TIDMRMG
RNS Number : 8019F
Royal Mail PLC
19 November 2020
Royal Mail plc
(Incorporated in England and Wales)
Company Number: 8680755
LSE Share Code: RMG
ISIN: GB00BDVZYZ77
LEI: 213800TCZZU84G8Z2M70
Royal Mail plc
19 November 2020
This announcement contains inside information for the purpose of
Article 7 of the Market Abuse Regulation (EU) No 596/2014.
ROYAL MAIL plc
RESULTS FOR THE HALF YEARED 27 SEPTEMBER 2020
26 weeks ended 26 weeks ended
27 September 29 September
Reported measures (GBPm) (1) 2020 2019 Change(3)
--------------------------------- -------------- ============== =========
Revenue 5,671 5,166 9.8%
Operating (loss) / profit (20) 61 (132.8%)
Profit before tax 17 173 (90.2%)
Basic earnings per share (pence) 1.4p 15.3p (13.9p)
Adjusted measures (GBPm) (1,2)
--------------------------------- -------------- -------------- ---------
Operating profit 37 165 (77.6%)
Profit before tax 18 146 (87.7%)
Basic earnings per share (pence) 0.4p 11.1p (10.7p)
Net debt (1,006) (1,372)
--------------------------------- -------------- -------------- ---------
H1 2020-21 Summary:
-- Group revenue up 9.8%, driven by strong parcel growth at both
Royal Mail and GLS. Group reported operating loss of GBP20 million;
Group adjusted operating profit(2) of GBP37 million, growth in GLS
profit more than offset by loss in Royal Mail.
-- Royal Mail performance reflects opportunity from change in business mix:
-- Revenue up 4.9% with parcels up 33.2% partly offset by letters decline of 20.5%;
-- Adjusted operating loss(2) of GBP129 million (H1 2019-20:
profit of GBP75 million) with costs of mix change (GBP95 million),
COVID-19 (GBP85 million), voluntary redundancy (GBP147 million) and
international conveyance (GBP32 million);
-- Adjusted operating loss in regulated business(4) of GBP180
million, (H1 2019-20: GBP25 million profit) reflecting the decline
in letter revenue;
-- Addressed letter volumes (ex. elections) down 28% and total
letter volume down 33%. Parcel volume up 31%;
-- Government COVID-19 support not utilised during the pandemic.
-- GLS performance boosted by exceptional volumes and short-term
price initiatives in some countries:
-- Revenue up 21.7% and adjusted operating margin 8.9%;
-- Improved performance in focus countries (France, Spain and the US);
-- Operating profit up 84.4% to GBP166 million.
-- Scenario update for FY2020-21:
-- Uncertainty remains, particularly for Q4;
-- Royal Mail revenue now projected to be GBP380 to GBP580
million higher year on year. Mix change costs increased to GBP210
million, cost of COVID-19 GBP155 million;
-- Royal Mail would be better than break even at adjusted
operating profit level if revenues outturn at higher end of
scenario;
-- GLS now projected as 21% to 23% revenue growth year on year,
with c. 8% adjusted operating margin.
Keith Williams, Interim Executive Chair, commented:
"The growth in online shopping and parcels during the pandemic,
combined with our increased focus on delivering more of what
customers want, has led to revenue growth of nearly 10% for the
Group in the first half, with Royal Mail revenue up nearly 5%. For
the first time, parcels revenue at Royal Mail is now larger than
letters revenue, representing 60% of total revenue, compared with
47% in the prior period. GLS delivered strong revenue growth of
21.7%, with adjusted operating margin up by 300 basis points. B2C
accounted for 56% of GLS volume in the first half. Across the
Group, our people have worked incredibly hard to keep delivering
for our customers during these unprecedented times, and I want to
thank them for their dedication and commitment.
We have been pushing forward with our transformation in Royal
Mail and delivering more new innovations, products and services for
our customers. Whilst we have done exceptionally well in terms of
revenue and have seen real growth for the first time since
privatisation, we have recorded a first half adjusted operating
loss of GBP129 million after restructuring charges of GBP147
million, and a reported operating loss of GBP176 million. As
anticipated the reduction in letter volumes has had a significant
impact on the regulated business which lost GBP180 million in the
first half, and demonstrates the need for change in the Universal
Service.
The level of revenue growth in the first half shows we have the
right strategy and that Royal Mail can be cash generative and a
sustainable, profitable business in the future. But we need to
speed up the pace of change in order to create a profitable
business in the UK. We are making good progress on the initiatives
we set out in June. We are reducing management layers to increase
our speed of decision making, directing the business towards those
activities which generate quicker payback and focusing our capital
expenditure on projects which will improve our customer proposition
and increase our efficiency. These initiatives should add to top
line growth and generate a saving of around GBP330 million in
operational costs.
Talks with our unions are at an important stage. We have been
encouraged by our talks with CWU, which have intensified over the
past weeks. With the improved revenue performance, we have focused
on how we can deliver efficiency and productivity in a growth
environment together, which will enable the business to see the
benefits of operational leverage.
We are already working hard to deliver Christmas, recruiting
around 33,000 additional flexible workers in Royal Mail over the
peak season, and we continue to provide significant support to the
Government's COVID-19 testing programme and the distribution of
protective equipment.
In GLS our strong footprint, local market presence and
operational agility have enabled us to successfully manage the
challenges of COVID-19. GLS also benefitted from scale effects,
along with successful pricing initiatives in certain markets. Our
focus countries - Spain, France and the US - have emerged stronger
and our task now is to continue the turnaround, lock-in and build
on that success. GLS is well positioned to continue to benefit from
the shift to B2C, cross-border growth and evolving customer needs
towards more convenience and ease in receiving parcels.
We have updated our scenario for the full year. As parcel
volumes at both Royal Mail and GLS have continued to be robust year
to date, revenue performance in the scenario has improved. It
remains difficult to give precise guidance but parcel growth is
expected to remain robust in Q3, with more uncertainty over trends
in Q4 due to the development of the COVID-19 pandemic, further
recessionary impacts and trends in international volumes."
Business unit financial summary(1,2)
Revenue Adjusted operating profit
----------- ======================================== ----------------------------------------
26 weeks 26 weeks 26 weeks 26 weeks
ended ended ended ended
27 September 29 September 27 September 29 September
(GBPm) 2020 2019 Change(3) 2020 2019 Change(3)
=========== ============= ============= ========== ============= ============= ==========
Royal Mail 3,828 3,649 4.9% (129) 75 (272.0%)
GLS 1,870 1,537 21.7% 166 90 84.4%
Intragroup (27) (20) 35.0% - - -
=========== ============= ============= ========== ============= ============= ==========
Group 5,671 5,166 9.8% 37 165 (77.6%)
----------- ------------- ------------- ---------- ------------- ------------- ----------
1 Reported results are in accordance with International
Financial Reporting Standards (IFRS). Adjusted results exclude the
pension charge to cash difference adjustment and specific items,
consistent with the way financial performance is measured by
Management and reported to the Board.
2 For further details on Adjusted Group operating profit,
reported results and Alternative Performance Measures (APMs) used,
see section entitled 'Presentation of results and Alternative
Performance Measures'.
3 All percentage changes reflect the movement between figures as
presented, unless otherwise stated.
4 The Regulated Business is a subset of Royal Mail plc's core UK
business, as defined by Ofcom, which excludes certain subsidiaries
such as Parcelforce Worldwide, eCourier and the Royal Mail Property
unit. It is the regulatory entity which contains the Universal
Postal Service network and all the products provided through or in
relation to that network. The operating loss of the Regulated
Business includes intragroup revenues with eCourier and property
rent costs payable to the group's property unit.
Results presentation
A results webcast presentation for analysts and institutional
investors will be held at 9:00am today, Thursday 19 November 2020
at www.royalmailgroup.com/results .
A trading update covering the nine months ending 27 December
2020 is expected to be issued in February 2021.
