, in
accordance with when they are expected to reverse. The increase in
the pension surplus due to actuarial factors gives rise to a
deferred tax charge of GBP75 million in equity.
In July 2013, UK statutory tax rates of 21 per cent for 2014-15
and 20 per cent for subsequent years were enacted. These condensed
consolidated financial statements therefore recognise a net UK
deferred tax liability at the future rate of 20 per cent.
8. Cash flow (including non-GAAP information on specific
items)
The Group uses the following analysis of free cash flow (a
non-IFRS measure) to monitor its cash performance. This measure
eliminates inflows/(outflows) between net debt items (see note 6)
and includes finance cash costs paid.
A reconciliation of 'net cash inflow before financing
activities' in the consolidated statement of cash flows to 'free
cash inflow' below, is included within this note.
Half year Half year
ended ended
28 September 29 September
2014 2013
GBPm GBPm
======================================================= ============== ==============
EBITDA before transformation costs 416 483
Trading working capital movements (152) (155)
Difference between pension costs charged in
operating profit and pension cash flows 69 36
======================================================= ============== ==============
Total Group ongoing pension costs in the income
statement 285 245
Total Group cash flows relating to ongoing
pension costs:
- RMPP defined benefit scheme employer contributions
(see note 9d) (192) (190)
- Defined contribution scheme employer contributions (19) (14)
RMSEPP deficit correction payments (see note
9d) (5) (5)
======================================================= ============== ==============
Total investment(1) (249) (212)
======================================================= ============== ==============
Voluntary redundancy(2) (68) (30)
Business transformation payments (7) (11)
One-off project and property costs (24) (55)
======================================================= ============== ==============
Total transformation investment - operating
expenditure (99) (96)
Total transformation investment - capital expenditure (25) (21)
======================================================= ============== ==============
Total transformation investment (124) (117)
Total non-transformation investment - capital
expenditure (125) (95)
======================================================= ============== ==============
Tax paid (6) (13)
Net finance costs paid (9) (23)
Dividend received from associate undertaking - 2
======================================================= ============== ==============
In-year trading cash inflow 69 118
Other working capital movements 16 50
Cash cost of operating specific items (2) (13)
Proceeds from disposal of property and associate
undertaking (non-operating specific items) 34 28
Free cash inflow 117 183
======================================================= ============== ==============
(1) Total investment is represented by several different line
items in the consolidated statement of cash flows.
(2) Voluntary redundancy payments comprise GBP39 million (H1
2013-14 GBPnil) in respect of the management reorganisation
programme, and GBP29 million (H1 2013-14 GBP30 million) in respect
of other voluntary redundancy payments. Within these amounts GBP11
million (H1 2013-14 GBP8 million) is in respect of the Royal Mail
Pension Plan (RMPP) defined benefit pension scheme top-up amounts
(see note 9d). This GBP11 million comprises GBP1 million (H1
2013-14 GBPnil) for the management reorganisation programme and
GBP10 million (H1 2013-14 GBP8 million) for other voluntary
redundancy.
Working capital movements
Half year Half year
ended ended
28 September 29 September
2014 2013
GBPm GBPm
================================================ ============== ==============
Other working capital movements:
Pay deal accrual for 2013-14 - 65
September 2014 payroll paid after 28 September
2014 45 -
Stamps used but purchased in previous periods (29) (15)
Total other working capital movements 16 50
Trading working capital movements (152) (155)
Total working capital movements (136) (105)
================================================ ============== ==============
Free cash flow reconciliation
The following analysis provides a reconciliation of 'net cash
inflow before financing activities' in the consolidated statement
of cash flows and free cash inflow.
