TIDMRMG
RNS Number : 8068U
Royal Mail PLC
17 July 2018
17 July 2018
ROYAL MAIL plc
TRADING UPDATE FOR THE THREE MONTHSED 24 JUNE 2018
Royal Mail plc (RMG.L) today issued a trading update covering
the three months ended 24 June 2018.
Rico Back, Group Chief Executive Officer, Royal Mail plc,
said:
"Overall, trading in the first three months of our 2018-19
financial year was in line with our expectations.
"Our performance in UK letters and parcels was as anticipated
and GLS continued to perform strongly. In the UK, we are making
progress with the trials and initiatives under our new Pensions,
Pay and Pipeline agreement. We, together with the CWU, are working
with Government to enable the introduction of a Collective Defined
Contribution scheme.
"Our outlook and other guidance are unchanged from that set out
in our financial report for the full year ended 25 March 2018."
Trading performance for the three months ended 24 June 2018
Group Underlying
change(1)
Revenue 2%
UKPIL Underlying
change(1)
Revenue (1%)
-- UKPIL revenue was down 1%, with parcel revenue up 6% and total letter revenue down 7%.
-- Excluding the benefit of elections in the prior period, UKPIL
revenue was flat and total letter revenue was down around 5%.
Parcels Underlying
change(1)
Volumes 7%
Revenue 6%
-- Parcel volumes were up 7%, largely driven by higher volumes
from retailer account customers. Royal Mail Tracked 24(R) /48(R)
and Tracked Returns(R) services saw volume growth of 24%.
-- Our international parcels business continued to benefit from
our cross-border traffic initiative which accounted for around 2
percentage points of total parcel volume growth and around 1
percentage point of parcel revenue growth in the period. Outside of
this initiative, we saw an increase in lower AUR import volumes.
UPU price rises, effective from January 2018, accounted for around
1 percentage point of parcel revenue growth in the period.
-- Parcelforce Worldwide volumes were up 4% benefitting from
better than expected volumes from contract customers. However, due
to a customer withdrawing from the market, we do not expect this
level of performance to continue throughout the remainder of the
year.
-- Total parcel revenue was up 6%, reflecting trends in the domestic traffic mix.
Letters Underlying
change(1)
Addressed letter volumes (6%)
Revenue (7%)
-- Addressed letter volumes (excluding political parties'
election mailings) decreased by 6%, in line with our
expectations.
-- Some customers remain uncertain about the application of GDPR
which came into effect on 25 May 2018. We are monitoring any
potential impact closely. We continue to work with customers to
find solutions for their marketing mail needs.
-- Total letter revenue (including marketing mail) was down 7%.
Excluding the benefit of elections in the prior period, total
letter revenue was down around 5%.
GLS Underlying
change(1)
Volumes 10%
Revenue 11%
-- GLS continued to perform strongly, with volumes up 10% and
revenue up 11%. Excluding the impact of working days across Europe,
volumes were up 9% and revenue was up 10%.
-- Revenue growth was achieved in almost all markets, with
continued strong growth in Italy, Denmark and Spain. Poland, where
we have opened three new depots in response to demand, and our
other Eastern European businesses all saw double digit revenue
growth in the period.
-- In the US, work continues on the integration of GSO and
Postal Express and we have seen growth in interstate traffic.
-- Redyser, acquired in February 2018, is being consolidated
within our existing Spanish operations.
Recent developments
On 1 June 2018, Rico Back assumed the role of Group CEO of the
Company and joined the Board. Sue Whalley was appointed CEO of UK
Post and Parcels and joined the Board on the same date.
Ofcom announced it was commencing an investigation into our
Quality of Service performance for the 2017-18 financial year on 1
June 2018. We welcome the opportunity to continue discussions with
Ofcom about a number of factors that impacted our Quality of
Service performance, as well as the actions we have taken to
address those challenges. Were these factors taken into account by
Ofcom, we estimate that we would have achieved our First Class and
exceeded our Second Class Quality of Service targets in 2017-18. It
will be for Ofcom to decide. We are participating fully in the
investigation.
We are making progress on the trials and initiatives covered by
the new Pensions, Pay and Pipeline agreement. We have launched our
01:30 later acceptance time service for parcels from our larger
account customers. Trials of different delivery methods have
started at eight sites. Trials using tools and technology to better
align resource to workload are in train. Together with the CWU, we
continue to engage with Government to make the necessary regulatory
and legislative changes to enable a Collective Defined Contribution
(CDC) scheme to be established. We welcome the recent report from
the Work and Pensions Select Committee, which has recommended that
the Government introduce CDC pensions in the UK.
Financial reporting for 2018-19
The 2018-19 financial year is a 53-week year ending 31 March. To
provide meaningful comparison with 2017-18, adjusted Group and
UKPIL revenue, costs (including operating costs, but not
transformation costs) and operating profit for 2018-19 will also be
presented on a 52-week basis to exclude the revenue earned during
the 53(rd) week but only the incremental operating costs associated
with that revenue. The Group's balance sheet and cash flow
statement will be presented on a 53-week basis. GLS reports on the
basis of a calendar year ending 31 March.
The frontline pay award of GBP101m was paid in the first quarter
of 2018-19. The GBP20m overage payment in respect of the sale of
the Paddington Mail Centre in 2014 was received in April 2018. As a
result of the timing of payments, we expect an additional outflow
in 'trading working capital' in relation to VAT payments and in
'other working capital' related to monthly paid staff in
2018-19.
Current trading and outlook
Overall, our trading performance in the first three months of
the financial year was in line with our expectations.
We maintain our outlook for addressed letter volume declines of
between 4-6% per annum (excluding political parties' election
mailings). Due to the potential impact of GDPR and, or, if business
uncertainty persists, we still expect to be at the higher end of
the range of decline for 2018-19 and may fall outside the range in
a period. In GLS, we continue to expect a good performance in
2018-19, although margins may be impacted by continuing labour
market pressures in many of its markets.
Our outlook and other guidance are also unchanged from that set
out in our financial report for the full year ended 25 March
2018.
The results for the half year ending 23 September 2018 are
expected to be announced on Thursday 15 November 2018.
Note:
(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
(Redyser 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 the impact of Redyser in
GLS. For comparison purposes all underlying adjustments are made to
the prior period.
In the first three months of 2018-19 there were 74.8 working
days in UKPIL (3M 2017-18: 74.8). In the first half of 2018-19
there will be 152.0 working days in UKPIL (H1 2017-18: 152.0 days).
The 2018-19 financial year is a 53-week year (310 working days).
The 53(rd) week occurs in the last quarter. For 2018-19 the
estimated full year 52-week revenue and profit impact of working
days in UKPIL is a decrease of around GBP15m (2018-19: 304.5 days;
2017-18: 305.0 days).
Enquiries
Investor Relations
Catherine Nash
Phone: 020 7449 8183
Email: investorrelations@royalmail.com
Media Relations
Rebecca Hammond
Phone: 07841 103 824
Email: rebecca.hammond@royalmail.com
Royal Mail press office out of hours: 020 3338 1007
Company Secretary
Kulbinder Dosanjh
Phone: 020 7449 8133
Email: cosec@royalmail.com
LEI 213800TCZZU84G8Z2M70
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 news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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