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22 May 2019 07:01
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: investorrelations@royalmail.com
Media Relations
Beth Longcroft
Phone: 07435 768 549
Email: beth.longcroft@royalmail.com
Royal Mail press office out of hours: 020 7449 8246
Company Secretary
Mark Amsden
Phone: 020 7449 8289
Email: cosec@royalmail.com
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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