Half year Half year
ended ended
28 September 29 September
2014 2013
GBPm GBPm
============================================= ============== ==============
Net cash inflow before financing activities 128 208
Finance costs paid (11) (25)
============================================= ============== ==============
Free cash inflow 117 183
============================================= ============== ==============
9. Employee benefits - pensions under IAS 19
Summary pension information
Half year Half year
ended ended
28 September 29 September
2014 2013
GBPm GBPm
Pension costs:
Ongoing:
UK defined benefit scheme (income statement
rates(1) 23.6%, 20.3%) (265) (231)
UK defined contribution scheme (17) (11)
=============================================== ============== ==============
Total UK ongoing pension costs (282) (242)
Total GLS defined contribution type scheme
costs (3) (3)
=============================================== ============== ==============
Total Group ongoing pension costs (285) (245)
=============================================== ============== ==============
Difference between ongoing income statement
charge and cash flows (cash flow rates 17.1%
for both years) (2) 74 41
=============================================== ============== ==============
Total Group pension cash flows relating to
ongoing pension costs (211) (204)
=============================================== ============== ==============
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 difference excludes the Royal Mail Senior Executives
Pension Plan (RMSEPP) deficit correction payments of GBP5 million
(H1 2013-14 GBP5 million). The employer contribution cash flow rate
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.
Pensions Reform
In June 2013, the Company began a consultation with the Royal
Mail Pension Plan (RMPP), Royal Mail section (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 (RM section)
Trustee to implement a Pensions Reform with effect from 1 April
2014.
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 was recognised in the
income statement of the Group for the comparative half year ended
29 September 2013.
The following disclosures relate to the major assumptions,
sensitivities, surplus and gains/losses recognised in the schemes
for the RMPP (RM section) and Royal Mail Senior Executives Pension
Plan (RMSEPP) defined benefit schemes, in the financial statements
of the Group:
a) Major long-term assumptions used for accounting (IAS 19)
purposes - RMPP (RM section) and RMSEPP
At 28 September At 30 March
2014 2014
======================================================== =================== ===========
Retail Price Index (RPI) 3.3% 3.4%
Consumer Price Index (CPI) 2.3% 2.4%
Discount rate
- nominal 4.2% 4.5%
- real (nominal less RPI)(3) 0.9% 1.1%
Rate of increase in pensionable salaries(4) RPI-0.1% RPI-0.1%
Rate of increase for deferred pensions - RMSEPP
members transferred from Section A or B of RMPP CPI CPI
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 CPI CPI
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 29/27 years
Life expectancy from age 60 - for a current 40/60
year old female RMPP (RM section) member 32/30 years 32/30 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.
The real discount rate has decreased to 0.9 per centfrom 1.1 per
cent at March 2014.
Demographic assumptions, for example mortality, remain unchanged
from those at March 2014.
The RMPP (RM section) liabilities are sensitive to changes in
key assumptions. The potential impact of the largest sensitivities
on the liabilities is as follows:
Potential
increase
in liabilities
Key assumption change GBPm
================================================= ===============
Additional one year of life expectancy 65
Increase in inflation rate (both RPI and CPI
simultaneously) of 0.1% p.a. 65
Decrease in discount rate of 0.1% p.a. 65
Increase in CPI assumption (assuming RPI remains
constant) of 0.1% p.a. 20
================================================== ===============
Changes opposite to those in the above table (e.g. an increase
in discount rate) would have the opposite effect on
liabilities.
b) Schemes' assets and liabilities
The combined schemes' assets and liabilities were as
follows:
At 28 September
2014 At 30 March 2014
GBPm GBPm
============================================= =============== ================
Fair value of schemes' assets 4,688 3,833
Present value of schemes' liabilities (2,605) (2,097)
============================================= =============== ================
Surplus in schemes (pre IFRIC 14 adjustment) 2,083 1,736
IFRIC 14 adjustment (15) (13)
============================================= =============== ================
Surplus in schemes 2,068 1,723
============================================= =============== ================
The surplus in RMSEPP is assumed to be available as a refund as
per IFRIC 14 and, as such, is shown net of taxation withheld.
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 IFRS.
