Royal Mail : Full Year Results 2016-17

Reported results (£m)

52 weeks ended
26 March 2017

52 weeks ended
27 March 2016

Underlying
change

Revenue

9,776

9,251

1%

Operating profit before transformation costs

490

485

Operating profit after transformation costs

353

294

Profit before tax

335

267

Basic earnings per share - continuing operations (pence)

27.5p

21.5p

In-year trading cash flow

420

254

Net debt

(338)

(224)

Proposed full year dividend per share (pence)

23.0p

22.1p

4%

Adjusted results (£m)

Revenue

9,776

9,251

1%

Operating profit before transformation costs

712

742

(6)%

Operating profit after transformation costs

575

551

2%

Margin

5.9%

6.0%

10bps

Profit before tax

559

538

Basic earnings per share (pence)

44.1p

41.3p

Revenue

Adjusted operating profit before
transformation costs

(£m)

52 weeks ended 26 March 2017

52 weeks ended
27 March 2016

Underlying
change

52 weeks ended 26 March 2017

52 weeks ended
27 March 2016

UKPIL

7,658

7,671

(2%)

548

625

GLS

2,118

1,580

9%

164

117

Group

9,776

9,251

1%

712

742

•

Revenue was up one per cent on an underlying basis. Growth in GLS more than offset the decline in UKPIL revenue.

•

Adjusted operating profit before transformation costs was £712 million, down six per cent.

•

Adjusted operating profit margin after transformation costs increased on an underlying basis by 10 basis points.

•

Reported operating profit before transformation costs was £490 million.

•

We are past the peak of investment spend. Net cash investment was £492 million compared to £656 million in 2015-16.

•

In-year trading cash flow increased to £420 million.

•

Net debt increased to £338 million following the acquisition of Golden State Overnight Delivery Services Inc. (GSO) and Agencia Servicios Mensajería S.A.U. (ASM).

•

The Board is recommending a final dividend of 15.6 pence per ordinary share, giving a total dividend of 23.0 pence per share for 2016-17, up four per cent.

•

UKPIL revenue was down two per cent. Parcel revenue increased by three per cent; total letter revenue declined by five per cent.

•

UKPIL parcel volumes were up three per cent, driven by growth in Royal Mail account parcels.

•

Addressed letter volumes (excluding the impact of political parties' election mailings) declined by six per cent. As previously stated, overall business uncertainty in the UK is impacting letters.

•

Strategic focus on costs drove a one per cent reduction in UKPIL underlying operating costs before transformation costs. This is the third year of underlying UKPIL cost reduction.

•

UKPIL collections, processing and delivery productivity improved by 2.7 per cent. This is at the better end of our target range.

•

We exceeded our 93.0 per cent regulatory First Class mail target, with 93.1 per cent delivered the next working day. We also exceeded our regulatory Quality of Service target of 98.5 per cent for Second Class Mail.

•

GLS performed well. Volumes and underlying revenue were up nine per cent. GLS achieved revenue growth in almost all its markets from a broad customer base.

•

As part of a careful and focused expansion by GLS, it acquired GSO in California and ASM in Spain.

•

Responding to challenging operating environment and continuing to focus on sustainable cash generation.

•

Expect to keep in step with addressable UK parcels market growth of around three per cent due to IT-enabled improvements.

•

Maintain outlook for addressed letter volume decline of between four to six per cent per annum (excluding the impact of political parties' election mailings) - expect to be at higher end of range of decline in 2017-18 if business uncertainty persists.

•

Continue to invest in GLS' careful and focused international expansion to help drive growth for the Group.

•

Remain on track to avoid around £600 million of annualised operating costs in UKPIL by 2017-18.

•

Expect net cash investment of around £450 million in 2017-18 and less than £500 million per annum going forward.

•

Progressive dividend policy supported by in-year trading cash flow generation of the Group.

Reported results are prepared in accordance with International Financial Reporting Standards (IFRS). Adjusted results exclude the pension charge to cash difference and specific items, consistent with the way that financial performance is measured by Management and reported to the Board.

Movements are presented on an underlying basis. For further details of reported results, adjusted and underlying Alternative Performance Measures (APMs) used in the Financial Report for the full year ended 26 March 2017, including reconciliations to the closest IFRS measures where appropriate, see page 22.

Internal estimate based on Triangle Management Services/RMG Fulfilment Market Measure (2015); defined as individually addressed parcels and packets, generated and delivered in the UK, weighing up to 30kg, that do not require special handling. Includes access fulfilment large letters & parcels and excludes click‐and‐collect, same‐day, small local operators and all international traffic. Excludes Amazon Logistics and other retailers' own‐delivery networks.