TIDMRMG
RNS Number : 3093L
Royal Mail PLC
18 July 2017
18 July 2017
ROYAL MAIL plc
TRADING UPDATE FOR THE THREE MONTHSED 25 JUNE 2017
Royal Mail plc (RMG.L) today issued a trading update covering
the three months ended 25 June 2017.
Moya Greene, Chief Executive Officer, Royal Mail plc, said:
"Overall, we have had a good start to our financial year. Group
revenue was up 1%, driven by another strong performance in GLS.
This more than offset a 1% decline in UKPIL revenue.
"GLS continues to be a driving force for the Group. Its ongoing,
focussed international expansion is increasing our geographic
diversification, scale and reach. In UK parcels, our quality of
service and improved product offerings are driving high levels of
customer satisfaction and attracting new customers and higher
volumes. Our performance in letters was better than we expected,
despite continued business uncertainty in the UK.
"We remain on track to deliver our cost avoidance and net cash
investment targets for the full year."
Trading performance for the three months ended 25 June 2017
Group Underlying
change(1)
Revenue 1%
UKPIL Underlying
change(1)
Revenue (1%)
-- UKPIL revenue was down 1%, with parcel revenue up 3% and total letter revenue down 4%.
Parcels Underlying
change(1)
Volumes 5%
Revenue 3%
-- Parcel volumes were up 5%, with growth driven by a good
performance in Royal Mail account parcels where we have won new
contracts and gained more traffic from existing customers. In
particular, Royal Mail Tracked services saw strong volume growth of
39%.
-- Our international parcels business benefitted from a new
initiative to attract cross-border traffic(3) from Asia into
Europe. This accounted for nearly 2 percentage points of the volume
growth and 1 percentage point of the revenue growth in the period.
International volume trends continued to reflect the relative
weakness in Sterling, with slowing imports (outside of our
cross-border initiative) and improving contract export volumes,
compared with the prior period.
-- Parcelforce Worldwide also saw an improvement in recent
trends with volumes up nearly 1% in the period.
-- Total parcel revenue was up 3%, reflecting the mix within the
domestic and international traffic channels.
Letters Underlying
change(1)
Addressed letter volumes (6%)
Revenue (4%)
-- Addressed letter volumes decreased by 6% (excluding the
impact of political parties' election mailings). Volumes benefitted
from certain mailings associated with the 2017 General Election,
which had around a 1 percentage point positive impact on the
movement.
-- Total letter revenue was down 4%, benefitting from higher
than expected revenue associated with the UK political parties'
2017 General Election mailings.
-- We do not report marketing mail revenue on a quarterly basis
due to the timing of the required survey data. However, at this
early stage in the year, the revenue trend in our main advertising
products (retail addressed, unaddressed and access advertising
letters) remains the same as last year.
GLS Underlying
change(1)
Volumes 5%
Revenue 6%
-- GLS continued to perform strongly. Revenue growth was
achieved in all its main markets, with strong growth in many
markets, including Italy.
-- Including the impact of the recent acquisitions, GLS revenue
was up around 18% on a constant currency basis in the period.
-- Performance in the period reflects the timing of Easter and
other public holidays across Europe. Excluding this impact,
underlying volume and revenue movements would have been around 4
percentage points higher. This impact is expected to be around 2
percentage points for the full year.
-- ASM, acquired in June 2016, is performing well ahead of
expectations and is being integrated into GLS Spain.
-- In the United States, GSO, which we acquired 9 months ago, is
performing in line with expectations. On 6 April 2017, we announced
the acquisition of Postal Express, an overnight parcel delivery
company operating throughout the Pacific Northwest of the United
States, for $13.3m. Postal Express will be integrated into GSO.
Recent developments
On 8 May 2017, following Trustee approval, the Company confirmed
that the Royal Mail Pension Plan (the Plan), in its current form,
will close to future accrual on 31 March 2018.
We have had extensive talks with our unions, Unite/CMA and the
CWU, on proposals for future retirement benefits for Plan members.
We were pleased to announce on 14 July that we have improved our
proposal and are now offering Plan members a choice between a
Defined Benefit cash balance scheme and a Defined Contribution
scheme. Both schemes will be established as new sections of the
Plan. We are also proposing improvements to the Royal Mail Defined
Contribution Plan for current and future members. We expect that
the overall cost of the new proposal will be no more than the
current cash cost of annual pension contributions of around
GBP400m. We believe that the risk to the Company of the proposed
Defined Benefit cash balance scheme would be materially lower than
under the current Plan. Our managerial union Unite/CMA believes
that this is the best position achievable and is positive in
keeping the defined benefit scheme open, and is planning to hold a
consultative ballot of its members on the proposal. We continue to
discuss future pension arrangements with the CWU.