Changes in the value of the defined benefit pension liabilities,
fair value of the schemes' assets and the net defined benefit
asset/(liability) are analysed as follows:
Defined benefit Defined benefit Net defined
asset liability benefit asset/(liability)
==================== ===================== =============================
At 28 At 30 At 28 At 30 At 28 At 30
September March September March September March
2014 2014 2014 2014 2014 2014
GBPm GBPm GBPm GBPm GBPm GBPm
======================================= =========== ======= =========== ======== ================= ==========
Opening net retirement benefit
surplus/(deficit) - pre IFRIC
14 adjustment 3,833 3,343 (2,097) (2,513) 1,736 830
======================================= =========== ======= =========== ======== ================= ==========
Amounts included in the income
statement:
Ongoing UK defined benefit
pension scheme costs (included
in people costs) - - (265) (448) (265) (448)
Royal Mail Pension Plan amendment - - - 1,350 - 1,350
Pension interest income/(cost)(5) 92 172 (54) (103) 38 69
======================================= =========== ======= =========== ======== ================= ==========
Total included in profit
before tax 92 172 (319) 799 (227) 971
======================================= =========== ======= =========== ======== ================= ==========
Amounts included in other
comprehensive income - remeasurement
gains/(losses):
Actuarial gain/(loss) arising
from:
Demographic assumptions - - - 4 - 4
Financial assumptions - - (131) (256) (131) (256)
Experience adjustment - - 6 2 6 2
Return on schemes' assets
(excluding interest income) 501 (203) - - 501 (203)
======================================= =========== ======= =========== ======== ================= ==========
Total actuarial gains/(losses)
on defined benefit schemes 501 (203) (125) (250) 376 (453)
======================================= =========== ======= =========== ======== ================= ==========
Other:
Employer contributions 208 407 - - 208 407
Employee contributions 68 136 (68) (136) - -
Benefits paid (16) (25) 16 25 - -
Curtailment costs - - (13) (20) (13) (20)
Movement in pension-related
accruals 2 3 1 (2) 3 1
======================================= =========== ======= =========== ======== ================= ==========
Total other movements 262 521 (64) (133) 198 388
======================================= =========== ======= =========== ======== ================= ==========
Closing net retirement benefit
surplus/(deficit) - pre IFRIC
14 adjustment 4,688 3,833 (2,605) (2,097) 2,083 1,736
======================================= =========== ======= =========== ======== ================= ==========
5 Pension interest income results from applying the schemes'
discount rate as at 30 March 2014 to the schemes' assets at that
date. Similarly, the pension interest cost results from applying
the schemes' discount rate as at 30 March 2014 to the schemes'
liabilities at that date.
The return on assets has been driven by the increase in market
value of gilts, which the RMPP (RM section) (the Plan) Trustee
holds as part of its liability hedging strategy. This strategy has
been agreed with the Company to support the commitment Royal Mail
has made to its employees, which is that, subject to certain
conditions, RMPP will remain open until at least March 2018.
The largest risks faced by the Plan are movements in interest
rates and inflation rates. To reduce the risk of movements in these
rates putting the Plan into a funding deficit, and the Company not
being able to maintain its March 2018 commitment, the Trustee aims
to hedge in advance the funding liabilities which will build up by
March 2018. The liabilities projected to accrue to March 2017 have
already been hedged - predominantly through investment in gilts and
derivatives (interest rate and inflation rate swaps) providing
exposure to gilts. The impact of the Plan's advance hedging of
projected funding liabilities is to increase volatility in the
pension surplus due to the return on the liability hedging assets
not being matched by an increase in the accrued liabilities. As the
accrued liabilities get closer to the projected liabilities that
have been hedged, this volatility will reduce.
The economic exposure of these interest rate and inflation rate
swaps held in a specific managed portfolio for this purpose at 28
September 2014 is GBP4.0 billion (30 March 2014 GBP3.8 billion).
There were no open equity derivatives within this portfolio at 28
September 2014.
Details of the investment strategy of the Trustee are described
on page 91 of the 2013-14 Annual Report.
c) Actuarial and accounting surplus (RMPP (RM section) and
RMSEPP)
The actuarial/cash funding surplus of GBP1,585 million at 30
September 2014 (31 March 2014 GBP1,422 million) allows the Company
to maintain its contributions at 17.1 per cent of pensionable pay.
As part of the Pensions Reform agreement the Company committed to
keep, subject to certain conditions, the RMPP (RM section) open to
future accrual at least until March 2018.
