TIDMRMG
RNS Number : 1977C
Royal Mail PLC
18 January 2018
18 January 2018
ROYAL MAIL plc
TRADING UPDATE FOR THE NINE MONTHSED 24 DECEMBER 2017
Royal Mail plc (RMG.L) today issued a trading update covering
the nine months ended 24 December 2017.
Moya Greene, Chief Executive Officer, Royal Mail plc, said:
"We have had a good performance over the important Christmas
period thanks to the hard work and dedication of our people. They
pulled out all the stops to deliver a great Christmas for the
UK.
"We remain the number one facilitator of e-commerce in the UK
due to our significant investments to improve our customer
offering. Parcel volumes in the nine months were up 6%, with 149m
parcels handled over the December trading period. Letters
performance was better than expected with addressed letter volumes
down 5%. GLS delivered another strong performance with volumes and
revenue up 10%. Overall, Group revenue was up 2%.
"Given our performance to date, we expect to see broadly similar
volume and revenue trends in UK parcels and letters for the full
year as in the nine months. In GLS, we expect underlying revenue
growth for the full year to be broadly in line with the first
half.
"We have continued to make progress in talks with our unions on
pay, pensions and the other issues under discussion. We have agreed
the fundamental principles on some of the key issues and talks are
ongoing to finalise these and other areas. We believe we can reach
agreement on an affordable and sustainable pension solution and a
pay deal that will enable us to continue to innovate and grow."
Trading performance for the nine months ended 24 December
2017
Group Underlying
change(1)
Revenue 2%
UKPIL Underlying
change(1)
Revenue flat
-- UKPIL revenue was flat, with parcel revenue up 4% offsetting
total letter revenue which was down 3%.
Parcels Underlying
change(1)
Volumes 6%
Revenue 4%
-- In UK parcels, the overall trends in the first nine months
were broadly unchanged from the first half.
-- Parcel volumes were up 6%, with growth largely driven by a
good performance in Royal Mail account parcels. Royal Mail Tracked
24(R) /48(R) and Tracked Returns(R) services saw continued strong
volume growth of 31%.
-- Our international parcels business continued to benefit from
our new cross-border traffic initiative(2) 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,
largely from Asia.
-- Parcelforce Worldwide volumes were up 2% benefitting from new customer wins.
-- Total parcel volumes in the December trading period were
149m, up 6% over the same period last year.
-- Total parcel revenue was up 4%, reflecting trends in the
international traffic mix with a decline in higher AUR consumer
export traffic due to the competitive market.
Letters Underlying
change(1)
Addressed letter volumes (5%)
Revenue (3%)
-- Letters performance in part reflected lapping a relatively weak period in the prior year.
-- Addressed letter volumes (excluding political parties' election mailings) decreased by 5%.
-- We do not report marketing mail revenue on a quarterly basis
due to the timing of the required survey data. However, the revenue
trend in the first nine months in our main advertising products
(retail addressed, unaddressed and access advertising letters) was
broadly similar to the first half.
-- Total letter revenue (including marketing mail) was down 3%.
GLS Underlying
change(1)
Volumes 10%
Revenue 10%
-- GLS continued to perform strongly with volumes and revenue up
10%. Revenue growth was achieved in all its main markets, with
continued strong growth in Italy. Good growth was also seen in
Denmark and Eastern Europe.
-- Performance in the period reflects the timing of Easter and
other public holidays across Europe. Excluding this impact,
underlying volume and revenue movements would have been around 3
percentage points higher. This impact is expected to be around 2
percentage points for the full year.
-- In the US we continue to integrate GSO and Postal Express to
realise operational synergies and commercial benefits.
Recent developments
We have continued to make progress in talks with our unions on
pay, pensions and the other issues under discussion. We have agreed
the fundamental principles on some of the key issues and talks are
ongoing to finalise these and other areas. We believe we can reach
agreement on an affordable and sustainable pension solution and a
pay deal that will enable us to continue to innovate and grow.
Current trading and outlook
Overall, our trading performance in the first nine months of the
financial year was good and in line with our performance in the
first half. GLS continues to deliver strong volume and revenue
growth. UK parcels performed well, underlining our position as the
UK's leading e-commerce facilitator. UK addressed letter volumes
(excluding political parties' election mailings) were better than
expected.
For the full year, we expect parcels performance to be broadly
in line with the performance in the first nine months reflecting
progress in account parcels, as we continue to make improvements to
our network and services. We continue to monitor the impact of
overall business uncertainty in the UK on letter volumes, but given
the performance to date we would expect addressed letter volumes
(excluding political parties' election mailings) to be in the
middle of the range of 4-6% decline for the full year.
In GLS, we expect underlying revenue growth for the full year to
be broadly in line with the first half. We are, however, continuing
to see cost pressures due to labour market conditions in many of
GLS' European markets, as well as in the US, which may slightly
impact margins this year.
Our cost avoidance programme is on track to deliver around
GBP190m of UKPIL operating costs avoided in 2017-18. Given the
impact of the industrial relations environment on the pace of
change, we now expect transformation costs to be around GBP130m for
the full year.
We continue to expect that our total net cash investment will be
around GBP450m for the full year.
Otherwise, our outlook and other guidance are unchanged from
that set out in our financial results for the half year ended 24
September 2017.
The results for the full year ending 25 March 2018 are expected
to be announced on Thursday 17 May 2018.
Notes:
(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
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 exclude the impact of ASM, GSO and Postal
Express in GLS. In the first nine months of 2017-18 there were
230.0 working days in UKPIL (9M 2016-17: 230.3). For 2017-18 the
estimated full year revenue and profit impact of working days in
UKPIL is a reduction of around GBP15m (2017-18: 305.0 days;
2016-17: 305.6 days). For comparison purposes all underlying
adjustments are made to the prior period.
(2) Cross-border traffic arrives into our Heathrow processing
plant mainly from Asia for customs clearance and onward transit
into mainland Europe. We are responsible for paying the associated
terminal dues to the local postal operator.
Enquiries:
Investor Relations
Catherine Nash
Phone: 020 7449 8183
Email: investorrelations@royalmail.com
Sabreen Flores
Phone: 07841 466 378
Email: investorrelations@royalmail.com
Media Relations
Peter Tilley
Phone: 07841 803 316
Email: peter.tilley@royalmail.com
Royal Mail press office out of hours: 020 3338 1007
Company Secretary
Kulbinder Dosanjh
Phone: 020 7449 8133
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 company news service from the London Stock Exchange
END
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