Enquiries:
Investor Relations
John Crosse
Phone: 07483 390 957
Email: investorrelations@royalmail.com
Royal Mail investor relations line: 020 7449 8183
Media Relations
Jenny Hall
Phone: 07776 993 036
Email: jenny.hall@royalmail.com
Mark Street
Phone: 07515 924 344
Email: mark.street@royalmail.com
Royal Mail press office out of hours: 020 7449 8246
Company Secretary
Mark Amsden
Phone: 020 7449 8289
Email: cosec@royalmail.com
INTERIM EXECUTIVE CHAIR REVIEW
Whilst the COVID-19 pandemic continues to present challenges for
both Royal Mail in the UK and GLS, the first half performance has
been above our initial expectations in many areas. In the first six
months we have seen stronger growth than expected in parcels at
Royal Mail, which has more than offset the decline in letters from
a revenue perspective, and for the first time revenue from parcels
now exceeds that from letters. However, we have also incurred
significant costs due to increased parcel volumes and manual
sortation of much of this additional volume through our network,
costs related to COVID-19 such as protective equipment, overtime
and agency staff, as well as social distancing measures, along with
management restructuring costs, which have led to an adjusted
operating loss of GBP129 million in the UK.
We have prepared for our peak period around Christmas, deploying
eight temporary parcel sort centres and recruiting around 33,000
flexible workers to help manage peak volumes. Overall we are
planning to increase our investment in peak this year by around
GBP100 million, to ensure we maintain quality as we deliver
Christmas for our customers and continue to support the
Government's COVID-19 testing programme . However, the impact of
the pandemic is ever changing and whilst we have contingency plans
in place, accurately predicting the volumes and absence rates given
the risk of rising COVID-19 infection rates is challenging.
We have been engaged in talks with CWU since July, which have
intensified over the past weeks. Our first half performance
demonstrates we can capture the revenue opportunity in the market,
and deliver a growth agenda to support jobs, which has long been
advocated by CWU. There is common ground in this vision, however,
we need to reach agreement soon in order to move ahead with our
programme that will enable the business to see the benefits of
operational leverage and deliver a financially sustainable
future.
At Royal Mail, our ambition is to be the leading delivery
company in the UK. We have an unrivalled combination of scale,
brand, reach and innovation, and are well positioned in the market
with B2C (Business to Consumer) and cross-border presenting key
growth opportunities. But we need to accelerate the pace of change
in order to take advantage of these opportunities, to bring new
services to our customers and to capture growth in parcels and
beyond.
GLS has seen continued strong growth in parcel volumes in the
first half. Our focus on productivity and the actions we've taken
on costs, along with successful pricing initiatives in certain
markets and the positive leverage from higher volumes, in
particular in May and June, has delivered significant margin
expansion compared to the same period last year. Our focus
countries have emerged stronger and our task now is to lock-in and
build on that success. GLS is well positioned to continue to
benefit from the shift to B2C, cross-border growth and evolving
customer needs towards more convenience and ease in receiving
parcels.
It remains difficult to give precise guidance for the rest of
the year. We have updated our scenario, first presented in June of
this year, to take account of trading year to date and the
additional experience we now have of operating during the COVID-19
pandemic. Royal Mail revenue is now projected to be GBP380 million
to GBP580 million higher year on year, given the continued strength
in parcel volume growth, whilst mix change costs have increased to
GBP210 million. The cost of COVID-19 has also increased due to
ongoing social distancing measures and an expected rise in absence
rates. We have also now included an increase in international
conveyance costs. We anticipate Royal Mail would be better than
break even, at an adjusted operating profit level, if revenues
outturned at the higher end of the scenario. GLS revenue growth in
the scenario is now 21% to 23% year on year, with around an 8%
adjusted operating margin. Whilst parcel growth is expected to
remain robust in Q3, there is more uncertainty over trends in Q4
due to the impact of changes to international postal rates and
Brexit on international volumes, and possible further recessionary
impacts across our footprint from the COVID-19 pandemic.
Liquidity remains strong, at around GBP2.0 billion (including
undrawn syndicated loan facilities) at 27 September 2020. In-year
trading cash inflow in the first half was GBP219 million. Net debt
reduced to GBP1,006 million (September 2019: GBP1,372 million;
March 2020: GBP1,132 million).
As we said at the time of our FY2019-20 announcement, we do not
expect dividends to be paid in respect of FY2020-21. Our ambition
is to re-commence dividend payments in FY2021-22.
Royal Mail
Operating performance
Revenue grew 4.9%, with parcel revenue growth more than
offsetting the decline in letter revenue.
Parcel volumes grew strongly in the first half, driven by an
increase in e-commerce activity as customers shopped more online as
a result of COVID-19 restrictions. Domestic account parcel volumes,
excluding Amazon, were up 51% and Royal Mail Tracked 24(R) /48(R)
and Tracked Returns(R) performed strongly with 72% growth year on
year. We processed 2.5 million tracked parcels on our busiest day.
We were also pleased to be able to support the Government's
COVID-19 testing and PPE programmes through the collection and
delivery of tens of millions of test kits and hundreds of millions
of items of PPE.
International parcel volumes grew over the first six months
driven by imports, in particular as China emerged from COVID-19
restrictions and economic activity increased early in the period.
However, growth in international volumes weakened as the half
progressed, impacted by reduced global air capacity and increased
conveyance costs, with export volumes recording a small decline in
the period.
Towards the end of the first half the overall parcel volume
growth rate slowed, from 37% in the first two months to 31% for the
first half in total, due to the gradual relaxation of COVID-19
restrictions in the UK and weaker international volumes.
Parcel revenue grew by 33.2% period on period. We saw a positive
product mix over the half, as customers traded up to higher value
tracked products and volumes improved in higher value channels.
The initial impact of COVID-19 at the start of the period saw a
significant reduction in letter volumes, with addressed letter
volumes (ex. elections) 33% lower in the first two months.
Addressed Advertising mail, which has a lower average unit revenue
(AUR), was significantly impacted. In the first half Addressed
Advertising mail volume was down 49% as customer marketing
campaigns were delayed or cancelled. In recent months Advertising
mail has seen an improvement, as some business activity has
resumed. In FY2019-20 addressed Advertising mail accounted for
around a quarter of addressed letter volumes (ex. elections),
compared to around a fifth in H1 2020-21.
Business mail, which has a much higher average unit revenue
compared to Advertising mail, has been more resilient, with a rate
of decline in volume of just under half that seen for addressed
Advertising mail. Business mail accounted for just over half of
addressed letter volumes (ex. elections) in FY2019-20.
For the first half, addressed letter volumes (ex. elections)
were 28% lower year on year. Total letter revenue was down
20.5%.
Whilst these dynamics have driven better than expected revenues,
the mix change from handling fewer letters and more parcels, and
manual sortation of much of this additional volume, increased costs
in the period by GBP95 million.
In addition, costs related to COVID-19 (elevated absence, social
distancing, additional protective equipment and other costs) were
GBP85 million in the first six months.
International conveyance costs also increased GBP32 million due
to shortage in airline conveyance capacity as a result of
COVID-19.
There was also a voluntary redundancy charge of GBP147 million
in the first half, primarily related to the management restructure
announced in June, with a planned reduction of around 2,000
roles.
As a result of these costs, Royal Mail recorded an adjusted
operating loss of GBP129 million in the first half (H1 2019-20:
GBP75 million profit), including voluntary redundancy costs.
The regulated business recorded a loss of GBP180 million (H1
2019-20: GBP25 million profit).
Innovation and customer focus
We have sharpened our focus on the customer in Royal Mail in the
past six months and streamlined our decision making by bringing
together all domestic and international parcels, letters and
commercial support services under the newly created role of Chief
Commercial Officer.
As part of our commitment to providing a great experience for
our customers and delivering greater convenience, following a
successful trial in the West of England, our parcel pick-up service
- Parcel Collect - is now available nationally. Parcel Collect is a
new collection service direct from a customers' door or a nominated
safe place. Customers pay for their postage and collection online
or via the Royal Mail app. Royal Mail will then collect up to five
parcels per address, six days a week. Over 76,000 items have been
booked in for collection since launch on the 19 October.
