TIDMRMG
RNS Number : 8435H
Royal Mail PLC
27 March 2020
Royal Mail plc
(Incorporated in England and Wales)
Company Number: 8680755
LSE Share Code: RMG
ISIN: GB00BDVZYZ77
LEI: 213800TCZZU84G8Z2M70
This announcement contains inside information for the purpose of
Article 7 of the Market Abuse Regulation (EU) No 596/2014.
COVID-19 UPDATE
Royal Mail plc (RMG.L) today issued an update on the impact of
COVID-19 on its UK and international businesses.
Summary:
-- Continue to expect FY2019-20 Group adjusted operating profit
(before IFRS 16) of GBP300 million - GBP340 million.
-- Strong liquidity (currently above GBP800 million in cash plus
GBP925 million RCF) and limited financial debt (pre-IFRS16).
-- Significant uncertainty going forward, but UKPIL expected to
be materially loss making in FY2020-21 and GLS profitability
significantly reduced.
-- To preserve cash the Board intends not to propose a final dividend.
-- Previously highlighted delays to our UKPIL transformation
plan, when combined with uncertainty around the length and impact
of the COVID-19 pandemic, mean it will now take longer to achieve
the targets laid out in our Journey 2024 plan.
-- Board has suspended guidance for 2020-21 and beyond.
Rico Back, Group Chief Executive Officer, Royal Mail plc, said:
"We are focused on protecting our people, company and the
communities we serve during this unprecedented crisis. We are
putting the health and wellbeing of colleagues and customers first.
At the same time, we are delivering the parcels and letters that
are a lifeline for those who cannot leave their homes.
"We are entering a period of significant uncertainty in a good
financial position. We have a strong balance sheet. We have
substantial levels of liquidity and low levels of debt. We are
taking immediate steps to further reduce our costs and protect our
cash flow."
Our operational response
During this challenging time, our priorities are protecting our
people, company and customers. Postal services are a key part of
national infrastructures. Across our Group, we are keeping mail and
parcels moving.
As the UK's Universal Service Provider, we provide letter and
parcel deliveries to over 30 million businesses and households. We
are taking steps, in the workplace and on rounds, to limit contact
between colleagues and with customers on delivery. We are working
together with CWU to play our part in delaying or mitigating
coronavirus. We welcome Ofcom's commitment to take a pragmatic view
of changes to regulated services that protect our people, customers
and services. In recent weeks, we have seen rising levels of sick
absence as colleagues self-isolate or care for family members. W e
cannot rule out reductions to services as COVID-19 develops.
Recent trading
UKPIL
In the last two weeks advertising mail in particular has been
significantly impacted due to the COVID-19 pandemic, as marketing
campaigns have been delayed or cancelled, especially in the travel
sector. Business mail volumes have been resilient to date and
broadly in line with previous expectations, supported by recent
customer mailings. We anticipate that recent restrictions on
individuals and businesses will have a negative impact on unsorted
and stamped mail, although we are unable to quantify it at this
stage. Whilst it is difficult to accurately predict how letter
volumes will evolve over the coming weeks we do expect downward
pressure to continue.
In Parcels, business to consumer volumes have been strong during
the last two weeks, supported by an increase in e-commerce as
people have shopped more online. Royal Mail Tracked 24(R)/48(R) and
other standard products have performed well. Tracked Returns(R)
volumes have been lower than expected due to weaker volumes from
the clothing sector. Volumes through the Post Office have seen
declines in the past 7 days due to recent restrictions on movement
and at this time it is difficult to assess how volumes will develop
in the coming weeks. Business to business volumes have seen a
significant negative impact, although this only accounts for a
small proportion of our overall parcel volumes.
International has seen lower volumes given restrictions in
certain countries, especially into and out of China, and reduced
air freight capacity.