On 15 May 2017, it was announced that Stuart Simpson, Director
of Group Finance, will be appointed Chief Finance Officer from the
conclusion of the Company's Annual General Meeting on 20 July
2017.
On 2 June 2017, it was announced that conditional contracts had
been exchanged for the sale of two of the seven plots at Royal
Mail's Nine Elms site for a total consideration of GBP101m, GBP3m
of which was received on exchange of contracts by way of deposit.
The proceeds of the sale will be used for general corporate
purposes, with around GBP30m committed to be re-invested into the
Nine Elms site for infrastructure works.
Current trading and outlook
Overall, our trading performance in the first three months of
the financial year was good. GLS continues to perform strongly and
is driving forward its international expansion. UK parcels
performed well underlining our position as the UK's leading
delivery company. We continue to monitor the impact of overall
business uncertainty in the UK on letter volumes.
Our cost avoidance programme is on track to deliver around
GBP190m of UKPIL operating costs avoided in 2017-18. We expect that
our total net cash investment will be around GBP450m this year.
Our outlook for UK letters and parcels trends and other guidance
is unchanged from that set out in our financial results for the
full year ended 26 March 2017.
The results for the half year ending 24 September 2017 are
expected to be announced on Thursday 16 November 2017.
Notes:
1. All movements are on an underlying basis unless otherwise
stated. Underlying revenue change is calculated after adjusting for
working days in UKPIL, movements in foreign exchange, acquisitions,
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 exclude ASM, GSO and Postal Express in GLS.
In the first three months of 2017-18 there were 74.8 working days
in UKPIL (3M 2016-17 75.6). We estimate that the impact of working
days in UKPIL will be around negative GBP15m for the full year
(2017-18 305; 2016-17 305.6). For comparison purposes all
underlying adjustments are made to the prior period.
2. Movements in Sterling exchange rates impact UKPIL import
revenue and terminal dues (in distribution and conveyance costs)
associated with exports. In the three months, weaker Sterling
resulted in a positive impact of GBP4m on UKPIL revenue and a GBP5m
increase in terminal dues. Underlying change is adjusted for this
impact in the period.
3. Cross-border traffic arrives into our Heathrow processing
plant from Asia for customs clearance and onward transit into
mainland Europe. We are responsible for paying the associated
terminal dues to the local postal operator.
Enquiries:
Investor Relations
Catherine Nash
Phone: 020 7449 8183
Email: investorrelations@royalmail.com
Sabreen Flores
Phone: 07841 466 378
Email: investorrelations@royalmail.com
Media Relations
Peter Tilley
Phone: 07841 803 316
Email: peter.tilley@royalmail.com
Royal Mail press office out of hours: 020 3338 1007
Company Secretary
Kulbinder Dosanjh
Phone: 020 7449 8133
Email: cosec@royalmail.com
Disclaimer
Figures presented in this trading update are not audited. This
trading update contains certain statements that constitute
"forward-looking statements". Such forward-looking statements
involve known and unknown risks, uncertainties and other factors,
which may cause the actual results, performance or achievements of
the Group or industry results to be materially different from any
future results, performance or achievements expressed or implied by
such forward-looking statements. Persons receiving this release
should not place undue reliance on any forward-looking
statements.
The Group disclaims any obligation or undertaking to update or
revise any forward-looking statements contained in this document to
reflect any change in its expectations or any change in events,
conditions or circumstances on which such statements are based
unless required to do so by applicable law, the Prospectus Rules,
the Listing Rules or the Disclosure Guidance and Transparency Rules
of the Financial Conduct Authority.
About Royal Mail plc
Royal Mail plc is the parent company of Royal Mail Group
Limited, the leading provider of postal and delivery services in
the UK and the UK's designated universal postal service provider.
UK Parcels, International & Letters (UKPIL) comprises the
company's UK and international parcels and letters delivery
businesses operating under the "Royal Mail" and "Parcelforce
Worldwide" brands. Through the Royal Mail Core Network, the company
delivers a one-price-goes-anywhere service on a range of parcels
and letters products. Royal Mail has the capability to deliver to
more than 30 million addresses in the UK, six days a week
(excluding UK public holidays). Parcelforce Worldwide operates a
separate UK network which collects and delivers express parcels.
Royal Mail also owns General Logistics Systems (GLS) which operates
one of the largest ground-based, deferred parcel delivery networks
in Europe.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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