The funding liabilities have increased more than the accounting
liabilities since they are calculated by reference to gilt yields
which have fallen to a greater extent than corporate bond yields on
which the accounting liabilities are calculated. As a result, the
funding surplus has increased less than the accounting surplus.
d) Pension cash flows
The analysis below shows how the defined benefit scheme employer
contributions in note 9b reconcile with the defined benefit scheme
pension cash flows in note 8. Comparative figures are shown for 29
September 2013 and 30 March 2014 consistent with those shown in
notes 8 and 9b respectively.
Half year Half year
ended ended Year ended
28 September 29 September 30 March
2014 2013 2014
GBPm GBPm GBPm
=============================================== ============== ============== =============
Ongoing defined benefit (RMPP (RM section))
scheme employer contributions 192 190 380
Deficit correction payments (RMSEPP) 5 5 10
Pension top-up payments relating to
voluntary redundancy (RMPP (RM section))
- within transformation opex 11 8 17
Movement in Company contributions accrued
(RMPP (RM section)) - 1 -
=============================================== ============== ============== =============
Employer defined benefit scheme contributions
(note 9b) 208 204 407
=============================================== ============== ============== =============
10. Earnings per share (including non-GAAP information on
specific items)
Half year Half year
ended ended
28 September 29 September
2014 2013
===================== =====================
Excluding Excluding
specific Specific
Reported items Reported items
================================================ ========= ========== ========= ==========
Profit from continuing operations attributable
to equity holders of the parent (GBPm) 125 163 1,220 168
Weighted average number of shares issued
(million) 1,000 1,000 1,000 1,000
Basic earnings per share (pence) 12.5 16.3 122.0 16.8
Diluted earnings per share (pence) 12.5 16.3 122.0 16.8
================================================ ========= ========== ========= ==========
The diluted earnings per share for the half year ended 28
September 2014 is based on a weighted average number of shares of
1,000,986,276 to take account of the issue of potential ordinary
shares resulting from the Long Term Incentive Plan (LTIP) for
certain senior management.
The basic and diluted earnings per share for the comparative
half year ended 29 September 2013 assumed that one billion shares
in issue at the date of the Company's listing on the London Stock
Exchange (15 October 2013) existed for the whole of that reporting
period.
11. Related party transactions
During the period the Group entered into the following
transactions with related parties:
Half year Half year
ended ended
28 September 29 September
2014 2013
GBPm GBPm
============================================ ============== ==============
Sales/recharges to:
- RMPP (RM section) 3 2
Purchases/recharges from:
- Associate undertaking (Quadrant Catering
Limited) 9 12
============================================ ============== ==============
Amounts owed to:
- Associate undertaking (Quadrant Catering
Limited) 2 3
============================================ ============== ==============
In view of HM Government's retained stake in Royal Mail plc, the
Group has taken advantage of the exemption conferred by IAS 24
Related Party Disclosures, not to disclose transactions between the
Group and HM Government-related entities, including Post Office
Limited, and with HM Government itself.
UKPIL provides collection and delivery services to a significant
number of HM Government-related entities. An arrangement is also in
place whereby Post Office Limited charges the Group for the sale of
Royal Mail products e.g. stamps and philatelic items, through its
network of Post Office branches.
The sales to and purchases from related parties are made at
normal market prices. Balances outstanding at the half year are
unsecured, interest free and settlement is made in cash.
Key management compensation
The basis of remuneration of key management personnel currently
remains consistent with that disclosed in the 2013-14 Annual
Report.
12. Events after the reporting period
Shared-based payment
On 1 October 2014 Save As You Earn (SAYE) share options were
granted to employees who had applied for the awards under the rules
of the scheme. The fair value of the awards has been calculated on
the date of grant using the Black-Scholes option pricing model.
Awards will vest at the end of the three-year scheme, which will be
accounted for as an equity-settled scheme. An IFRS 2 charge will be
recognised in the second half year, based on the number of people
in the scheme, their average overall investment and other relevant
assumptions required by the Black-Scholes model.