GLS
The impact of COVID-19 has been very challenging, although this
differs from country to country. There has been disruption in key
markets, particularly in Italy, France and Spain, where the most
severe restrictions on movement have been imposed. In the last 2
weeks Business to Business (B2B) volumes have fallen significantly
in some markets. Whilst we have seen growth in business to consumer
volumes, driven by e-commerce, this has not offset B2B declines. We
expect the declines in B2B volumes to continue.
In all our markets, we are following government and local
authority guidelines and advice. While levels of sickness absence
vary from market-to-market, the overall trend is an increase in
absence from work due to the COVID-19 pandemic.
Business continuity
We are actively monitoring the rapidly evolving COVID-19
situation. We have implemented a comprehensive business continuity
plan. We have established a daily committee to manage the crisis,
chaired by Group CEO Rico Back and including key executives from
Operations, Finance, and Human Resources.
We are reviewing the timing and phasing of the Group's
investment programme. We are reviewing all capital expenditure,
whilst being careful not to compromise the long-term prospects of
the business. We are taking significant action to contain all costs
and preserve cash.
Our financial position
The Group's current liquidity position is strong, with good
levels of cash and limited financial debt. Currently the Group has
in excess of GBP800 million in cash plus a GBP925 million Revolving
Credit Facility. Both our leverage (net debt/EBITDA) and interest
coverage (EBITDA/interest) covenants for our RCF are 3.5x (pre IFRS
16). There are no financial covenants on either the EUR550 million
bond (maturing October 2026) or the EUR500 million bond (maturing
July 2024). If current volume and revenue trends outlined above
were to persist, the Group is confident it has sufficient liquidity
and will be able to stay well within covenant limits. However, if
trends remained unchanged, by the calendar fourth quarter the risk
around covenants would increase.
The Board has also taken note of the emergency funding measures
available to companies recently announced by the Government.
In the light of the current economic uncertainty, the Board
believes it is prudent not to recommend a final dividend for the
financial year 2019-20.
As part of the usual annual results process, we will conduct an
impairment assessment based on updated forecasts which take into
account COVID-19 impacts.
Directorate Change
Over the past 18 months Stuart Simpson has made a major
contribution to Royal Mail's strategy and the day-to-day running of
our business in his roles as CFO and COO. In order to allow Stuart
to focus on his role as Chief Finance Officer at this critical
moment, Stuart will hand over his UK operational responsibilities
to Achim Dunnwald on 1 April 2020 . Achim will be the COO of Royal
Mail UK and will report to Rico Back. Achim is ideally placed to
lead the UK operation, given his leadership role mapping out our
Journey 2024 strategy.
Outlook
We continue to expect FY2019-20 Group adjusted operating profit
(before IFRS 16) of GBP300 million - GBP340 million.
For 2020-21, there is the potential for sharp and sustained
economic downturns in many of our core markets. Due to the
rapidly-evolving and fluid nature of the COVID-19 pandemic, it is
too early to accurately predict the impact. However, it is likely
that UKPIL will be materially loss making in 2020-21, with
profitability at GLS significantly reduced. The previously
highlighted delays to our UKPIL transformation plan, when combined
with uncertainty around the length and impact of the COVID-19
pandemic, means we now believe it will take longer than expected to
achieve the targets laid out in our Journey 2024 plan. Therefore,
the Board has taken the decision at this time to suspend guidance
for 2020-21 and beyond. We are undertaking a review of our Journey
2024 plan and will update the market when practicable.
Further updates and full year results
Following guidance from the FCA and FRC, the Group plans to
defer the announcement of its Full Year Results 2019-20, previously
scheduled for 21 May 2020, and will update the market with a
revised date in due course.
-ends-
Enquiries:
Investor Relations
John Crosse
Phone: 020 7449 8183
Email: investorrelations@royalmail.com
Media Relations
Beth Longcroft
Phone: 07435 768 549
Email: beth.longcroft@royalmail.com
Mark Mann
Phone: 07483 390980
Email: mark.mann@royalmail.com
Company Secretariat
Mark Amsden
Phone: 020 7449 8289
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 news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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END
UPDJRMRTMTITMRM
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