ROYAL MAIL plc INTERIM MANAGEMENT STATEMENT

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22 July 2014
ROYAL MAIL plc
INTERIM MANAGEMENT STATEMENT
Royal Mail plc (RMG.L) today issued its Interim Management Statement covering the financial position and
trading performance of the Group for the three months ended 29 June 2014 and including the period
from 31 March 2014 to date.

Moya Greene, Chief Executive Officer, Royal Mail plc, said:

“In the first three months of our financial year we have delivered low single digit revenue growth in line
with our strategy. Trading has been characterised by a good performance in letters, with the decline in
addressed letter volumes better than our expected range, but a weaker than expected performance in UK
parcels, largely driven by the intensifying competitive environment in the account, consumer/SME and
export channels. GLS continues to perform well in Europe. On costs, performance is better than expected.
“Given the increasing challenges we are facing in the UK parcels market, our parcels revenue for the year
is likely to be lower than we had anticipated. However, through cost control measures and with continued
good letters performance we expect to be able to offset the impact on profit such that our overall
performance would remain in line with our expectations for the full year. Our parcels revenue will be
dependent on our performance in the second half, which includes the Christmas trading period, and on no
further weakening in our addressable UK parcels market.”
Trading performance for the three months ended 29 June 2014
Group Change1

Revenue 2%
UKPIL Change1

Revenue 1%
 Cost management remains a key focus. The management reorganisation programme announced in
March 2014 is on track to realise cost savings of around £25m which will benefit the second half of the
year. In particular, we are maintaining a tight control on non-people costs. In addition, the increase in
cost of sales is slowing due to lower export mail volume growth

UK Parcels Change1

Volumes 1%
Revenue (1)%
 As expected, period-on-period comparison of volume and revenue growth is impacted by the phasing
of customers’ reaction to the introduction of size-based pricing in April 2013. In the prior period revenue saw an immediate uplift as a result of this pricing change, but consumer/SME volumes saw a
phased decline as customers took time to react
 Export parcel volumes were lower than expected due to the impact of stronger Sterling and increasing
competition in the export market. This had the effect of reducing UK parcels revenue growth in the
period by around 150 basis points which is not expected to reverse in the full year
 Changes to Amazon’s minimum order level for free delivery and expansion of its own delivery network
have reduced addressable market volumes. Competition in account and consumer/SME parcels has
intensified more than expected as other carriers seek to fill capacity in their networks by aggressively
reducing prices
 Overall performance in June was weaker due to a slowdown in the retail sector
 We have a number of initiatives focused on addressing the impact of these issues: we are opening our
network longer on Saturdays and on Sundays to receive goods from e-retailers; Parcelforce Worldwide
has started a Sunday delivery service for online shoppers; and we have introduced new shipping tools
for large online retailers. The benefits of these initiatives are expected in the second half of the year

UK Letters Change1

Addressed letter volumes (3)%
Revenue 3%
 Addressed letter volumes decreased by 3% (excluding the impact of the European and local elections in
May 2014), better than our expected range of a 4-6% decline per annum, mainly due to the
improvement in UK economic conditions
 Letter revenue was up 3%, benefitting from the impact of price increases and the uplift from the
elections traffic
 Walk sequencing rates have increased to 82% as a result of increasing the number of letters we handle
through our automated pipeline. Overall Quality of Service is exceeding our targets. The successful
launch of MailmarkTM has added additional value to our bulk letters and meter mail products
 On 20 June 2014 we made a formal evidence submission to Ofcom, for whom the primary duty is to
secure the provision of a financially sustainable universal service, setting out the threat to the universal
postal service posed by unfettered cherry-picking of high density urban areas for direct delivery
competition
GLS Change1

Volumes 6%
Revenue 6%

 Trading in the period has been encouraging with improved revenue in the majority of countries
 The situation in Germany remains challenging with competitors pursuing aggressive volume strategies
but delivery costs have stabilised. The turnaround in GLS France continues to progress well but the
resulting profit improvement is expected to be offset by increased IT investment across the network.
GLS Italy continues to perform well, benefitting from new franchisee acquisitions

Outlook

We continue to expect UK addressed letter market volumes, excluding elections, to decline by 4-6% per
annum. For 2014-15 we continue to expect to be at the better end of this range.
We anticipate that the UK parcels market will continue to be highly competitive which will have a
downward impact on average unit revenues. In addition, we expect that the continued strength of Sterling
and increasing competition in the export market will impact export parcels revenue for the rest of the year.However, we have implemented a number of initiatives that aim to enable us to gain share of the
addressable UK parcels market. The benefits of these initiatives will be skewed towards the second half, in
particular the critical Christmas trading period.
GLS continues to perform well but its reported results will be impacted by the strength of Sterling.
Given the increasing challenges we are facing in the UK parcels market, our parcels revenue for the year is
likely to be lower than we had anticipated. However, through cost control measures and with continued
good letters performance we expect to be able to offset the impact on profit such that our overall
performance would remain in line with our expectations for the full year. Our parcels revenue will be
dependent on our performance in the second half, which includes the Christmas trading period, and on no
further weakening in our addressable UK parcels market.
As previously highlighted, period-on-period comparison of reported Group operating profit after
transformation costs will be impacted by certain one-off and other items6
, particularly in the first half such
that margin expansion will be skewed to the second half of the year.
No material events or transactions impacting the Group’s financial position have taken place during the
period from 31 March 2014 to date. Royal Mail made a statement on 16 July 2014 on the French
competition authority investigation into alleged antitrust law breaches by GLS France. Given the early stage
of this matter, we cannot yet determine the amount or range of potential loss, however, it is possible that
it could be material.
No material changes have occurred to the Group’s financial position since the Annual Report and Financial
Statements 2013-14 issued on 6 June 2014.
The results for the half year ending 28 September 2014 are expected to be announced on Wednesday 19
November 2014.
Notes:
1) Throughout this document, growth/decline changes are stated on a like-for-like basis, unless
otherwise indicated. Like-for-like changes in revenue are calculated after adjusting for movements
in foreign exchange in GLS and working days in UKPIL revenue. For volumes, like-for-like changes
are adjusted for working days in UKPIL
2) Working days - There was approximately one less working day in the first three months ended 29
June 2014 compared with the first three months of the prior financial year
3) UKPIL addressed letter volumes exclude elections, but no adjustment is made to UKPIL letter
revenue for elections as there are direct costs associated with handling election traffic. In the first
three months the impact of elections on letter revenue growth was c.300 basis points, but this
impact will diminish over the course of the financial year
4) The cumulative average translation rate for the three months ended 29 June 2014 was £1 =
€1.225, compared with £1 = €1.177 for first three months of the prior financial year.
5) To date means up to 21 July 2014, being the latest practicable date prior to the publication of this
Interim Management Statement
6) Certain one-off and other items are:
a. One-off VAT credit of £35m in the first half of 2013-14 that will not be repeated in the
first half of 2014-15
b. Half year impact of the expected £70-80m increase in the IAS 19 pension service charge
c. Half year impact of the expected c.£20m increase in depreciation and amortisation
d. Impact of approximately one less working day in the first half 2014-15
Enquiries:

Media Relations
Mish Tullar
Phone: 07423 524 154
Email: mish.tullar@royalmail.com
Beth Longcroft
Phone: 020 7449 8241
Email: beth.longcroft@royalmail.com
Royal Mail press office out of hours: 020 3338 1007
Investor Relations
Catherine Nash
Phone: 020 7449 8297
Email: investorrelations@royalmail.com

Disclaimer:
Figures presented in this Interim Management Statement are not audited. This Interim Management
Statement 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 document 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 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 29 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.