Property disposals
Disposal of Paddington site
During the reporting period, the Group's former Paddington Mail
Centre site was reclassified from 'property, plant and equipment'
to 'property assets held for sale' on the Group balance sheet. On
14 October 2014, the Company announced that contracts had been
exchanged for the sale of this site to Great Western Developments
Limited for GBP111 million in cash. This property is part of Royal
Mail's 'London Development Portfolio', which comprises sites Royal
Mail has identified for potential sale or development in
London.
The purchaser intends to seek further planning permission which,
if granted, will require the purchaser to pay a further GBP20
million to Royal Mail Group Limited. In addition, if the purchaser
sells the site within two years of completion, it has agreed to pay
50 per cent of any net sale proceeds above the GBP111 million
purchase price if sold within the first year and 25 per cent if
sold within the second year.
A 10 per cent non-refundable deposit of GBP11.1 million was paid
upon exchange of contracts. The remaining proceeds will be payable
upon completion, which is expected to take place on 8 December
2014. Net cash proceeds of the sale of around GBP108 million will
be used for general corporate purposes. The site had a carrying
value as at 28 September 2014 of GBP1.6 million.
Disposal of Nine Elms site
On 11 November 2014, Royal Mail initiated a process to evaluate
the options for its former South London Mail Centre site in Nine
Elms, Vauxhall. A decision on how the Company will proceed will be
made following a comprehensive review of all the options and the
submissions received from interested parties. Royal Mail will seek
to optimise value from the site and will consider all options to
achieve this including a sale of the site or developing it in
conjunction with a partner.
The site currently houses a Delivery Office which is planned to
move to a new site in 2017, with arrangements put in place for
Royal Mail to have continued use of the existing facility in the
interim.
Interim dividend
The Board has declared and approved an interim dividend of 6.7
pence per share (H1 2013-14 not applicable). The dividend amounts
to GBP67 million (H1 2013-14 not applicable) and will be paid on 14
January 2015 to shareholders on the register on 28 November 2014.
The ex-dividend date is 27 November 2014.
Statement of Directors' responsibilities in relation to the
Financial Report for the half year ended 28 September 2014
The Directors confirm that to the best of their knowledge:
-- the condensed consolidated financial statements have been
prepared in accordance with IAS 34 'Interim Financial Reporting',
as adopted by the European Union;
-- the Financial Report for the half year ended 28 September 2014 includes a fair review of:
-- the important events during the first six months of the
financial year, and their impact on the condensed set of financial
statements as required by DTR 4.2.7R(1);
-- the principal risks and uncertainties for the remaining six
months of the financial year, as required by DTR 4.2.7R(2); and
-- the related party transactions that have taken place in the
first six months of the financial year and any changes therein, as
required by DTR 4.2.8R.
A list of current Directors is maintained on the Company's
website:
http://www.royalmailgroup.com/about-us/management-and-committees/royal-mail-plc-board
By Order of the Board
Moya Greene Matthew Lester
Chief Executive Officer Chief Finance Officer
19 November 2014
Independent review report to Royal Mail plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the Half Year Financial Report for the
half year ended 28 September 2014 which comprises the consolidated
income statement, consolidated statement of comprehensive income,
consolidated statement of changes in equity, consolidated balance
sheet, statement of consolidated cash flows and the related notes 1
to 12. We have read the other information contained in the Half
Year Financial Report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
(UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The Half Year Financial Report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the Half Year Financial Report in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRS as adopted by the
European Union. The condensed set of financial statements included
in this Half Year Financial Report has been prepared in accordance
with IAS 34, 'Interim Financial Reporting', as adopted by the
European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the Half Year
Financial Report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the Half Year Financial Report for the half year ended 28
September 2014 is not prepared, in all material respects, in
accordance with IAS 34 as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Ernst & Young LLP
London
19 November 2014
Shareholder information
Registered Office
Royal Mail plc
100 Victoria Embankment
London EC4Y 0HQ
Registered in England and Wales
Company number 08680755
Registrars
Equiniti
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA
www.shareview.co.uk
Tel: 0871 384 2656 (from outside the UK: +44 (0)121 415
7086)
Calls are charged by the service provider at 8 pence per minute
plus network extras. Lines are open 8.30am to 5.30pm UK time,
Monday to Friday.
