Royal Mail plc Full Year Results 2016-17

RNS Number : 4819F

Royal Mail PLC

18 May 2017

 

FINANCIAL RESULTS

18 May 2017

ROYAL MAIL PLC

RESULTS FOR THE FULL YEAR ENDED 26 MARCH 2017

Royal Mail plc (RMG.L) today announced its results for the full year ended 26 March 2017.

To view the full Financial Report for the full year ended 26 March 2017 please click here:

http://www.rns-pdf.londonstockexchange.com/rns/4819F_-2017-5-17.pdf 

Moya Greene, Chief Executive Officer, commenting on the results, said:

"We have made good progress against all of our strategic priorities. This has been a more challenging period for UK businesses and we have come through it well.

"Our multi-year focus on costs is a key priority. We are on track to avoid around £600 million of annualised costs in UKPIL by 2017-18. We are past the peak of investment; we now expect net cash investment of around £450 million in 2017-18.

"GLS is performing very well and is growing revenue organically and through acquisitions. Its deep expertise and focus on B2B parcels in multiple geographies - now 41 European countries and seven states in the US - positions it to be a greater force for growth for the Company. We will continue to invest in careful and focused international expansion by GLS.

"Through a combination of our strategic approach to costs and more efficient investment spend, we will support our progressive dividend policy with the in-year trading cash generation of the Group."

Group financial summary¹

Reported results (£m)	52 weeks ended 26 March 2017	52 weeks ended 27 March 2016	Underlying2  change
Revenue	9,776	9,251	1%
Operating profit before transformation costs	490	485
Operating profit after transformation costs	353	294
Profit before tax	335	267
Basic earnings per share - continuing operations (pence)	27.5p	21.5p
In-year trading cash flow	420	254
Net debt	(338)	(224)
Proposed full year dividend per share (pence)	23.0p	22.1p	4%
Adjusted results (£m)
Revenue	9,776	9,251	1%
Operating profit before transformation costs	712	742	(6)%
Operating profit after transformation costs	575	551	2%
Margin	5.9%	6.0%	10bps
Profit before tax	559	538
Basic earnings per share (pence)	44.1p	41.3p

Business units

	Revenue				Adjusted operating profit before transformation costs
(£m)	52 weeks ended 26 March 2017	52 weeks ended 27 March 2016	Underlying change		52 weeks ended 26 March 2017	52 weeks ended 27 March 2016
UKPIL	7,658	7,671	(2%)		548	625
GLS	2,118	1,580	9%		164	117
Group	9,776	9,251	1%		712	742

Group performance^1,2

•	Revenue was up one per cent on an underlying basis. Growth in GLS more than offset the decline in UKPIL revenue.
•	Adjusted operating profit before transformation costs was £712 million, down six per cent.
•	Adjusted operating profit margin after transformation costs increased on an underlying basis by 10 basis points.
•	Reported operating profit before transformation costs was £490 million.
•	We are past the peak of investment spend. Net cash investment was £492 million compared to £656 million in 2015-16.
•	In-year trading cash flow increased to £420 million.
•	Net debt increased to £338 million following the acquisition of Golden State Overnight Delivery Services Inc. (GSO) and Agencia Servicios Mensajería S.A.U. (ASM).
•	The Board is recommending a final dividend of 15.6 pence per ordinary share, giving a total dividend of 23.0 pence per share for 2016-17, up four per cent.

Business performance^1,2

•	UKPIL revenue was down two per cent. Parcel revenue increased by three per cent; total letter revenue declined by five per cent.
•	UKPIL parcel volumes were up three per cent, driven by growth in Royal Mail account parcels.
•	Addressed letter volumes (excluding the impact of political parties' election mailings) declined by six per cent. As previously stated, overall business uncertainty in the UK is impacting letters.
•	Strategic focus on costs drove a one per cent reduction in UKPIL underlying operating costs before transformation costs. This is the third year of underlying UKPIL cost reduction.
•	UKPIL collections, processing and delivery productivity improved by 2.7 per cent. This is at the better end of our target range.
•	We exceeded our 93.0 per cent regulatory First Class mail target, with 93.1 per cent delivered the next working day. We also exceeded our regulatory Quality of Service target of 98.5 per cent for Second Class Mail.
•	GLS performed well. Volumes and underlying revenue were up nine per cent. GLS achieved revenue growth in almost all its markets from a broad customer base.
•	As part of a careful and focused expansion by GLS, it acquired GSO in California and ASM in Spain.

