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Royal Mail plc Full Year Results 2019-20

25 Jun 2020, 08:17

https://www.royalmailgroup.com/en/press ... s-2019-20/

Royal Mail plc (RMG.L) is today announcing its Results for the full year ended 29 March 2020 and providing an update on trading since the year end.

Keith Williams, interim Executive Chair, Royal Mail Group, commented: “In recent years, our UK business has not adapted quickly enough to the changes in our marketplace of more parcels and fewer letters. COVID-19 has accelerated those trends, presenting additional challenges.

“We are implementing a three-step plan. Firstly, we’re taking immediate action on costs, which will result in a £130 million saving in people costs next year and flat non-people costs, along with a reduction of around £300 million in capex across the Group over the next two years, to address the immediate impact of COVID-19. Regrettably, we are also proposing a management restructure impacting around 2,000 roles. We are committed to conducting the upcoming consultation process carefully and sensitively. We will work closely with our managers and their representatives during this difficult period, including supporting them as they transition into the next stage in their careers.

“Secondly, we’re accelerating the pace of operational change in the UK to address long-standing challenges and be sustainable for the long term. Thirdly, we’re working with all stakeholders to underpin the USO to ensure it reflects user needs and is modern, contemporary and sustainable. We want to ensure Royal Mail remains a key part of the UK economy, a good employer, and the nation’s delivery partner of choice.

“At GLS, we are capitalising on growth opportunities in parcels, protecting margin in the short term with opportunities for margin expansion in the future. At the same time, we are seeking to improve performance in key markets. We will focus investment on growing markets, and improve cashflow.

“Royal Mail and GLS are different businesses, with different strategies. At Royal Mail, our focus is on a step change in transformation; at GLS we aim to continue to grow. Our new structure brings more focus and accountability and whilst there are few synergies today between Royal Mail and GLS, in the medium term an international presence is clearly important, and the opportunity remains to create more value for shareholders. Given the challenges of the current year, the Board does not intend to pay any dividend in relation to 2020-21, but our ambition is to re-commence dividend payments in 2021-22, supported by GLS.

“Finally, I’d like to offer my profound thanks to all my colleagues across the Group. Our UK postmen and women are playing a crucial role in mitigating the impact of the COVID-19 pandemic. They are key workers on the frontline. Our GLS colleagues have also gone the extra mile in the many countries in which they operate to support their customers and communities.”

    Group revenue increased by £259 million, or £396 million after adjusting for the 53rd week in 2018-19.
    Reported operating profit before specific items down £124 million, driven by lower UKPIL profitability.
    Dividend per share of 7.5p reflects Board decision not to recommend final dividend for 2019-20.
    Total liquidity (including undrawn committed facilities) of around £1.9 billion. Includes £925 million syndicated
    bank loan facility of which £225 million is undrawn.
    Operating specific items charge of £162 million, down £19 million. Includes £91 million non-cash impairment
    with respect to Parcelforce Worldwide.

    Parcel volumes up 2 per cent, lower than expected, due to threat of industrial action (Q3) and impact of COVID-19 on international import volumes (Q4). Parcel revenue up 4.6 per cent, due to targeted pricing actions.
    Addressed letter volumes (excluding election mailings) down eight per cent, in line with guidance provided in Q3 trading update. Total letter revenue down 0.9 per cent, benefitting from two elections in the period and targeted price increases.
    £188 million of costs avoided, in line with guidance of £150-200 million.
    Productivity improvement of 1.0 per cent, below our original target of over 2 per cent. Due to necessary additional investment to protect quality in Q3 and COVID-19.
    Adjusted operating costs up 2.8 per cent, driven by increased distribution and conveyance and people costs, including service quality measures.
    Adjusted operating profit margin of 1.5 per cent (down 110 basis points) reflects lower UKPIL profitability.

    GLS

    Volumes up 4 per cent excluding acquisitions, or 5 per cent including acquisitions. Revenue grew 6.3 per cent excluding acquisitions, or 9.5 per cent including acquisitions.
    Adjusted operating profit including acquisitions of £208 million, up 17.5 per cent. Up 13.5 per cent excluding acquisitions.
    Adjusted operating profit margin of 6.6 per cent, up 50 basis points compared with prior period. In line with 6-7 per cent annual target range.