Our new inflight redirections service, launched in June, allows
customers to change their delivery after it has been sent. This
means customers no longer have to worry about not being in to
receive the parcel. I n the last month we further enhanced inflight
redirections to enable customers to change the delivery day or
location to a Post Office or Royal Mail Customer Service Point for
them to collect. We continue to improve our Royal Mail app and have
extended our age verification service to smaller business
customers, for example allowing eBay sellers to send goods that
require age verification on the doorstep. Royal Mail offers
unparalleled flexibility for customers to send and receive items
whenever and wherever they want; through our great and
long-standing partnership with the Post Office, online and through
our extensive network of postboxes, parcel postboxes and customer
service points.
For our Letters customers, we have focused on introducing online
platforms to act as a convenient "one stop shop" for advertising
and business mail. Our 130,000 plus retail customers can now access
advertising and business mail services online via Hybrid Mail,
Admailer and dropaleaflet.com. Instead of having to liaise with
multiple suppliers to manage the posting, printing and customer
targeting of advertising campaigns, they can now do it all in one
place. Customers tell us how many items they want to send, upload
the artwork and addresses, and we can manage the rest. Central and
local Government organisations, insurers, banks and retailers have
all starting to use these services.
As part of our digitisation strategy, we are in the advanced
stages of plans to include 2D barcodes on our stamps. This is part
of our ambition to have a barcode on every mail item that enters
our network. This enhancement will help us manage mail volumes more
efficiently by providing transparency into our operation. We will
update our customers and the market on our rollout plans in due
course.
We continue to build a pipeline of new initiatives for both
letter and parcel customers. Each is designed to meet the growing
customer requirement for more convenient options of sending and
receiving letters and parcels, and to meet the increasing demand
for more information about their letters and parcels in this
digital, information-hungry, age.
We look forward to the publication of Ofcom's User Needs Report
before the end of 2020. In anticipation of Ofcom's findings we
continue to engage with our customers and stakeholders about how
they expect their needs to change in future. These ongoing
discussions are reinforcing our view that the best way to ensure
the Universal Service continues to meet our customers' needs is to
rebalance our service model more towards parcels. It is clear from
our conversations with customers that they value and want to retain
the 'one price goes anywhere' principle, want more frequent and
convenient parcel deliveries, and they still want an affordable
next-day letters service. The upcoming Ofcom review of the
regulatory framework for the postal market will be vital in
securing a platform which permits both the investment required to
deliver the USO demanded by the public and for that service to be
delivered sustainably. Any decision on whether substantive change
is required is a matter for the Regulator, Government and
ultimately Parliament. We would urge Ofcom and the Government to
consider swiftly what changes are appropriate given the rapidly
changing customer needs and the risks to the financial
sustainability of the Universal Service.
Action on costs
As previously announced, we have taken action to speed up
decision-making and improve our financial position. Our management
restructure will deliver an annualised GBP130 million cost benefit
from FY2021-22, and we have booked a charge of GBP140 million for
this programme, which is within the total voluntary redundancy
costs of GBP147 million in the period. These projects are always
difficult as we lose colleagues from the business, but we are on
track and we are now reaching the end of an extensive and detailed
consultation with Unite CMA, with the bulk of the role reductions
taking place in Q4 of the current financial year.
We continue to target GBP200 million of savings over 2 years in
non-people costs and have a strong pipeline of initiatives with
GBP70 million of savings delivered to date. However, keeping
non-people costs flat, excluding depreciation, in FY2021-22 vs.
FY2019-20 is increasingly challenging given the higher than
expected parcel volumes to date and the risk of COVID-19 costs
persisting into FY2021-22.
Industrial relations
Royal Mail is at a crucial juncture. We need substantial
business change in order to capture the opportunities from the
rapidly growing demand for parcels and provide a sustainable and
profitable future for Royal Mail.
We have been engaged in talks with CWU since July, which have
intensified over the past weeks. The focus has been on pay and how
we can work together to accelerate the pace of change to improve
our efficiency and productivity, so we can respond to a market that
has jumped forward three years in terms of customer behaviour and
the changing parcel/letters mix. We have been clear on our
programme and the operational changes we need to make, including
more regular revisions of our operations and resources across
delivery, processing and distribution, our ongoing network change
programme (e.g. parcel hubs and van delivery), and continuous
improvement across all our offices . We have laid out the benefits
to CWU which we believe can be delivered, which will fund future
frontline pay increases. Our first half performance demonstrates we
can capture the revenue opportunity in the market, and deliver a
growth agenda to support jobs, which has long been advocated by
CWU. There is common ground in this vision, however, we want to
reach agreement soon in order to move ahead with our programme that
will enable the business to see the benefits of operational
leverage and deliver a financially sustainable future.
As mentioned above, we have been consulting extensively with
Unite CMA on our management restructuring programme alongside
ongoing constructive discussions about transformation of the
business. Our discussions will continue on both fronts in the
coming weeks.
We are pleased to see the legislation that will enable our
proposed CDC (Combined Defined Contribution) pension scheme
progressing through Parliament. We expect the Pension Schemes Bill
to pass by Christmas 2020, with further regulations to follow next
year. Subject to these necessary regulations and authorisation from
the Pensions Regulator, we can then plan for the introduction of
our new CDC pension shortly thereafter. We have lobbied
successfully with CWU for the introduction of CDC pensions since
2018. This demonstrates what Royal Mail and CWU can achieve when we
work together.
Transformation
Whilst we will reduce capital expenditure this financial year
and next through a combination of efficiency, cancellation of some
projects and deferment of others, we remain committed to our
transformation programme and the level of capital expenditure
required to deliver it. We recently announced a contract for the
installation of four new Parcel Sortation Machines (PSMs) into our
operation. Build will commence on the first machine shortly after
Christmas and is planned to be operational in late Spring, with the
others later in FY2021-22.
Parcel automation has remained at c.33%, although given the
significant increase in volumes this has resulted in 166 million
more parcels being sorted at least once automatically compared to
the prior year. Our North West hub in Warrington, coming into
operation in 2022, will begin fit out of the automation equipment
in January 2021. In addition, we have commenced construction of our
Midlands parcel hub in Daventry, scheduled for completion in 2023.
With the capacity to process over 1 million items per day, it will
be the largest Royal Mail parcel hub in the UK.
As previously reported, the onset of the COVID-19 pandemic
delayed a number of our network trials. Automated Hours Data
Capture, our automated clocking in and clocking out system, has
equipment installed at 20 sites, with twelve sites live and eight
enabled with the technology but not yet operational. We are
planning to restart trials and following validation of the
benefits, will commence a national rollout to Processing sites
during FY2021-22.
Trials of Resource Scheduler, which will deliver greater
efficiency in the deployment of resources against planned workload,
have been scaled-up to six sites. Trials were suspended with the
onset of COVID-19 but work is underway to restart trial activities
in Q4 of the current financial year. Following the successful
conclusion of trials, we plan to start the national rollout from Q3
2021-22.
We now have 22 dedicated van routes across two trial offices to
test separate daily delivery of larger and next day Later
Acceptance Time parcels. Routes have been maintained throughout the
impact of COVID-19 and we are targeting eight further deployments
in the second half (four in Q3 and four in Q4) within the pilot
phase. These further pilots will help inform the full national
rollout and deployment design for 2021 onwards.
The Future
Looking ahead, we will retain and build on our position as the
leading delivery company in the UK by continuing to build on our
people, our brand, and our reputation for trust, quality and
products.
And we want to go further in future. We want to be seen as the
leaders in innovation too. By continuing to build a leaner, more
customer-centric, culture in Royal Mail, we will deliver more of
the innovations our customers really want and need.
One of the things our customers increasingly want is to be
partnering with the most environmentally friendly delivery operator
in the industry. Our 'feet on the street' network means that, based
on our own analysis, we already offer the lowest reported CO2 per
parcel of any major UK delivery operator.
Looking ahead, we have ambitious plans to reduce our
environmental footprint further. Royal Mail has committed to
becoming a net zero carbon business by 2050. As part of this
ambition we are moving towards having a fleet fuelled entirely by
alternative fuel. In the first half we launched a new trial - the
electric taxi van, based on a London taxi cab - for parcel
deliveries, which we are operating across a number of locations in
the UK, providing us with extended range and zero emissions. In the
second half we will begin trials with a hydrogen van operating in
Aberdeen. We will continue to expand our electric vans and our CNG
(compressed natural gas) HGV fleets to reduce our emissions and to
support the delivery of our environmental ambitions.
