Royal Mail plc

News Release

22 January 2015

ROYAL MAIL plc

TRADING UPDATE FOR THE NINE MONTHS ENDED 28 DECEMBER 2014

Royal Mail plc (RMG.L) today issued the following trading update covering the nine months ended 28 December 2014.

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

"Our postmen and women delivered a great service over the busy festive period. Royal Mail delivered one of its highest ever quality of service performances for parcel delivery to our customers over the month. This is because we started to plan for Christmas in April, putting investment behind extra sorting capacity with 10 temporary hubs and training around 19,000 extra people. As a result, Royal Mail was able to provide customers with reliability, flexibility and high quality delivery at a competitive price.

"As the UK's biggest parcels carrier we are proud that so many people and businesses the length and breadth of the country trusted us to deliver their Christmas.  We handled around 120m parcels in the month of December alone, 4% more than last year. Letters performed in line with our expectations, with addressed letter volumes down 3% in the first nine months. GLS, our ground-based European parcels business, continued to perform well.

"We are continuing to bear down on costs and expect that underlying operating costs before transformation costs in UKPIL will be flat for the full year. Given our performance over the Christmas period, we are confident that the outcome for the full year will be in line with our expectations."

Trading performance for the nine months ended 28 December 2014

·   UKPIL revenue was flat in the first nine months, with parcel and letter revenues now both flat year-on-year.

·   We delivered a strong cost performance and continue to expect to hold underlying operating costs before transformation costs in UKPIL flat for the full year.

·   Parcel volumes were up 3% in the first nine months, compared with 2% in the first half, supported by growth in import parcels. In account parcels, we have benefitted from the initiatives we introduced earlier in the year, successfully targeting new sectors of the market and benefitting from opening our network at the weekend.

·   Parcel volumes in the month of December alone were around 120m, 4% more than last year.

·   Parcel revenue performance has improved relative to the first half, which saw a 1% decline. There continues to be a highly competitive environment in all the major channels.

·   Parcelforce Worldwide volumes were up 10%. Pricing continues to be under pressure due to the competitive environment in the express delivery parcel market.

·   Addressed letter volumes decreased by 3% (excluding the impact of election mailings), better than our forecast range of a 4%-6% decline per annum, mainly due to the improvement in UK economic conditions this year.

·   Letter revenue was flat, compared with up 1% in the first half, partially reflecting the diminishing impact of election mailings over the year.

·   GLS performed well, continuing the trend seen in the first half. This reflects the attractiveness of our high quality deferred parcels offering.  

·   The change to the minimum wage came into effect in Germany at the start of 2015. It is too early at this stage to be able to determine the impact of this change on the German parcels industry but the impact on GLS Germany's cost base could be significant.

Current trading and outlook

The sale of our Paddington site completed as expected on 8 December 2014 with total gross cash proceeds of £111m being received.

Overall, trading in the nine months ended 28 December 2014 has been in line with our expectations, with the seasonal increase in parcel volumes coming through as anticipated. Given our performance over the Christmas period, and that we continue to expect to hold underlying UKPIL operating costs before transformation costs flat for the full year, we are confident that the outcome for the full year will be in line with our expectations. Our outlook for letter and parcel trends and other guidance remain unchanged from that set out in our Financial Report for the half year ended 28 September 2014 issued on 19 November 2014.

The results for the full year ending 29 March 2015 are expected to be announced on Thursday 21 May 2015.

Note:

1. Movements in volume, revenue and costs are on an underlying basis, unless otherwise stated. Underlying movements are calculated after adjusting for foreign exchange movements in GLS' revenue and working days in UKPIL revenue, as well as any non-recurring or distorting items that have impacted the reporting periods. For comparison purposes all underlying adjustments are made to the prior period. For volumes, underlying movements are adjusted for working days in UKPIL. There was approximately one less working day in the first nine months of 2014-15 compared with the first nine months last year.

Enquiries:

Investor Relations

Catherine Nash

Phone: 020 7449 8297

Email: investorrelations@royalmail.com 

Media Relations 

Mish Tullar

Phone: 07423 524 154

Email: mish.tullar@royalmail.com 

Neil McCrae

Phone: 07776 995738

Email: neil.mccrae@royalmail.com 

Royal Mail press office out of hours: 020 3338 1007

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 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.