Current Trading (first two months of 2020-21)

    Royal Mail (UKPIL)

    Revenue down £29 million, year-on-year. Excluding impact of European Parliamentary Elections in prior year, revenue broadly flat.
    Addressed letter revenue down 23 per cent (excluding elections); volumes (excluding elections) down 33 per cent. Advertising mail volumes down 63 per cent, significantly impacted by COVID-19. Business mail volumes more resilient; down 19 per cent.
    Parcel volume and revenue growth of 37 per cent and 28 per cent, respectively.
    UK domestic account volumes (excluding Amazon) up 65 per cent. Cumulative growth in tracked products, mainly consisting of Tracked 24®/48® and Tracked Returns®, of 76 per cent.
    Total costs up £80 million, driven by overtime and agency resource costs due to high levels of absence, social distancing measures, protective equipment and parcel related volume costs.
    Operating profit down £108 million, year on year (including benefit of May 2019 election).

    UK initiatives

    Taking action on two initiatives (management restructure and non-people costs) to deliver annual operating profit benefit in 2021-22 of £330 million.
    Management restructure, subject to consultation, targeting a reduction of c.2,000 roles out of a total population of c.9.700. Largest reductions in senior executive roles and non-operational functions. Expected to cost around £150 million, targeting annual benefit of £130 million in 2021-22.
    Targeting flat non-people costs, excluding depreciation, in 2021-22 versus 2019-20, with £200 million annual savings in 2021-22 offset by increases in parcel volume related costs.
    We are seeking to open talks with CWU on the need for change, future pay, and to address the issues raised in the ongoing industrial dispute. We expect that any pay inflation will be funded from productivity improvement cumulatively to March 2022.
    Capital expenditure review and reprioritisation: £250 million reduction across 2020-21 and 2021-22. Investment continues at higher than historical levels, including in parcel automation and hubs.
    Following the impairment of Parcelforce Worldwide assets, we expect depreciation charges in the UK to be broadly flat in 2020-21 versus 2019-20.
    No annual bonus for Executive Directors and Royal Mail executives in 2019-20.

    GLS

    Increased volatility - B2C volumes have grown in most markets following onset of COVID-19. B2B volumes negatively impacted.
    Revenue up 15 per cent including acquisitions, driven by growth in B2C.
    Operating profit margin improvement of 1.4 per cent.

    GLS initiatives

    Shift from B2B to B2C brings cost pressures – adopting a local market by market approach
    Implemented various measures to support network stability and quality. Focus on pricing, productivity and digital tools.
    Reviewing improvement plans for key focus markets.


Outlook 2020-21 and beyond

    Financial outlook and scenarios

    Unprecedented nature of pandemic means outlook is challenging and volatile.
    Continue to expect Royal Mail (UKPIL) to be materially loss-making in 2020-21. GLS profitability may potentially be reduced.
    Two scenarios for 2020-21 set out how the businesses could perform under certain sets of assumptions, but these are not guidance or forecasts.
    Scenario 1: assumes a UK GDP decline of 10 per cent for 2020-21 and COVID-19 restrictions continue to ease post June. Royal Mail (UKPIL) revenue £200 to £250 million lower year-on-year, with £140 million of additional costs related to COVID-19 and £110 million due to higher parcel volumes. GLS revenue growth 5-7 per cent, operating margin of around 6 per cent.
    Scenario 2: assumes a deeper recession, with a UK GDP decline of 15 per cent for 2020-21. Royal Mail (UKPIL) revenue £500 to £600 million lower year-on-year, with £155 million of additional COVID-19 related costs and £100 million of costs associated with higher parcel volumes. GLS revenue growth of 0-2 per cent, operating margin of around 5 per cent.

    Dividend and balance sheet

    No final dividend recommended for 2019-20.
    No dividend expected to be paid in respect of 2020-21. Ambition to re-commence dividend payments in 2021-22, supported by GLS.
    Strong balance sheet: total liquidity, including undrawn committed facilities, around £1.9 billion. Under both scenarios above, balance sheet and liquidity would be robust, with access to sufficient cash and unutilised facilities.
    The Group will provide a further update at its AGM on 8 September 2020.

Royal Mail plc Full Year Results 2019-20

25 Jun 2020, 12:58

And over the past 3 months has been like 3 Christmases

Royal Mail plc Full Year Results 2019-20

25 Jun 2020, 14:54

I thought, the CWU were already in talks?

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