Ltb 340/2014 ROYAL MAIL PLC FINANCIAL RESULTS

[TrueBlueTerrier]

Letter to Branches




No. 340/2014
Ref :
Date: 22 May 2014


To: All Branches with Postal Members

Dear Colleague,

ROYAL MAIL PLC FINANCIAL RESULTS

You will be aware that Royal Mail plc has today announced its financial results for the year ended 30 March 2014. The company states that results are in line with expectations.

The salient points of the results are as follows:

Group revenues have increased by 2 per cent on the previous year to £9,456 million, due to parcel revenue growth in both UKPIL and GLS.

Group operating profit after transformation costs increased to £430 million from £403 million due to parcel revenue growth more than offsetting letter volume declines.

Net debt has reduced to £555 million from £906 million.

The company has reported a 1.7 per cent productivity improvement.

CEO Moya Greene has described the results as another good performance, but the report also highlights two key competitive challenges facing the company.

Firstly, the competitive environment on the parcels side is more intense, and whilst parcel revenues increased as a result of price rises, UKPIL parcel volumes were flat compared with the previous year.

Secondly, the company states that without timely regulatory action, direct delivery competition in letters could undermine the economics of the universal service.

Attached to this LTB is a briefing paper prepared by our Research Department which goes into more detail on the results.

This is a positive set of results for Royal Mail which has been delivered by the hard work and commitment of CWU members. It is also important for the union to recognise the competitive challenges faced by the company in both parcels and letters. The Agenda for Growth agreement provides a strong platform for us to work with the company to address those challenges

Yours sincerely,


Dave Ward
Deputy General Secretary (P)

Royal Mail Group Preliminary Financial Results 2013/14


Overview

Royal Mail announced its preliminary financial results for the year ended 30 March 2014 on 22 May 2014. The results cover both the period from April 2013 until mid October 2013 when the company was still in public ownership and from mid October 2013 until the end of March 2014 when sixty percent of the company had been privatised.

The results show improvements in revenue (up 2% to £9.46bn) due to parcel revenue growth in both UKPIL and GLS, although parcel volumes in UKPIL remained flat. Parcels remained the largest contributor to total Group revenues at 51%. Overall letter revenue declined 2% whilst addressed letter volumes were down 4% (at the low end of the forecast range 4%-6%) where Royal Mail expects it to remain for 2014/15. Operating profits for the Group increased 6.7% to £430m due to parcel revenue growth more than offsetting letter volume declines.

Royal Mail says they are facing increasing challenges in the parcels and letters markets but that the Group’s objectives for the 2014/15 financial year are single digit revenue growth, margin expansion and growth in underlying free cash flow. On competition, Royal Mail estimates that TNT’s plans for their end-to-end delivery network could reduce Royal Mail’s revenues by over £200m in 2017/18 and is pushing the regulator Ofcom to act to protect the universal service now.

Royal Mail Group

Key improvements for 2013-14 compared to the previous financial year include:

Revenues increased 2% from £9.15bn to £9.46bn;
Operating profits stood at £430m, up 6.7% from £403m;
Operating margin was 4.2%, down from 4.4% the previous year. Royal Mail says this was due to the management reorganisation programme;
Cash inflow was £398m (up £64m from £334m) due to trading performance and reduced investment spend. This drove a significant reduction in the Group’s net debt to £555m from £906m the previous year.
Royal Mail’s notional Earnings Per Share1 excluding specific items was 26.3p for 2013/14, up from 21p the previous year.

The Group’s transformation costs increased by £46m to £241m. Around £104m of this is attributed to the management reorganisation which will be implemented in 2014/15, whilst the remaining £137m is attributed to ongoing modernisation costs (down from £193m the previous year). Royal Mail expects the management re-organisation to deliver annualised cost savings of £50m of which £25m will be realised in 2014/15.

Royal Mail reported a 1.7% productivity improvement this financial year, the same level of improvement reported the previous year but outside the company’s target range of 2%-3%.

UKPIL (UK Parcels, International and Letters)

Key financial results in this part of the business were as follows:

Revenues were up 2% to £7.79bn;
Operating profits stood at £309m up from £294m;
Operating costs before transformation costs in UKPIL were up 1% to £7.24bn; and
Operating margin was 3.5% down from 3.9%, again as a result of the provision for the management reorganisation programme.
Parcel volumes stayed broadly flat as expected (mainly as a result of the impact of size-based pricing); with a slight dip of 4m items to a total of 1,068m items. However UKPIL parcel revenue increased by 7% to £3.16bn. Parcels comprised 41% of UKPIL revenues this year compared to 38% last year.

UKPIL letter revenue (including marketing mail) declined 2% to £4.63bn. Addressed letter volumes declined by 4%, at the low end of forecasts.

On competition, Royal Mail estimates that TNT’s plans for their end-to-end delivery network could reduce Royal Mail’s revenues by over £200m in 2017/18. The company says that unfettered direct delivery competition from TNT, combined with the suspension of their proposed access price changes following a complaint by TNT to Ofcom, means there is a reasonable prospect that Ofcom’s indicative EBIT2 margin range of 5%-10% for reported business may never sustainably be achieved. The company says they are preparing a regulatory submission calling on Ofcom to take immediate action and carry out a full review of direct delivery.

GLS

Key information on this part of the business is as follows:
Revenues were up 7% to £1.65bn.
Operating profits were £108m, up from £101m the previous year; and
Operating margin was 6.5%, down from 6.7% the previous year due to the full year effect of further increases in sub-contractor rates in Germany.
Both domestic and international volumes in GLS increased, with an overall growth in volumes of 6%.
‘Other’ business

The combined revenue of Royal Mail’s ‘Other’ business (Romec, Quadrant, and NDC) was £18m, up from £15m the year previously. Total operating profits for these parts of the business stood at £13m, up from £8m the previous year.

Dividend

Royal Mail intends to pay a dividend of 13.3p per share, subject to shareholder approval at the Annual General Meeting on 24 July 2014. The reports states the Board’s intention remains to pursue a progressive dividend policy.

[5plusbonusball]

Did I miss the "thank you to all employees for all your hard work and a big bonus for all non-hardworking linos" bit.

[TrueBlueTerrier]

Did I miss the "thank you to all employees for all your hard work and a big bonus for all non-hardworking linos" bit.

No - I wouldn't expect the Union to say those things, although I would hope they would push your message to Royal Mail on our behalf.

[hans solo]

can we all attend the agm as shareholders