ROYAL MAIL GROUP FINANCIAL RESULTS
As you may have seen reported in the media this morning, the Royal Mail Group has today published its financial results for the year to 31st March 2015. The results are decent and demonstrate a successful year for the company despite the challenges of Regulation, competition and a declining letters market.
The results reflect the efforts of postal workers who have continued to improve productivity (up by 2.5%) often in very difficult circumstances.
At the same time, it is also important to recognise that the underlying trends in the postal market pose serious challenges for the future. These factors mean that the company is putting out a cautious message about the outlook for coming years. As we look to the future, it is forecast that letter volumes will continue to decline and that the parcels market will remain very competitive. In this environment it more important than ever that the union continues to focus its efforts on campaigning against unfair competition and for the company to do more in driving forward investment in growth and innovation.
We have attached to this LTB our press release and a report prepared by our Research Department that summarises the key points contained in the financial results.
Finally, all Branches will be aware of the one year profit related bonus scheme that is directly linked to this year’s financial results. We are discussing this with the company and further information will follow in due course.
Any queries in relation to the content of this LTB should be addressed to the DGSP department.
General Secretary Elect
CWU CALLS FOR ROYAL MAIL TO PRIORITISE GROWTH AFTER DECENT RESULTS
Responding to Royal Mail’s annual results, released today (Thursday), the CWU described them as a decent set of results for this year, whilst calling on the company to work harder at delivering growth.
Dave Ward, CWU general secretary-elect, said:
“The results produced by Royal Mail today are decent, and show Royal Mail can go forward in good shape.
“These results have been delivered by improving productivity and the hard of work of postal workers. Those workers have shown they have supported the need to change to build growth in the business.
“I am today calling on Royal Mail to show they have the same drive and commitment for growth and innovation and call on them to work with CWU to deliver it.”
Commenting on the decline in the letters market, Dave added:
“However, we also recognise the note of caution that that there remains a structural decline in the letters market of 4 per cent. Therefore, the union again calls on the regulator Ofcom, to recognise this clear fact and to stop blindly increasing the competition in the sector.
“The recent announcement by Whistl that they have discontinued their delivery operation is a clear sign of the overcrowded postal market; and jobs will continue to be lost if the regulator fails to change its approach.
“Ofcom’s approach to competition is a continuous threat to jobs, as well as to terms and conditions as they push for a race to the bottom.
“Ofcom has also failed to understand the impact of unfair competition on the universal service obligation (USO) and we would remind them again, safeguarding the USO is their primary obligation.
Click on link to view results
ROYAL MAIL FULL YEAR RESULTS 2014/15
Royal Mail released its full year financial results on 21 May 2015. Whilst the parcels and letters market in the UK remains highly competitive, the company said trading was in line with its expectations. Parcels revenues for the year were lower than expected, however Royal Mail says that the focus on efficiency and tight cost control kept operating profit before transformation (£740m) in line with expectations. This tight focus on costs, particularly in the core UK letters and parcels business, is set to continue in 2015/16.
Royal Mail continues to highlight overcapacity in the parcels market and the impact this has on pricing and therefore parcel revenue growth. The growth of Amazon’s parcel delivery network remains a concern, with Royal Mail continuing to estimate that it will reduce the annual rate of growth in the addressable parcels market to around 1%-2% per annum in the short term. The collapse of City Link had a positive impact on Parcelforce volumes; however, it is believed the bulk of City Link’s traffic was captured by competitor UK Mail.
The structural decline in addressed letter volumes continued, although at 4% this was at the better end of its forecast. Royal Mail says the impact of election mailings off-set the impact of direct delivery competition in the year on revenues, estimated to have been around £20m. The results reported today are for the period before Whistl’s suspension of its end-to-end delivery operations. Marketing mail was up 5% as a result of improved UK economic conditions and the impact of MarketReach.
There was a significant improvement on productivity within UKPIL, with £109m saved on costs and a productivity improvement of 2.5%. This is up from 1.7% the previous year and in the middle of Royal Mail’s target range of 2-3%.
Royal Mail Group
The adjusted results for Royal Mail Group for 2014/15 compared to the previous year are:
• Revenue up 1% to £9,424m due to parcel revenue growth in UKPIL and above-expectation revenue growth in Royal Mail’s European parcel business GLS;
• Operating profit before transformation costs up 6% to £740m;
• Operating profit after transformation costs up 5% to £595m;
• Operating profit margin after transformation costs was up to 6.3% from 5.2%;
• Profit before taxation up to £569m from £421m.
• Free cash-flow increased to £453m (impacted by £100m from the sale of the Paddington site) and this supported a dividend payment of 21p (up 5% from the previous year).
UK Parcels, International and Letters (UKPIL)
The adjusted financial results for UKPIL for 2014/15 compared to the previous year are:
• UKPIL revenue was flat at £7,757m with a 1% decline in total letter revenue offset by parcel revenue growth of 1% in a competitive parcels market;
• UKPIL operating profit before transformation costs was up 1% to £615m;
• Total parcel volumes were up 3% overall, with parcel volumes in the Royal Mail core network up 3% and Parcelforce volumes up 12% (impacted by the demise of City Link);
• Addressed letter volume declines were 4% – at the better end of the forecast range – accompanied by a 1% decline in total letter revenues; and
• Marketing mail revenue increased by 5% to £1,167m.
Looking at costs in UKPIL, underlying operating costs were reduced by 1%. People costs were up 1%, with the 3% pay increase for front-line staff offset by £42m in savings from the management reorganisation programme and a significant increase in productivity improvements to 2.5% (up from 1.7% the previous year and in the middle of Royal Mail’s target range). Non-people costs, which includes infrastructure and vehicle costs, were also reduced by 4%. Royal Mail is looking to continue this tight control on costs in 2015/16.
General Logistics Systems (GLS)
Royal Mail’s European parcel business, GLS, continued to perform well with a better-than-expected performance on revenue – up 7% to £1,653m. Operating profits were also up 6.4% to £115m, with the reported results impacted by a stronger Pound and an 8% increase in parcel volumes.
The “Other” part of Royal Mail Group, which includes stakes in Romec and Quadrant, was down to £14m from £18m the previous year.
The Board will be recommending a final dividend of 14.3p per share. Combined with the interim dividend per share of 6.7p, this represents a total dividend of 21p per share for 2014/15. This is up 5% on the previous full year dividend of 20p per share in 2013/14.
This means eligible full-time employees who received the 729 allocation of Free Shares will have received around £250 in dividend payments by 31 July 2015 since privatisation, subject to shareholder approval at the 2015 AGM. Royal Mail says it is remains committed to growing dividends.