TIDMRMG
RNS Number : 3991P
Royal Mail PLC
17 November 2016
17 November 2016
Royal Mail plc
Results for the half year ended 25 September 2016
To view the Financial Report for the half year ended 25
September 2016 please click here:
http://www.rns-pdf.londonstockexchange.com/rns/3991P_-2016-11-16.pdf
Royal Mail plc (RMG.L) today announced its results for the half
year ended 25 September 2016.
Moya Greene, Chief Executive Officer, commenting on the results,
said:
"Our performance was broadly in line with our expectations.
Group revenue increased by one per cent on an underlying basis,
driven by a good performance from GLS, our continental European
parcels business. We delivered UK parcel volume and revenue growth
including new contract wins. Addressed letter volume decline was
within our forecast range. The recent acquisition of ASM in Spain
and GSO in California supports GLS' strategy of targeted and
focused geographic expansion.
"We have increased our cost avoidance target from GBP500 million
to GBP600 million of annualised costs cumulative over the three
financial years ending 2017-18. We are targeting to reduce
underlying UKPIL operating costs before transformation by up to one
per cent in 2016-17, depending on the absorbable rate of change
within our organisation. We are past the peak of investment. Net
cash investment is expected to be no more than GBP500 million per
annum, compared with an average of GBP615 million over the past
three years.
"As always, our performance for the full year will be dependent
on the important Christmas period. Extensive planning, which began
in the spring, will help us to manage our busiest time. This
includes the recruitment of over 19,000 temporary staff and opening
nine temporary parcel sort centres."
Group financial highlights
26 weeks ended 26 weeks ended
25 September 27 September Underlying
Adjusted(1) results (GBPm) 2016 2015 change(2)
--------------------------------------- -------------- -------------- ----------
Revenue 4,583 4,395 1%
Operating profit before transformation
costs 320 342 (5%)
Operating profit after transformation
costs 262 248
Margin 5.7% 5.6% 40bps
Profit before tax 252 240
Earnings per share 19.2p 18.1p
--------------------------------------- -------------- -------------- ----------
Reported(3) results (GBPm)
--------------------------------------- -------------- -------------- ----------
Operating profit before transformation
costs 206 208
Operating profit after transformation
costs 148 114
Profit before tax (continuing
operations) 110 116
Earnings per share (continuing
operations) 8.6p 8.8p
In-year trading cash flow 116 1 115
Net debt(4) (452) (369)
Interim dividend per share 7.4p 7.0p 0.4p
--------------------------------------- -------------- -------------- ----------
Business performance
Adjusted operating profit before
Revenue transformation costs
--------- ------------------------------------------ ----------------------------------
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended
25 September 27 September Underlying 25 September 27 September
(GBPm) 2016 2015 change(2) 2016 2015
--------- -------------- -------------- ---------- ---------------- ----------------
UKPIL(5) 3,641 3,654 (1%) 247 290
GLS 942 741 9% 73 52
Group 4,583 4,395 1% 320 342
Group financial performance
-- Revenue was up one per cent on an underlying basis, with good growth
in GLS offsetting the decline in UKPIL revenue.
-- Adjusted operating profit before transformation costs was GBP320 million.
-- Adjusted operating profit margin after transformation costs increased
by 40 basis points.
-- In-year trading cash flow increased to GBP116 million, reflecting
more efficient investment spend.
-- In line with our stated interim dividend policy, the Board has declared
a dividend of 7.4 pence per share for the half year ended 25 September
2016.
Business performance
-- UKPIL revenue declined one per cent on an underlying basis. Parcel
volumes were up two per cent, driven by growth in Royal Mail account
and import parcels. Parcel revenue increased by three per cent.
-- Addressed letter volumes declined by four per cent on an underlying
basis within our forecast range of a 4-6 per cent decline per annum.
Total letter revenue declined by three per cent. Marketing mail revenue
was down eight per cent. Uncertainty leading up to and after the EU
Referendum led to a reduction in overall UK marketing activity.
-- On an underlying basis, total adjusted UKPIL operating costs before
transformation costs were flat.
-- UKPIL collections, processing and delivery productivity increased
by 2.2 per cent, within our target range of a 2.0-3.0 per cent improvement
per annum.
-- GLS continued to perform well over the period, taking into account
the impact of public holidays across Europe. Volumes were up 10 per
cent on an underlying basis, benefiting from strong growth in export
volumes. Revenue increased by nine per cent, with growth in almost
all markets. Operating profit was up 25 per cent on an underlying
basis.
-- GLS recently acquired ASM in Spain and Golden State Overnight in California,
supporting its strategy of targeted and focused geographic expansion.
Outlook summary
-- The key drivers for the UK letters and parcels markets remain unchanged.
Letter volumes, particularly advertising letter volumes, are linked
to movements in GDP and we are monitoring developments in the UK economy
closely.