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, 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 Services',
where full details of the shareholder portfolio service are
provided. When registering for this service, you will need to have
your 11-digit shareholder reference number to hand.
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'.
Corporate website
Additional corporate and other information can be accessed on
www.royalmailgroup.com. Information made available on the website
is not intended to be, and should not be regarded as being, part of
this Financial Report.
The maintenance and integrity of the Group's website is the
responsibility of the Directors; the work carried out by the
auditor does not involve consideration of these matters and
accordingly, the auditor accepts no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
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. Financial Report for the half year
ended 28 September 2014 (c) Royal Mail Group Limited 2014. All
rights reserved.
Financial Calendar
2014
27 November Interim dividend: ex-dividend date
28 November Interim dividend: record date
2015
14 January Interim dividend: payment date
22 January Trading Update
28 March Financial year end
May Full Year Results
May/June Annual Report and Financial Statements 2014-15
July Annual General Meeting
Dividend Re-Investment Plan
The Royal Mail Dividend Re-Investment Plan (DRIP) is available
to shareholders who would prefer to invest their dividends in the
shares of the Company. For those shareholders electing to
participate in the DRIP the last date for receipt of applications
is 12 December 2014. Further information is available on the
Company's website:
http://www.royalmailgroup.com/investors/shareholder-communications/dividend-re-investment-plan
Results presentation
A results presentation for analysts and institutional investors
will be held in London at 9.30am on 19 November 2014 and a
simultaneous webcast will be available at
www.royalmailgroup.com/results
Contact information
Investor Relations:
Catherine Nash
Phone: 020 7449 8183
Email: investorrelations@royalmail.com
Media Relations:
Shane O'Riordain
Phone: 020 7449 8105
Email: shane.o'riordain@royalmail.com
Mish Tullar
Phone: 020 7449 8247
Email: mish.tullar@royalmail.com
Beth Longcroft
Phone: 020 7449 8241
Email: beth.longcroft@royalmail.com
Royal Mail press office out of hours: 020 3338 1007
Forward looking statements
This document contains certain forward looking statements
concerning the Group's business, financial condition, results of
operations and certain of the Group's plans, objectives,
assumptions, projections, expectations or beliefs with respect to
these items. Forward looking statements are sometimes, but not
always, identified by their use of a date in the future or such
words as 'anticipates', 'aims', 'due', 'could', 'may', 'will',
'should', 'expects', 'believes', 'intends', 'plans', 'potential',
'targets', 'goal' or 'estimates'.
Forward looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the Group's actual
financial condition, performance and results to differ materially
from the plans, goals, objectives and expectations set out in the
forward looking statements included in this document. Accordingly,
readers are cautioned not to place undue reliance on forward
looking statements.
By their nature, forward looking statements relate to events and
depend on circumstances that will occur in the future and are
inherently unpredictable. Such forward looking statements should,
therefore, be considered in light of various important factors that
could cause actual results and developments to differ materially
from those expressed or implied by these forward looking
statements. These factors include, among other things: changes in
the economies and markets in which the Group operates; changes in
the regulatory regime within which the Group operates; changes in
interest and exchange rates; the impact of competitive products and
pricing; the occurrence of major operational problems; the loss of
major customers; undertakings and guarantees relating to pension
funds; contingent liabilities; the impact of legal or other
proceedings against, or which otherwise affect, the Group; and
risks associated with the Group's overseas operations.
All written or verbal forward looking statements, made in this
document or made subsequently, which are attributable to the Group
or any persons acting on its behalf are expressly qualified in
their entirety by the factors referred to above. No assurance can
be given that the forward looking statements in this document will
be realised; actual events or results may differ materially as a
result of risks and uncertainties facing the Group. Subject to
compliance with applicable law and regulation, the Company does not
intend to update the forward looking statements in this document to
reflect events or circumstances after the date of this document,
and does not undertake any obligation to do so.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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