We are well positioned in the market, and B2C and cross-border
present key growth opportunities. Underpinned by our operations,
people and technology, we will simplify our product set and
continue to invest in innovation, such as our new Parcel Collect
service, to bring services which are relevant to our customers to
capture growth in parcels and beyond.
GLS
While the current COVID-19 crisis has brought both additional
challenges and extra costs, the market changes accelerated by it
have created opportunities. GLS delivered a strong performance in
the first half, with growth in almost all markets. Volumes were up
21% in the first six months, driven by international and B2C.
International is a key differentiator for GLS with one of the
largest ground-based deferred parcel networks in Europe. B2C
accounted for 56% of volume in the first half. More recently there
have been indications that B2B volume is also recovering having
been negatively impacted by the pandemic.
Revenue increased by 21.7% (20.1% excluding acquisitions).
Germany, Italy and France accounted for 53.6% of total GLS revenue
(H1 2019-20: 54.9%), with North America contributing 9.6% (H1
2019-20: 9.8%).
Revenues have increased significantly in those GLS companies
which already had a relatively high proportion of B2C volumes
pre-COVID-19, for example Spain, Europe East and Denmark. Due to
the flexibility in our network, GLS has also been able to respond
quickly to market developments in other countries where it has a
lower proportion of B2C, such as Germany and Belgium. We have also
remained focused on B2B customers by maintaining high quality
levels.
Actions taken to mitigate the additional costs of higher B2C
volumes, included: online drop off permission; contactless
delivery; a focus on productivity and last mile efficiency; and
pricing initiatives in selected markets led to a strong performance
in the first half. Operating profit also benefited from significant
volume growth in the early part of the period, particularly during
May and June, as more efficient utilisation in processing and line
haul helped offset higher unit costs in delivery. All of this
resulted in adjusted operating profit in the first half of GBP166
million (H1 2019-20: GBP90 million) with margin expansion of 300
bps to 8.9%. Around GBP36 million of the reported improvement in
operating profit in the first half is considered to be one-off in
nature due to exceptional volumes, associated positive operational
leverage effects and short-term pricing initiatives.
Performance in the first half in previously underperforming
"focus countries" - France, Spain and the US - improved. France saw
revenue growth of 19.2% and a significant reduction in operating
losses from EUR11 million in the prior period. Volume growth has
slowed in recent months compared to the first quarter, but is still
robust, driven by international and new customer wins.
Spain continued to perform strongly with revenue growth of
49.5%, driven by B2C volume and positive price / mix. Volume growth
has again slowed in recent months but is still strong. Operating
profit improved significantly compared with a small loss in the
prior year.
In North America the US performance has stabilised and improved
versus prior year, with increased management focus and the benefit
of the contribution from Mountain Valley Express (MVE) acquired in
October 2019. Growth in B2C volumes has resulted in pressure on
final mile delivery costs, but synergies in the US line haul
network have provided some benefits to offset. In Canada, Dicom
revenue declined by 6.5% impacted by lower freight and B2B volumes,
although margin improved due to initiatives taken to streamline the
cost base to fit with the lower activity level.
GLS is well positioned to achieve further success in its markets
and benefit from the shift to B2C, cross-border growth and evolving
customer needs towards more convenience and ease in receiving
parcels.
Scenario for FY2020-21
Given the uncertainty surrounding the development of the
pandemic in the remainder of the year and possible recessionary
impacts across our business, which could have a significant
influence on parcel volumes, along with a potential impact of
Brexit, it remains difficult to give precise second half
guidance.
We have updated only our central Scenario, first presented in
June of this year as Scenario 1, to take account of trading year to
date and the additional experience we now have of operating during
the COVID-19 pandemic.
FY2020-21 Scenario (change vs. prior year)
Royal Mail AGM (September) Latest view
-------------------------
YTD 30/8 FY20-21 H1 (actual) H2 FY20-21
Letter revenue (22)% (17)% (20.5)% (12)% (16)%
--------- -------------- ------------ ------------
Domestic parcel revenue 37% 25% 35% 35% 35%
International parcel
revenue 17% 10% 23% 7% 14%
Total UK parcel revenue 33% 22% 33.2% 30% 31%
--------- -------------- ------------ ------------
Royal Mail revenue GBP139m GBP75m GBP179m GBP200m GBP380m
year on year change(1) higher to GBP150m higher to GBP400m to GBP580m
higher higher higher
--------- -------------- ------------ ------------
Net cost of mix change GBP(85)m GBP(140-160)m GBP(95)m GBP(115)m GBP(210)m
from Letters to Parcels
--------- -------------- ------------ ------------
Cost of COVID-19* GBP(75)m GBP(120)m GBP(85)m GBP(70)m GBP(155)m
--------- -------------- ------------ ------------
International conveyance GBP(32m) (GBP30m) (GBP62m)
costs**
--------- -------------- ------------ ------------
1. Includes elections in 2019-20 (GBP82 million)
* Costs of elevated absence, social distancing, additional
protective equipment and other COVID-19 related costs
** The increase in the costs of overseas conveyance on export
mail.
GLS AGM (September) Latest view
-------------------
YTD 30/8 FY20-21 H1 (actual) H2 FY20-21
Revenue Growth 19% 10-14% 22% 20%-24% 21%-23%
--------- -------- -------- --------
Adjusted operating
profit margin 8.1% c. 7% 8.9% c. 7% c. 8%
--------- -------- -------- --------
Royal Mail
Letters revenue
In the second half, we expect tighter economic conditions and
uncertainty associated with both the economy and Brexit, with the
rate of decline projected to slow vs. H1 assuming the current
trajectory of business recovery is maintained, driven largely by a
partial recovery in advertising mail revenues. This would result in
an estimated decline of 12% year on year in the second half.
FY2020-21 letter revenue is therefore estimated to decline 16%,
in line with our original scenario from June.
A 1% change from our current projection would impact letter
revenues in the remainder of the year by c. GBP15 million.
Parcels revenue
In the second half, if customer behaviours remain similar to our
current experience, we project continued strong growth, with
revenues up 30%.
Domestic parcel revenue growth is expected to be 35% in the
second half, a result of the second national lockdown, and
potential subsequent localised lockdowns, but with significant
uncertainty in respect to customer behaviours in Q4.
International parcels revenue growth is expected to drop to 7%
in H2, with full year growth of 14%, predominantly driven by the
expected impact that Brexit will have on our export parcel market
in the final quarter.
A 1% change from our current projection would impact parcel
revenues in the remainder of the year by c. GBP20 million.
Costs
The accelerated growth in parcels requires investment in
additional manual sortation resource and incremental logistics
costs, resulting in a projected net cost of mix change within our
core network of around GBP210 million. Given our outlook on letters
has remained broadly consistent since June, the additional mix
costs we might now expect to incur relate to our revised view that
parcel growth will be stronger than previously anticipated in the
second half.
The implied incremental cost of each percentage point increase
in domestic parcel revenue is c.GBP8 million. This short-term
incremental cost illustrates the investment projected to be
required to handle and deliver additional volumes before any
inflationary cost pressures or efficiencies. This incremental cost
is higher in Q3 than at other times of the year since the network
is already operating at near capacity, hence it is more difficult
to absorb work across the pipeline.
The "one off" costs of COVID-19 include the costs of covering
higher than usual absence levels within our core frontline
operational network, as well as the provision of protective
equipment. These costs also include the costs associated with
deployment of social distancing measures. For FY2020-21, these are
projected to be around GBP155 million. COVID-19 "one off" costs
have increased since the September update driven by revised absence
levels now anticipated following both national and local
lockdowns.
The growth in International revenue is associated with material
price increases in many markets. This has resulted in revenue
growth but also significant increases in the costs of overseas
conveyance on export mail.
Royal Mail adjusted operating profit
If Royal Mail revenue outturns at the higher end of the
projected scenario range for FY2020-21, we would anticipate
adjusted operating profit to be better than breakeven.
GLS
The scenario now shows revenue growth is anticipated to be
20%-24% in the second half and 21%-23% for the full year. Operating
profit margin is anticipated to be c.8%, driven by GLS' strong
performance in the first half of the year and the recent positive
impact of the new lockdown restrictions in several geographies.