Outlook summary

•	Responding to challenging operating environment and continuing to focus on sustainable cash generation.
•	Expect to keep in step with addressable UK parcels market3 growth of around three per cent due to IT-enabled improvements.
•	Maintain outlook for addressed letter volume decline of between four to six per cent per annum (excluding the impact of political parties' election mailings) - expect to be at higher end of range of decline in 2017-18 if business uncertainty persists.
•	Continue to invest in GLS' careful and focused international expansion to help drive growth for the Group.
•	Remain on track to avoid around £600 million of annualised operating costs in UKPIL by 2017-18.
•	Expect net cash investment of around £450 million in 2017-18 and less than £500 million per annum going forward.
•	Progressive dividend policy supported by in-year trading cash flow generation of the Group.

1	Reported results are prepared in accordance with International Financial Reporting Standards (IFRS). Adjusted results exclude the pension charge to cash difference and specific items, consistent with the way that financial performance is measured by Management and reported to the Board.
2	Movements are presented on an underlying basis. For further details of reported results, adjusted and underlying Alternative Performance Measures (APMs) used in the Financial Report for the full year ended 26 March 2017, including reconciliations to the closest IFRS measures where appropriate, see page 22.
3	Internal estimate based on Triangle Management Services/RMG Fulfilment Market Measure (2015); defined as individually addressed parcels and packets, generated and delivered in the UK, weighing up to 30kg, that do not require special handling. Includes access fulfilment large letters & parcels and excludes click‐and‐collect, same‐day, small local operators and all international traffic. Excludes Amazon Logistics and other retailers' own‐delivery networks.

For further information, please contact:

Investor Relations:

Catherine Nash

Phone: [phone]

Email: [e-mail]

Media Relations:

Peter Tilley

Phone: [phone]

Email: [e-mail]

Andrew Moys

Phone: [phone]

Email: [e-mail]

Results presentation:

A results presentation for analysts and institutional investors will be held in London at 9:30am on 18 May 2017 and a simultaneous webcast will be available at www.royalmailgroup.com/results.

A trading update covering the three months ending 25 June 2017 is expected to be issued on 18 July 2017.

Registered Office:

Royal Mail plc

100 Victoria Embankment

London EC4Y 0HQ

Registered in England and Wales

Company number 08680755

Disclaimer

This document contains certain forward-looking statements concerning the Group's business, financial condition, results of operations and certain of the Group's plans, objectives, assumptions, projections, expectations or beliefs with respect to these items. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as 'anticipates', 'aims', 'due', 'could', 'may', 'will', 'should', 'expects', 'believes', 'intends', 'plans', 'potential', 'targets', 'goal' or 'estimates'.

Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the Group's actual financial condition, performance and results to differ materially from the plans, goals, objectives and expectations set out in the forward-looking statements included in this document. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements.

By their nature, forward-looking statements relate to events and depend on circumstances that will occur in the future and are inherently unpredictable. Such forward-looking statements should, therefore, be considered in light of various important factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, among other things: changes in the economies and markets in which the Group operates; changes in the regulatory regime within which the Group operates; changes in interest and exchange rates; the impact of competitive products and pricing; the occurrence of major operational problems; the loss of major customers; undertakings and guarantees relating to pension funds; contingent liabilities; the impact of legal or other proceedings against, or which otherwise affect, the Group; and risks associated with the Group's overseas operations.

All written or verbal forward-looking statements, made in this document or made subsequently, which are attributable to the Group or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurance can be given that the forward-looking statements in this document will be realised; actual events or results may differ materially as a result of risks and uncertainties facing the Group. Subject to compliance with applicable law and regulation, the Company does not intend to update the forward-looking statements in this document to reflect events or circumstances after the date of this document, and does not undertake any obligation to do so.

 

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