News Column

Royal Mail plc Full Year Results 2013-14

May 27, 2014

ENP Newswire - 27 May 2014

Release date- 23052014 - Royal Mail plc today announced its Full Year results for the year ended 30 March 2014.

Moya Greene, Chief Executive Officer, Royal Mail plc, said: 'Our performance was in line with our expectations. We delivered two per cent revenue growth, controlled operating costs and drove strong free cash flow. 'We are facing a couple of headwinds. The competitive environment on the parcels side is more intense. We are taking steps to remain the leader in this growing market.

'On the letters side, the headwind is direct delivery and we have strategies in place to counter its adverse financial impact. However, without timely regulatory action, direct delivery could undermine the economics of the Title: Universal Service Description: Postal products and associated minimum service standards that must be available to all addresses in the UK. Universal Service and our ability to generate sustainably a five to ten per cent EBIT margin in our reported business.

'Our key value drivers of single digit revenue growth, margin expansion and underlying free cash flow growth remain the objectives for the Group for the 2014-15 financial year.'

Revenue and volume

Group revenue increased by two per cent, due to parcel revenue growth in both UKPIL and GLS. Parcels are the largest contributor to Group revenue, accounting for 51 per cent.

UKPIL revenue was GBP7,787 million, up two per cent. UKPIL parcel revenue increased by seven per cent. As expected, parcel volumes (1,068 million items) were flat compared with 2012-13.

UKPIL letter revenue (including marketing mail) declined to GBP4,625 million, a two per cent reduction. The four per cent decline in addressed letter volumes for the full year was at the better end of our forecast range of four to six per cent per annum. Marketing mail revenue, part of letter revenue, was GBP1,111 million.

GLS revenue was GBP1,651 million, up seven per cent. Volumes increased six per cent, with growth in both domestic and international volumes.

Profit and margins

Group operating profit before transformation costs grew to GBP671 million.

Transformation costs of GBP241 million for the year include a provision of GBP104 million in relation to the management reorganisation programme, announced on 25 March 2014, which will be implemented in 2014-15.

Group operating profit after transformation costs increased to GBP430 million. The operating profit margin reduced from 4.4 per cent to 4.2 per cent, as a result of the provision for the management reorganisation programme.

UKPIL generated operating profit after transformation costs of GBP309 million. The operating profit margin decreased from 3.9 per cent to 3.5 per cent, again as a result of the provision for the management reorganisation programme.

GLS operating profit was GBP108 million. The operating profit margin decreased from 6.7 per cent to 6.5 per cent due to the full year effect of further increases in sub-contractor rates in Germany.

Profit before taxation (excluding specific items) of GBP363 million reflects the trading performance of the Group. Accounting standards require us to include a one-time, non-cash benefit of GBP1,350 million as a result of the Pensions Reform in reported profit before taxation and reported notional earnings per share.

Notional earnings per share (EPS)

Notional EPS excluding specific items was 26.3 pence.

Cash flow and balance sheet

EBITDA before transformation costs grew to GBP942 million, due to improved trading performance.

Net cash investment of GBP581 million represents GBP617 million investment after cash from asset disposals of GBP36 million.

Free cash flow increased to GBP398 million. This has driven a reduction in net debt to GBP555 million.


As previously indicated, the Board has recommended a final dividend of 13.3 pence per share, subject to shareholder approval at the Annual General Meeting, to be held on 24 July 2014.

Transformation and cost control

Collections, processing and delivery productivity improved by 1.7 per cent, as we reduced the number of frontline hours at a faster rate than the reduction in the level of workload.

Eight Mail Centres closed this financial year, taking the total number of Mail Centres remaining to 40. We have completed or commenced modernisation in 94 per cent of our Delivery Offices.

Tight cost control meant non-people costs in UKPIL reduced by three per cent.


The Ofcom investigation into changes to access pricing puts this commercial response to changing market conditions on hold.

Based on our estimates of the impact of TNT Post UK's publicly-stated plans, direct delivery could reduce Royal Mail revenue by over GBP200 million in 2017-18.

With our proposed access price changes suspended and unfettered direct delivery rollout, there is a reasonable prospect that Ofcom's indicative EBIT margin range of between five and ten per cent for Royal Mail's reported business may never sustainably be achieved.

We are preparing a regulatory submission calling on Ofcom to take action now and carry out a full review of direct delivery.

Summary outlook

We are facing increasing challenges in the parcels and letters markets in the UK. However, our key value drivers of single digit revenue growth, margin expansion and underlying free cash flow growth remain the objectives for the Group for 2014-15.

The Board's intention remains to pursue a progressive dividend policy, having regard to the normalised earnings progression of the Group.

Investor Contact:

Catherine Nash

Tel: 020 7449 8297


Media Contact:

Shane O'Riordain

Tel: 020 7449 8105

Email: shane.o'

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: ENP Newswire

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