RMG.L Regulatory News (RMG)

Royal Mail plc

25 March 2014

ROYAL MAIL PLC

CONTINUED EFFICIENCY PROGRAMME

· Royal Mail has a continuous focus on efficiency. As part of this programme, it will today commence a formal consultation with Unite and CWU with a proposal to achieve a net reduction of around 1,300 roles. It is proposed that there will be a reduction of approximately 1,600 roles, with around 300 new or enhanced roles created.

· The vast majority of employees impacted will be in the Group's operational and head office managerial population. There is no impact from this initiative on frontline employees, including postmen and women, or the services Royal Mail provides to its customers.

· The programme is expected to deliver annualised cost savings of around £50 million, of which approximately £25 million will be realised in 2014-15.

· No impact on expected cumulative cash investment over 2013-14 and 2014-15, which remains at around £1.2 billion.

· Charge of around £100 million associated with the programme will be recognised in transformation costs, resulting in a total charge of around £230 million for 2013-14.

· The underlying trends for the full year are expected to be broadly in line with those seen in the first half.

Royal Mail Group (RMG.L) will today commence a formal consultation with Unite and CWU, primarily across its managerial population and with some impact in its support and administrative functions. There is a proposed reduction of approximately 1,600 roles, with around 300 new or enhanced roles created. Since 2003, almost 50,000 employees have left the Group. Royal Mail is committed to conducting this consultation carefully and sensitively. The Group has a strong track record of achieving change through natural turnover, redeployment and voluntary redundancy wherever possible.GLS, Royal Mail's European, ground-based parcels delivery company, is not impacted.

Financial impact

The programme is expected to deliver annualised cost savings of around £50 million, of which approximately £25 million will be realised in 2014-15. In 2014-15, this benefit will partly mitigate a likely increase of around £70-80 million in the IAS19 non-cash pension service charge, due to external market conditions, and the potential impact of any increase in direct delivery competition.

There is no impact on the expected cumulative cash investment over 2013-14 and 2014-15, which remains at around £1.2 billion, as reduced costs of implementing certain projects in 2013-14 will help to offset the cash costs of the efficiency programme in 2014-15.

A charge of around £100 million associated with the efficiency programme will be recognised in the income statement for 2013-14 and included in transformation costs. Total transformation costs for the year will now be around £230 million, compared with our previous expectation of approximately £160 million.

The underlying trends for the full year are expected to be broadly in line with those seen in the first half.

Moya Greene, Chief Executive Officer, Royal Mail plc, said: "We are continuously improving our efficiency, whilst maintaining our high Quality of Service. We need to do so in order to effectively compete in the letters and parcels markets. This is the best way to ensure the continued delivery of the Universal Service and the good quality jobs we provide for our people."

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Contact information:

Media Relations 

Beth Longcroft

Phone: 020 7449 8241

Email: beth.longcroft@royalmail.com

Candice Macdonald

Phone: 07436 267324

Email: candice.macdonald@royalmail.com

Royal Mail press office out of hours: 020 3338 1007

Investor Relations

Catherine Nash

Phone: 020 7449 8297

Email: investorrelations@royalmail.com 

Disclaimer:

Figures presented in this announcement are not audited. This announcement 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 and 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.