The rest of year carries recessionary uncertainty and consequent
risk of lower volumes than were observed earlier in the year.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board has considered the principal risks faced by the Group
for the remaining six months of the year and has provided an update
on those risks as described at pages 62 to 72 of the Royal Mail plc
Annual Report and Financial Statements 2019-20:
www.royalmailgroup.com/media/11212/royal-mail-plc-annual-report-and-accounts-2019-20.pdf
COVID-19
The Group continues to face challenges due to the COVID-19
pandemic and the uncertainty as to how this might evolve over the
remainder of 2020 and into 2021. Lockdowns imposed by Governments
in the UK and Europe and the potential for further lockdowns and /
or other restrictive measures to mitigate infection rates creates
uncertainty over customer behaviour and the associated impact on
our business. COVID-19 is an overarching and interrelated risk
rather than a single principal risk.
The Board has considered the key principal risks most
significantly affected by the pandemic and provided an update on
these as follows:
Principal COVID-19 impact Mitigating actions
risk
Efficiency Parcels revenue has now exceeded We will move forward with
letters as a result of strong our transformation programme,
growth during the pandemic targeting opportunities for
in the UK. However, significant efficiency savings with more
costs have been incurred due revisions of the operations,
to the manual sortation of our network change programme
much of this growth and costs and continuous improvement
relating to COVID-19 such as activity.
protective equipment, use of We have signed a contract
overtime and agency staff, for the installation of four
restructuring costs and social more Parcel Sorting Machines,
distancing measures. Due to the first of which will start
the uncertain risks over future shortly after Christmas and
infection rates, there are the remainder to be completed
challenges in being able to in 2021-22.
accurately predict volumes We have commenced the construction
and potential impact on absence of our Midlands parcels hub
rates. and the North West hub remains
on track to come into operation
A number of network trials in 2022.
were delayed by the onset of We want to restart our trial
the pandemic affecting roll activity for Automated Hours
out of key transformation programmes Data Capture as soon as possible
Automated Hours Data Capture with a plan for national rollout
and Resource Scheduler. Work in 2021-22 following successful
is underway to progress these. conclusion of these trials.
Dedicated van routes have
been maintained during the
pandemic at trial sites with
further deployments planned
in the second half of the
year to inform the national
roll out.
-------------------------------------- --------------------------------------
Customer expectations Royal Mail's letters business We continue to focus on winning
and Royal performance remains closely and retaining as much of the
Mail's responsiveness aligned to UK economic conditions. current parcel growth as possible,
to market For the first half of the year, with an emphasis on those
changes addressed letter volumes (excluding customers and sectors that
elections) declined 28% with represent long term growth
total letters revenue down opportunities.
20.5%. This has been offset We will continue to support
by strong parcels growth of this with regular service
31%, revenue of 33.2%, driven feature developments and continuous
by an increase in e-commerce enhancements to our digital
as people shop more online access and service channels.
during COVID-19 restrictions. This includes leveraging parcel
Q4 remains challenging with technology investments to
a possible parcels volume slowdown bring to market new features
due to recessionary impacts to improve convenience and
across our footprint. customer control in the UK
The impact of Brexit and UPU and internationally.
rates will be key drivers of Our range of letter products,
international volumes in Q4. incentives and offers are
designed to demonstrate how
mail can help businesses.
We will deploy a range of
appropriate incentives to
encourage customers to reconnect
with using mail.
Economic and There was an unprecedented We have maintained a strong
political decline in GDP in the three liquidity position, with good
environment months to June 2020. While levels of cash, limited financial
the economy has started to debt and retained access to
recover, the extent to which a GBP925 million bank syndicate
it will continue to do so is facility.
highly uncertain. The rising Existing covenants have been
number of COVID-19 infections waived until March 2022 and
across the country, and the replaced with a basic liquidity
increasing use of restrictions, covenant.
pose a threat to economic recovery. We are implementing a range
There are a very wide range of immediate cost control
of views amongst economic forecasters activities and have enacted
on the potential path for GDP a measured reduction in investment
over the next few months. in the short term to underpin
A sharp and sustained economic our financial position.
downturn in our core markets The Group has the ability
in 2020-21 is expected. As to access the COVID Corporate
in the UK, economic growth Financing Facility (CCFF)
in the Eurozone has declined of up to GBP300 million until
substantially and the medium-term 19 May 2021 unless an extension
outlook is highly uncertain. is requested from the Bank
of England by 31 December.
--------------------------------------- -------------------------------------
Our UK Regulatory COVID-19 has accelerated the We continue to work with Ofcom
Framework shift in volumes from letters and Government on the financial
to parcels and has underlined sustainability of the Universal
the need for us to adapt to Service to ensure it reflects
the rapidly changing needs changing consumer and SME
of the customer. Our own research needs. We await the outcome
has shown that customers want of Ofcom's User Needs Review
more frequent and convenient with interest and continue
parcel deliveries whilst retaining to work with Ofcom regarding
the 'one price goes anywhere' our transformation plan which
principle and next working will further improve efficiency
day letter service. and respond to changing customer
demands.
--------------------------------------- -------------------------------------
Health, safety Our employees are classified We continue to prioritise
and wellbeing as key workers as we form part mitigating the risks to our
of the country's essential employees, contractors, agency
infrastructure. We have an workers and members of the
important role to play in keeping public posed by COVID-19,
parcels and mail moving during including enhancing our sick
the COVID-19 pandemic. COVID-19 pay policy and updating our
poses an increased risk to operating procedures to limit
public health and this means contact between colleagues
that the effectiveness of our and customers.
controls and processes to protect We are responding to changing
our employees, contractors, PHE and WHO instructions and
agency workers and members guidance through the development
of the public, are even more of internal policies, procedures,
important. risk assessments, instructions
and guidance. These arrangements
are communicated to employees
through a dedicated, comprehensive
multi-media communications
campaign.
Business Continuity COVID-19 and the Government's We continue to prioritise
and crisis response to contain the spread the protection of our people,
management of the disease continues to the country and our customers,
have a significant effect on whilst keeping parcels and
our UK and International businesses. mail moving. We actively monitor
Royal Mail staff are recognised the evolving COVID-19 threat
by Government as key workers, and have invoked a comprehensive
essential to keeping the country business continuity and crisis
connected during this time. management response across
We are adapting and responding the Group in line with our
to the rapidly evolving risks framework. We continue to
accordingly, in line with our engage closely with the Government,
existing Business Continuity public health authorities,
Management Framework. Ofcom, and customers to implement
necessary measures in response
to Government, PHE and WHO
advice. Steps are being taken
to minimise the impact on
services as much as possible.
-------------------------------------- -------------------------------------
In addition, the Board has considered the key principal risks
more generally and provided an update as follows:
Industrial Action
We continue to work with CWU during the COVID-19 pandemic to
ensure we achieve our objectives to safeguard the health and
wellbeing of our people and the communities we serve; and continue
to deliver the best possible service to our customers during the
pandemic.
We have been engaged in talks with CWU and these are at an
important stage. We have been encouraged by our talks with CWU,
which have intensified over the past few weeks. With improved
revenue performance, we have focused on how we can deliver
efficiency and productivity which will enable the business to see
the benefits of operational leverage.
We have been clear on our programme and required operational
changes and laid out the benefits to CWU which we believe can be
delivered to fund future front line pay increases, capture revenue
opportunity and deliver a growth agenda to support jobs.
There is common ground on this vision but we would like to reach
agreement with CWU soon in order to move ahead with our programme
that will enable the business to see the benefits of operational
leverage and deliver a financially sustainable future.
Pensions arrangements
The Pension Schemes Bill, which will enable CDC pension schemes
for the first time under UK law, is now currently progressing
through Parliament. Once the Bill has received Royal Assent,
detailed regulations will need to follow before Royal Mail will be
able to introduce its proposed CDC scheme.
Economic and political environment
The deadline in the Brexit Withdrawal Agreement to extend the
transition period has now passed and we await the outcomes of the
talks between the UK Government and EU regarding trading
arrangements post 1st January 2021. The rules which apply to non-EU
imports are expected to be extended to EU items at the end of the
transition period. Similarly, we would expect the EU to treat UK
imports as it does non-EU imports today. The impact on cross-border
parcel volumes will depend on the nature of the UK's future trading
relationships, and the future EU/UK customs and VAT
arrangements.
