Changes in External Reporting

RNS Number : 7706Z

Royal Mail PLC

22 May 2019

 

Royal Mail plc

(Incorporated in England and Wales)

Company Number: 8680755

LSE Share Code: RMG

ISIN:  GB00BDVZYZ77

LEI: 213800TCZZU84G8Z2M70

22 May 2019

ROYAL MAIL plc

CHANGES IN DISCLOSURES AND METRICS USED IN EXTERNAL REPORTING

Royal Mail plc (RMG.L) is setting out details of changes to its financial and non-financial disclosures and metrics used in external reporting. The aim of the changes is to improve transparency, accuracy, and understanding, and to eliminate 'underlying' movements. We will report our financial and non-financial performance on this basis for the 2019-20 financial year onwards.

Financial and non-financial disclosures and metrics for the full year 2018-19 on an adjusted 52-week basis have been re-presented with reconciliations provided where necessary.

1.     UK letters and parcels revenue and volumes

Historically, we have used statistical sampling surveys of stamped, metered and other prepaid revenue channels to allocate revenue relating to letters and parcels. We are moving to a new methodology which reduces our reliance on sampling by using Post Office traffic data which has been tested for accuracy.

This change only impacts the allocation of revenue between stamped letters and parcels, and some international export products. Advertising and business letters (including metered products), account parcels, and Parcelforce Worldwide revenues and volumes are not affected by this change. Total UKPIL revenue remains unchanged, but the allocation between letters and parcels revenue and volumes changes as a result of using Post Office traffic data rather than an estimate based on sampling.

The following table shows the impact on parcels and letters volumes and revenue under the previous and new methodologies for the 52 weeks ended March 2019.  As a result of using Post Office traffic data, £154 million of parcel revenue has been identified as being letter revenue.  Given the difference in average unit revenue, this equates to a larger movement in letter volumes than parcel volumes.

52 weeks to March 2019	As reported		Movement		New methodology
UKPIL volumes (m)
Parcels
Royal Mail	1,224		(36)		1,188
Parcelforce	99		-		99
Total parcel volume	1,323		(36)		1,287
Letters
Addressed	10,266		230		10,496
Unaddressed	2,880		-		2,880
Total letter volume	13,146		230		13,376
UKPIL revenues (£m)
Total parcel revenue	3,692		(154)		3,538
Total letter revenue	3,903		154		4,057
Total UKPIL revenue	7,595		-		7,595

 

2.    Definition of marketing mail revenue

The current definition of marketing mail includes specific advertising mail products and an allocation of revenue from stamped, metered and other prepaid revenue channels derived by statistical sampling surveys. The inclusion of survey data can create volatility and inaccuracies. In addition, the current definition of marketing mail revenue includes non-volume related revenue from data and redirections and the Address Management Unit which are not linked to advertising activity.

In order to improve consistency, the definition of marketing mail will be restricted to include only mail products which are specifically designated as advertising, both addressed and unaddressed. This has the impact of reducing the total amount of revenue defined as marketing mail revenue as set out below:

52 weeks ended March	2016	2017	2018	2019
As previously reported:
Revenue (£m)	1,176	1,087	1,101	994
Underlying movement	Flat	(8%)	1%	(10%)
Revised definition:
Revenue (£m)	832	796	761	692
Underlying movement	Flat	(5%)	(4%)	(9%)

3.    Underlying change

In order to aid comparison with a prior period, we currently present movements in revenue, costs, profits and margins on an underlying basis. Underlying movements take into account: differences in working days in UKPIL; movements in foreign exchange; acquisitions, and other non-recurring or distorting items. For volumes, underlying movements are adjusted for working days in UKPIL, the impact of acquisitions and exclude political parties' election mailings in letter volumes. All adjustments are made to the prior period.

From the 2019-20 financial year onwards, no underlying adjustments will be made to the prior period. Any factors having a material impact on period on period comparisons will instead be highlighted in the narrative to the results.

4.    Treatment and presentation of transformation costs

From the 2019-20 financial year onwards, transformation costs, comprising project costs and voluntary redundancy costs, will be included within their relevant operating cost categories.  Depending on their nature, project costs will be allocated across people costs and non-people costs, with the costs of voluntary redundancy will be separately disclosed within people costs.

As a result, operating profit before transformation costs will no longer be shown.  Profit after transformation costs will be replaced with operating profit.  The impact of the presentational changes for 2018-19 is shown below based on transformation costs of £133 million, comprising £87 million of project costs and £46 million of voluntary redundancy costs.  GLS results are unaffected by this change.

52 weeks ended March 2019
UKPIL (£m)		As reported	Movement	Represented
Revenue
Revenue		7,595	-	7,595
Costs
People costs		(4,975)	(92)	(5,067)
People costs		(4,975)	(46)	(5,021)
Voluntary redundancy costs			(46)	(46)
Non-people costs		(2,288)	(41)	(2,329)
Distribution & conveyance costs		(827)	-	(827)
Infrastructure costs		(819)	-	(819)
Other operating costs		(642)	(41)	(683)
Total operating costs		(7,263)	(133)	(7,396)
Adjusted operating profit before transformation costs		332	(133)
Transformation costs		(133)	133
Adjusted operating profit		199	-	199
Group (£m)		As reported	Movement	Represented
Revenue		10,444	-	10,444
Costs
People costs		(5,642)	(92)	(5,734)
People costs		(5,642)	(46)	(5,688)
Voluntary redundancy costs			(46)	(46)
Non-people costs		(4,293)	(41)	(4,334)
Distribution & conveyance costs		(2,591)	-	(2,591)
Infrastructure costs		(988)	-	(988)
Other operating costs		(714)	(41)	(755)
Total operating costs		(9,935)	(133)	(10,068)
Adjusted operating profit before transformation costs		509	(133)
Transformation costs		(133)	133
Adjusted operating profit		376	-	376

- ENDS -

Enquiries:

Investor Relations

Catherine Nash

Investor Relations contact number: 020 7449 8183

Email: [e-mail] 

Media Relations

Beth Longcroft

Phone: [phone]

Email: [e-mail] 

Royal Mail press office out of hours: 020 7449 8246

Company Secretary

Mark Amsden

Phone: [phone]

Email: [e-mail]

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.

 

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