RMG.L Regulatory News (RMG)

19 July 2016

ROYAL MAIL plc

TRADING UPDATE FOR THE THREE MONTHS ENDED 26 JUNE 2016

Royal Mail plc (RMG.L) today issued a trading update covering the three months ended 26 June 2016. Overall, trading in the period was in line with our expectations.

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

"In what is traditionally a quieter trading period for the business, we saw no material change in overall trends. Group revenue was up 1% while in the UK revenue was down 1%. In Europe, GLS continued to perform well.

"We continue to face the challenges caused by the current low inflationary environment and our highly competitive markets. We remain, however, very focussed on operational and financial efficiency and delivering a high quality service for all our customers."

Trading performance for the three months ended 26 June 2016

· UKPIL revenue was down 1%, with parcel revenue up 2% and letter revenue down 3%.

· Parcel volumes were up 2%, with growth driven by import parcels and Royal Mail account parcels, as well as an improving trend in the consumer/SME segment. As expected, Parcelforce Worldwide volume growth slowed to 2%, due to a very strong prior period.

· In Royal Mail account parcels, we continued to see uptrading to our tracked services improving the mix, as well as new contract wins.

· In international parcels, we continued to see the impact of high volumes of lower AUR import parcels, largely from China, but have started to see some positive impact from certain new initiatives. Higher AUR export volumes continue to be impacted by competition.

· Parcel revenue was up 2%, reflecting the impact of initiatives across all our channels to improve our products and price mix.

· Addressed letter volumes decreased by 2% (excluding the impact of political parties' election mailings). This reflected the timing of the return of direct delivery volumes in the prior period and certain mailings associated with the EU referendum. Excluding these one-off impacts, addressed letter volumes declined by around 4%.

· Total letter revenue was down 3%, reflecting the impact of low inflation, continued trends in downtrading, and declines in high AUR consumer/SME and export letters. Revenue from political parties' election mailings was similar to the prior period due to increased activity around the EU referendum.

· GLS continued to perform well. Performance in the period benefitted from the timing of Easter and other public holidays across Europe, which accounted for around 4 percentage points of the volume and revenue movement.

· Revenue growth was achieved in all our markets.

Recent developments

On 25 May Ofcom published its proposals in respect of its Review of the Regulation of Royal Mail. We are actively participating in the consultation process and will be providing a submission to Ofcom. Ofcom has indicated that it plans to issue a statement before the end of the 2016-17 financial year.

The proposed CWU pay award of 1.6% for 2016-17 and the Unite pay awards for junior and middle managers in Royal Mail of 1.6% from September 2015 and 1.3% from September 2016 have been accepted.

On 20 June we announced the acquisition of the Spanish express parcels delivery company, ASM Transporte Urgente (ASM), by the Spanish subsidiary of GLS, for a total consideration of around €71m. We also recently completed the acquisition of eCourier, a leading same day delivery company in the UK.

Current trading and outlook

Overall, trading in the three months ended 26 June 2016 was in line with our expectations, with no material change in overall trends. Movements in GDP are drivers for letter and B2B parcel volumes and we are monitoring the situation. We remain focussed on operational and financial efficiency and delivering a high quality service for all our customers.

The results for the half year ending 25 September 2016 are expected to be announced on Thursday 17 November 2016.

Notes:

1. Movements in revenue and volume are on an underlying basis, unless otherwise stated. Underlying change is calculated after adjusting for working days in UKPIL, foreign exchange movements and ASM in GLS, and other one-off items that distort the Group's underlying performance. For volumes, underlying movements are adjusted for working days in UKPIL and ASM in GLS and exclude political parties' election mailings in letter volumes. In the first three months of 2016-17 there were 75.6 working days in UKPIL (3M 2015-16 74.8). We estimate that the impact of working days in UKPIL will be around £65m for the full year (2016-17 305.6; 2015-16 303). For comparison purposes all underlying adjustments are made to the prior period.

Enquiries

Investor Relations

Catherine Nash

Phone: 020 7449 8183

Email: investorrelations@royalmail.com 

Media Relations 

Harshna Brahmbhatt

Phone: 0743 595 7464

Email: harshna.brahmbhatt@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.