The biggest operational impact to the Group would be in the
Customs clearance process. We believe the immediate risk to our
domestic operations is low, we are working to ensure the smooth
flow of mail across borders and are well placed to manage the
impact of changes to Customs processing.
There is still a great deal of uncertainty regarding the
treatment of traffic from the EU to Great Britain and from Great
Britain to Northern Ireland. We continue to seek further clarity
from Government on whether any changes will be required in the
future.
Risks that remain unchanged
The following risks remain unchanged from those disclosed in the
2019-20 Annual Report and Financial Statements:
-- Scale up and Grow GLS
-- Competition Act investigation
-- Capability - talent and strategic workforce planning
-- Major breach of information security, data protection regulation and/or cyber attack
-- Environment and sustainability
FINANCIAL REVIEW
Reported results and Alternative Performance Measures (APMs)
Reported results are prepared in accordance with International
Financial Reporting Standards (IFRS) and are set out in the
sections entitled 'Presentation of results and Alternative
Performance Measures' (APMs) and 'Condensed consolidated financial
statements'. APMs used in this report are consistent with the
2019-20 Annual Report. Updates to any APMs are set out in the
section entitled 'Alternative Performance Measures (APMs)'.
Group, Royal Mail and GLS reporting periods
The Group and Royal Mail results are for the 26 week period to
27 September 2020. The GLS financial period is the 6 months to 30
September 2020.
Group results
Reported results
Summary results (GBPm) Reported Reported
26 weeks 26 weeks ended
ended 27 29 September
September 2019
2020
=========== =================
Revenue 5,671 5,166
Operating costs (5,678) (5,044)
------------------------------------------------- ----------- =================
Operating (loss) / profit before specific items (7) 122
Operating specific items (13) (61)
------------------------------------------------- ----------- =================
Operating (loss) / profit (20) 61
Non-operating specific items (3) 88
Net finance costs (19) (19)
Net pension interest (non-operating specific
item) 59 43
------------------------------------------------- =========== =================
Profit before tax 17 173
------------------------------------------------- ----------- =================
Earnings per share (basic) 1.4p 15.3p
================================================= =========== =================
Group revenue increased by GBP505 million, largely due to higher
parcel revenue in GLS and Royal Mail, which more than offset the
decline in Royal Mail letters revenue. The Group operating loss
before specific items of GBP7 million, was driven by higher
operating costs mainly as a result of COVID-19, the cost of mix
change and volume and the previously announced management
restructure in Royal Mail. Operating specific items were GBP13
million and non-operating specific items GBP3 million.
The cost of the management restructure has not been treated as a
specific item, in line with market guidance issued in May 2019,
where we communicated that transformation costs (which includes
project costs and voluntary redundancy costs) would be part of
operating profit. The aim of this change was to simplify the
measures reported externally. Further details on specific items are
included in the section entitled 'Specific items and pension charge
to cash difference adjustment' and Alternative performance measures
(APMs).
Profit before tax of GBP17 million comprises a GBP133 million
loss in Royal Mail (H1 2019-20: GBP95 million profit) and a GBP150
million profit in GLS (H1 2019-20: GBP78 million profit). Basic
earnings per share decreased to 1.4 pence. A full reconciliation of
reported to adjusted results is set out in the section entitled
'Presentation of results'.
Adjusted results
Summary results (GBPm) Adjusted Adjusted
26 weeks ended 26 weeks ended
27 September 29 September
2020 2019 Change
------------------------ =============== =============== ---------
Royal Mail 3,828 3,649 4.9%
GLS 1,870 1,537 21.7%
Intragroup revenue (27) (20) 35.0%
------------------------ --------------- --------------- ---------
Group revenue 5,671 5,166 9.8%
======================== =============== =============== =========
Royal Mail (3,957) (3,574) 10.7%
GLS (1,704) (1,447) 17.8%
Intragroup costs 27 20 35.0%
------------------------ --------------- --------------- ---------
Group operating costs (5,634) (5,001) 12.7%
------------------------ --------------- --------------- ---------
Royal Mail (129) 75 (272.0%)
GLS 166 90 84.4%
------------------------ --------------- --------------- ---------
Group operating profit 37 165 (77.6%)
======================== =============== =============== =========
Operating profit margin 0.7% 3.2% (250 bps)
======================== =============== =============== =========
Group revenue grew by 9.8% in the period. Total parcel revenue
continued to grow as a percentage of Group revenue, accounting for
73.0% (H1 2019-20: 62.8%). Intragroup revenue represents revenue
from trading between Royal Mail and GLS, principally due to
Parcelforce Worldwide operating as GLS's partner in the UK.
Group operating costs increased by 12.7%. Distribution and
conveyance costs includes GBP27 million (H1 2019-20: GBP20 million)
of intragroup costs from trading between Royal Mail and GLS,
principally due to Parcelforce Worldwide operating as GLS's partner
in the UK.
Group operating profit margin was down 250 basis points, driven
by the lower level of profitability in Royal Mail.
The main factors impacting revenue and operating costs are
described in the sections entitled 'Royal Mail' and 'General
Logistics Systems (GLS)'.
Specific items and pension charge to cash difference
adjustment
26 weeks ended 26 weeks ended
27 September 29 September
(GBPm) 2020 2019
================================================ ============== ==============
Pension charge to cash difference adjustment
(within people costs) (44) (43)
Operating specific items
Regulatory fine - (51)
Impairment of assets (3) -
Employee Free Shares charge - (4)
Amortisation of acquired intangible assets (10) (10)
Legacy / other credits - 4
================================================ ============== ==============
Industrial diseases claim cost - (1)
Other - 5
================================================ ============== ==============
Total operating specific items (13) (61)
================================================ ============== ==============
Non-operating specific items
(Loss) / profit on disposal of property, plant
and equipment (3) 88
Net pension interest 59 43
Total non-operating specific items 56 131
================================================ ============== ==============
Total specific items and pensions adjustment
before tax (1) 27
================================================ ============== ==============
Total tax credit on specific items and pensions
adjustment 11 15
================================================ ============== ==============
The difference between the pension charge and cash cost (pension
charge to cash difference adjustment) comprises the difference
between the IAS 19 income statement pension charge rate of 19.7%
for the Defined Benefit Cash Balance Scheme (DBCBS) from 30 March
2020 and the actual cash payments agreed with the Trustee of
15.6%.
The pension charge to cash difference adjustment was GBP44
million in the period and is expected to be around GBP86 million
for the full year.
Amortisation of acquired intangible assets of GBP10 million (H1
2019-20: GBP10 million) relates to acquisitions in GLS.
The loss on disposal of GBP3 million (H1 2019-20: GBP88 million
profit) relates to various losses on disposal of property, plant
and equipment. The prior period profit largely relates to the land
sale of plots B & D and C at Nine Elms.
Non-operating specific items includes a net pension interest
credit of GBP59 million (H1 2019-20: GBP43 million), which was
higher than the prior period due to a higher pension surplus
position at 29 March 2020 compared with 31 March 2019.
Net finance costs
Reported net finance costs of GBP19 million (H1 2019-20: GBP19
million) largely comprised interest on bonds of GBP12 million (H1
2019-20: GBP6 million), interest on a bank syndicate loan facility
of GBP3 million (H1 2019-20: GBPnil), and interest on leases of
GBP14 million (H1 2019-20: GBP14 million). This is offset by
interest receivable of GBP13 million (H1 2019-20: GBP4 million).
The bank syndicate loan facility was extended by one year to
September 2025 with the option to extend for a further one
year.
Facility Drawn Facility
Facility Rate (GBPm) (GBPm) end date
----------------------------- ------------ -------- ------- ---------
EUR500 million bond 2.5% 456 456 2024
EUR550 million bond 2.7% 501 501 2026
Bank syndicate loan facility LIBOR+0.475% 925 - 2025
----------------------------- ------------ -------- ------- ---------
Total 1,882 957
============================= ============ ======== ======= =========
The blended interest rate on gross debt, including leases for
2020-21, is expected to be approximately 3%. The impact of
retranslating the EUR500 million and EUR550 million bonds is
accounted for in equity.