-- We are now targeting to avoid around GBP225 million of UKPIL operating
costs in 2016-17 and around GBP600 million of annualised operating
costs cumulative over the three financial years ending 2017-18.
-- We are now targeting to reduce underlying UKPIL operating costs before
transformation costs by up to one per cent in 2016-17. The outcome
of our cost performance will be dependent on the absorbable rate of
change within our organisation.
-- Transformation costs are now expected to be between GBP130-160 million
for 2016-17.
-- GLS will remain a focus for investment to help drive growth.
-- We are reprofiling our investment spend, which will be lower overall
and weighted to growth. We now expect net cash investment to be no
more than GBP500 million per annum going forward, compared with an
average over the last three financial years of GBP615 million.
-- We remain very focused on improving our products and services, controlling
costs, improving the efficiency of our spending and investing in new
areas to support growth. The outcome for the full year will be dependent
on the important Christmas period.
(1) Adjusted results are a non-IFRS measure and exclude specific items and
the pension charge to cash difference adjustment. The commentary in
this review, unless specified otherwise, focuses on the operating results
on an adjusted 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 results of the Group.
A reconciliation between adjusted and reported numbers is included on
page 14 of the Financial Report.
(2) All movements are on an underlying basis unless otherwise stated. Underlying
change is calculated after adjusting for working days in UKPIL, movements
in foreign exchange and ASM in GLS and other one-off items that distort
the Group's underlying performance. For volumes, underlying movements
are adjusted for working days and exclude the impact of political parties'
election mailings in UKPIL and ASM in GLS.
(3) Reported - prepared in accordance with International Financial Reporting
Standards (IFRS).
(4) Net debt is calculated by netting the value of financial liabilities
(excluding derivatives) against cash and other liquid assets.
(5) Following the Group's acquisition of the remaining 49 per cent shareholding
in Romec Limited (Romec) at the beginning of 2016-17, Romec has been
consolidated into the UKPIL segment (previously the Group's 51 per cent
shareholding was reported within the 'Other' segment). The 2015-16 UKPIL
results have been re-presented to reflect this change.
For further information, please contact:
Investor Relations:
Catherine Nash
Phone: 020 7449 8183
Email: investorrelations@royalmail.com
Dilani Paranavithana
Phone: 07436 546853
Email: dilani.paranavithana@royalmail.com
Media Relations:
Beth Longcroft
Phone: 07435 768549
Email: beth.longcroft@royalmail.com
Registered Office:
Royal Mail plc
100 Victoria Embankment
London EC4Y 0HQ
Registered in England and Wales
Company number 08680755
A trading update covering the nine months ending 25 December
2016 is expected to be issued on 19 January 2017.
Results presentation:
A results presentation for analysts and institutional investors
will be held in London at 9:30am on 17 November 2016 and a
simultaneous webcast will be available at
www.royalmailgroup.com/results.
Disclaimer
This document contains certain forward-looking statements
concerning the Group's business, financial condition, results of
operations and certain of the Group's plans, objectives,
assumptions, projections, expectations or beliefs with respect to
these items. Forward-looking statements are sometimes, but not
always, identified by their use of a date in the future or such
words as 'anticipates', 'aims', 'due', 'could', 'may', 'will',
'should', 'expects', 'believes', 'intends', 'plans', 'potential',
'targets', 'goal' or 'estimates'.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the Group's actual
financial condition, performance and results to differ materially
from the plans, goals, objectives and expectations set out in the
forward-looking statements included in this document. Accordingly,
readers are cautioned not to place undue reliance on
forward-looking statements.
By their nature, forward-looking statements relate to events and
depend on circumstances that will occur in the future and are
inherently unpredictable. Such forward-looking statements should,
therefore, be considered in light of various important factors that
could cause actual results and developments to differ materially
from those expressed or implied by these forward-looking
statements. These factors include, among other things: changes in
the economies and markets in which the Group operates; changes in
the regulatory regime within which the Group operates; changes in
interest and exchange rates; the impact of competitive products and
pricing; the occurrence of major operational problems; the loss of
major customers; undertakings and guarantees relating to pension
funds; contingent liabilities; the impact of legal or other
proceedings against, or which otherwise affect, the Group; and
risks associated with the Group's overseas operations.
All written or verbal forward-looking statements, made in this
document or made subsequently, which are attributable to the Group
or any persons acting on their behalf are expressly qualified in
their entirety by the factors referred to above. No assurance can
be given that the forward-looking statements in this document will
be realised; actual events or results may differ materially as a
result of risks and uncertainties facing the Group. Subject to
compliance with applicable law and regulation, the Group does not
intend to update the forward-looking statements in this document to
reflect events or circumstances after the date of this document,
and does not undertake any obligation to do so.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BFBLTMBIBBJF
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