Taxation
26 weeks ended 26 weeks ended
27 September 2020 29 September 2019
------------------------- ------------------------ ------------------------
(GBPm) Royal Mail GLS Group Royal Mail GLS Group
========================= ========== ===== ===== ========== ===== =====
Reported
(Loss)/profit before tax (133) 150 17 95 78 173
Tax credit / (charge) 33 (36) (3) 2 (22) (20)
Effective tax rate 24.8% 24.0% 17.6% n/a 28.2% 11.6%
Adjusted
(Loss)/profit before tax (142) 160 18 64 82 146
Tax credit / (charge) 24 (38) (14) (12) (23) (35)
Effective tax rate 16.9% 23.8% 77.8% 18.8% 28.0% 24.0%
========================= ========== ===== ===== ========== ===== =====
The Royal Mail adjusted tax credit of GBP24 million gives an
effective tax rate of 16.9% (H1 2019-20: 18.8%). The effective tax
rate on the credit is lower than the UK statutory rate mainly due
to an increase in a contingency provision and non-deductible
expenditure, which are only partially offset by technology
claims.
The GLS adjusted effective tax rate of 23.8% (H1 2019-20: 28.0%)
is lower than the prior year mainly due to the improved performance
of the US and France and the resulting reduction in non-recognition
of deferred tax assets on losses.
The Group adjusted effective tax rate is significantly impacted
by the blend of profits and losses. The GLS profits, which are
taxable at higher rates, are mostly offset by Royal Mail losses,
resulting in a high adjusted effective tax rate on a small net
profit.
The Group reported tax charge is GBP3 million on a reported
profit of GBP17 million. In addition to being impacted by the blend
of profits and losses, the tax charge is also impacted by the
non-taxable net pension interest income.
Adjusted earnings per share (EPS)
Adjusted basic EPS was 0.4 pence compared with 11.1 pence in the
prior period reflecting the trading performance of the Group.
In-year trading cash flow
26 weeks ended 26 weeks ended
27 September 29 September
(GBPm) 2020 2019
----------------------------------------------------- ============== ==============
Adjusted operating profit 37 165
Depreciation and amortisation 259 252
----------------------------------------------------- -------------- --------------
Adjusted EBITDA 296 417
Trading working capital movements 94 (105)
Share-based awards (LTIP and DSBP) charge adjustment 3 3
Gross capital expenditure (132) (113)
Net finance costs paid (24) (24)
Research and development expenditure credit 1 3
Income tax paid (19) (29)
In-year trading cash flow 219 152
===================================================== ============== ==============
In-year trading cash inflow was GBP219 million, compared with
GBP152 million in the prior period. This was mainly due to trading
working capital inflow (including voluntary redundancy costs) and
lower income tax paid, offset by a lower adjusted EBITDA and
increased capital expenditure.
Trading working capital inflow of GBP94 million was GBP199
million higher than the prior period, largely driven by the accrual
of voluntary redundancy costs (mainly for the management
restructure).
Income tax paid decreased by GBP10 million largely due to losses
made by Royal Mail and timing of GLS tax payments.
Gross capital expenditure
26 weeks ended 26 weeks ended
27 September 29 September
(GBPm) 2020 2019
-------------------------------- ============== ==============
Growth capital expenditure (86) (83)
Replacement capital expenditure (46) (30)
-------------------------------- -------------- --------------
Total (132) (113)
-------------------------------- -------------- --------------
Total gross capital expenditure was GBP132 million, of which GLS
spend was GBP54 million. Growth capital expenditure in GLS was
GBP14 million higher than the prior period. This is offset by GBP11
million lower growth capital expenditure in Royal Mail. Replacement
capital expenditure was GBP16 million higher than the prior period
predominantly driven by the timing of vehicle purchases and
increased spend on upgrading our data platforms. We continue to
invest in strategic projects in Royal Mail and GLS, including
expanding the GLS network, IT systems, activities supporting data
projects, and building our automated parcel hubs.
Net debt
A reconciliation of net debt is set out below.
26 weeks ended 26 weeks ended
27 September 29 September
(GBPm) 2020 2019
---------------------------------------------------- ============== ==============
Net debt brought forward at 30 March 2020 and
1 April 2019 (1,132) (300)
Capitalisation of leases under IFRS 16 - (1,062)
Free cash flow 188 245
---------------------------------------------------- -------------- --------------
In-year trading cash flow 219 152
Other working capital movements (14) (9)
Cash cost of operating specific items (2) (1)
Proceeds from disposal of property (excluding
London Development Portfolio), plant and equipment 2 5
Acquisition of business interests (3) (1)
Cash flows relating to London Development Portfolio (14) 99
---------------------------------------------------- -------------- --------------
Purchase of own shares - (3)
New lease obligation under IFRS 16 (non-cash) (38) (62)
Foreign currency exchange impact (24) (21)
Dividends paid to equity holders of the parent
Company - (169)
---------------------------------------------------- -------------- --------------
Net debt carried forward (1,006) (1,372)
==================================================== ============== ==============
Movements in GLS client cash are included within other working
capital. The amount held at 27 September 2020 was GBP34 million (H1
2019-20: GBP29 million). The cash cost of operating specific items
was an outflow of GBP2 million consisting of industrial disease
settlements and the cash cost of disposals.
Acquisition of business interests of GBP3m relates to deferred
consideration paid following the acquisition of Mountain Valley
Express (MVE) and Mountain Valley Freight Solutions businesses in
the prior year.
Cash outflow relating to the London Development Portfolio was
GBP14 million, consisting of infrastructure and enabling works
costs of GBP14 million for Mount Pleasant and GBP1 million for Nine
Elms, with a GBP1 million receipt relating to Nine Elms.
New lease obligations under IFRS 16 of GBP38 million relates to
additional lease commitments that were entered into during the
period.
Pensions
Details of each of the plans operated by Royal Mail are set out
below.
Defined Benefit Cash Balance Scheme (DBCBS)
An IAS 19 deficit of GBP345 million is shown on the balance
sheet in respect of the DBCBS. The scheme is not in funding deficit
and it is not anticipated that deficit payments will be required.
The DBCBS will be subject to triennial valuations, and the first
one will be performed as at 31 March 2021.
An IAS 19 pension service charge at 19.7% (GBP180 million) has
been charged to the income statement. The pension charge is greater
than the cash contribution rate as the assumed rate of future
increases in benefits (4.1%) is greater than the assumed discount
rate (1.5%).
The Group has made contributions at 15.6% (GBP143 million) of
DBCBS pensionable pay in respect of the scheme. Members contribute
6% (including Pension Salary Exchange).
Royal Mail Defined Contribution Plan (RMDCP)
Under the RMDCP, current and future RMDCP members in the
standard section contribute at the highest contribution tier
(employee: 6.0%; employer: 10.0%) unless they opt to contribute at
a lower level. The contribution rate for members not in the
standard section is employee: 5.0%; employer: 3.0%.
Royal Mail Pension Plan (RMPP)
The pre withholding tax accounting surplus of the RMPP at 27
September 2020 was GBP4,530 million, comprising assets of GBP12,031
million and liabilities of GBP7,501 million. The pre withholding
tax accounting surplus has reduced by GBP1,020 million in the
period, which is because the scheme's liabilities are linked to
changes in real corporate bond yields which fell significantly over
the period whereas the scheme's assets are linked to changes in
real Government bond yields which only reduced slightly over the
period. After the withholding tax adjustment, the accounting
surplus of the RMPP was GBP2,945 million at 27 September 2020. This
is an accounting adjustment with no cash benefit to the Group.
The triennial valuation of RMPP at 31 March 2018 was agreed on
19 July 2019. Based on this set of assumptions rolled forward, the
RMPP actuarial surplus on a technical provisions basis at 30
September 2020 was estimated to be around GBP279 million.
The RMPP closed in March 2018 to future accrual in its previous
form and the Group makes no service contributions in respect of
those liabilities.
Royal Mail Senior Executives Pension Plan (RMSEPP)
Following the purchase of an additional buy-in policy of
insurance in 2018-19, substantially all the liabilities of this
scheme are now covered by insurance policies. These significantly
reduce the potential risk to the Group in respect of this
scheme.
These insurance policies are considered assets of the RMSEPP and
do not confer any rights to individual members. Based on the rolled
forward assumptions used for the 31 March 2018 triennial valuation,
the RMSEPP actuarial surplus at 30 September 2020 was estimated to
be GBP7 million (31 March 2020: GBP9 million). The pre withholding
tax accounting surplus at 27 September 2020 was GBP8 million. The
RMSEPP closed in December 2012 to future accrual. The Group makes
no regular service contributions.
In accordance with the new Schedule of Contributions agreed as
part of the 2018 triennial valuation, around GBP500,000 a year is
to be paid for the period 1 April 2018 to 31 March 2025 in respect
of death-in-service lump sum benefits and administration
expenses.
The Trustees are considering the approach to be taken to address
the issue of unequal Guaranteed Minimum Pensions (GMPs) in respect
of the RMSEPP scheme but estimate that the cost of this will not be
material.
Cash pension costs for 2020-21
The Group expects to contribute around GBP285 million in the
2020-21 financial year in respect of DBCBS and RMPP with employees
expected to contribute around GBP105 million. The Group also
expects to contribute around GBP110 million into the defined
contribution plans in the Group. Total employer contributions in
respect of all pension schemes will therefore be around GBP400
million for the year.
Collective Defined Contribution (CDC) scheme and Defined Benefit
Lump Sum Scheme (DBLSS)
We have, for some time, been working closely with the CWU and
other stakeholders to make CDC a reality for Royal Mail and its
people.
The Pension Schemes Bill, which will enable CDC pension schemes
for the first time under UK law, is now currently progressing
through Parliament. Once the Bill has received Royal Assent
detailed regulations will need to follow. Once these, and the
authorisation regime that CDC schemes will need to complete, are in
place and after any further legislative and regulatory changes have
been made, Royal Mail aims to set up the first scheme of this kind
in the UK.
Based on current expectations, the CDC scheme will be accounted
for as a defined contribution scheme. The DBLSS will be accounted
for as a defined benefit scheme with the accounting treatment
expected to be similar to the transitional DBCBS. The new
arrangements will have fixed employer contributions of 13.6% and
employee contributions of 6%. The total annual cost of the proposed
scheme to Royal Mail is expected to be broadly similar to the
current costs.
Property
We have invested GBP15 million in the first half of the year on
works to separate the retained operational sites from the
development plots at Mount Pleasant and infrastructure works at
Nine Elms.
Mount Pleasant
Further cash proceeds are to be paid in contractually agreed
staged payments in 2020-21, with the final balance of consideration
to be paid in 2024. We have received staged payments totalling
GBP84 million to date. All proceeds received up to 2020-21, in
aggregate, are expected to cover Royal Mail's outgoings on the
separation and enabling works up to that point.
Nine Elms
To date we have received GBP101 million cash proceeds on formal
completion of the sale of Plots B and D to Greystar and GBP22
million cash proceeds on formal completion of the sale of Plot C to
Galliard Homes. We have committed to reinvesting around GBP30
million for infrastructure works associated with these plots.
Further investment will be required in relation to
infrastructure and Linear Park for the remaining plots, subject to
future sales.
Dividends
No final dividend was paid for the financial year 2019-20.
Royal Mail
Reported results
Summary results (GBPm) Reported Reported
26 weeks ended 26 weeks ended
27 September 29 September
2020 2019
================================================ =============== ===============
Revenue 3,828 3,649
Operating costs (4,001) (3,617)
================================================ =============== ===============
Operating (loss) / profit before specific items (173) 32
Operating specific items (3) (57)
================================================ =============== ===============
Operating loss (176) (25)
================================================ =============== ===============
Operating loss margin (4.6%) (0.7%)
================================================ =============== ===============
The detailed reported results for Royal Mail are set out in the
paragraph entitled 'Segmental reported results'. Reported revenue
was GBP179 million higher than the prior period driven by strong
parcels growth. The prior period benefitted from the European
Parliamentary election mailings. We have seen a substantial shift
in our revenue mix from letters to parcels.
The operating loss before specific items of GBP173 million, is
driven by increased people, distribution and conveyance costs as a
result of the mix change from letters to parcels, the impact of
COVID-19, international conveyance and restructuring costs.
Operating specific items of GBP3 million primarily relates to the
impairment of assets. Operating specific items in the prior period
largely related to a provision for a regulatory fine of GBP50
million and associated interest from Ofcom and the Employee Free
Shares Charge of GBP4 million.
Adjusted results
The Group makes adjustments to reported results under IFRS to
exclude specific items and the IAS 19 pension charge to cash
difference adjustment as set out in the section entitled 'Specific
items and pension charge to cash difference adjustment'.
Adjusted
26 weeks Adjusted
ended 26 weeks ended
27 September 29 September
Summary trading results (GBPm) 2020 2019 Change
-------------------------------------- ------------- --------------- --------
Letters 1,529 1,923 (20.5%)
Parcels 2,299 1,726 33.2%
-------------------------------------- ------------- --------------- --------
Revenue 3,828 3,649 4.9%
Operating costs (3,957) (3,574) 10.7%
-------------------------------------- ------------- --------------- --------
Operating (loss) / profit (129) 75 (272.0%)
-------------------------------------- ------------- --------------- --------
Operating (loss) / profit margin (3.4%) 2.1% (550bps)
-------------------------------------- ------------- --------------- --------
Letters volumes (m units)
Addressed letters 3,423 4,912 (30%)
Addressed letters (excluding election
mailings) (28%)
Unaddressed letters 686 1,244 (45%)
-------------------------------------- ------------- --------------- --------
Total letters 4,109 6,156 (33%)
-------------------------------------- ------------- --------------- --------
Parcels volumes (m units)
Domestic 681 492 38%
International 125 121 3%
-------------------------------------- ------------- --------------- --------
Total parcels 806 613 31%
-------------------------------------- ------------- --------------- --------
Royal Mail revenue was up 4.9%. We have seen a substantial shift
in our revenue mix with parcel revenue up 33.2%, more than
offsetting the letter revenue decline of 20.5%. Parcels revenue now
represents 60% of total Royal Mail revenue, compared with 47% in
the prior period.
Royal Mail parcel volumes increased by 31%. Royal Mail domestic
account parcel volumes, excluding Amazon, were up 51% driven by
increased e-commerce sales, resulting from the substantial shift in
retail spend from physical stores to online, seen following
lockdown. Royal Mail Tracked 24(R) /48(R) and Tracked Returns(R)
volumes, our key e-commerce products, grew by 72%. This growth has
been supported by the launch of our suite of Inflight Delivery
Options, the number one ask from our account sending customers.
Parcelforce Worldwide revenue performance was strong. Volumes
increased by 16%, due to increased traffic from our B2C customers
resulting from COVID-19, together with some new business wins. We
have also experienced significant growth in our import volumes
particularly from our partners in Europe.
Our international parcels business experienced revenue growth in
the period despite challenging trading conditions at the start of
the year. Import volumes were up driven by strong demand for our
cross-border offering. Export revenues were higher than the prior
period despite a fall in volumes. Cost pressures in overseas
delivery and shortage in airline conveyance capacity have increased
the cost of exporting parcels. The impact of reflecting these cost
pressures in our prices has led to a reduction in contract export
parcel volumes. Despite this, consumer and small and medium
enterprise traffic has been buoyant during the period driven by
heightened e-commerce demand globally.
Total parcel revenue increased by 33.2% reflecting the impact of
COVID-19 on mix and volume growth. In account, we saw our higher
average unit revenue tracked products grow faster than their
untracked equivalents, and customers up trading to our more premium
products. In non-account, our online parcel products experienced
significant growth, and overall volumes through Post Office Limited
(POL) were strong.
Total letter volume decline was 33%. Addressed letter volumes
excluding election mailings were down 28%. In addition to ongoing
structural decline, letter volume decline has been accelerated by
the impact of COVID-19, which has negatively impacted economic
activity and ongoing business uncertainty.
The pandemic has significantly impacted Advertising mail and
meter traffic. Overall, Advertising mail revenue of GBP160 million
was down 47.8%. Unaddressed letter volumes, which is part of
Advertising mail and attracts a much lower AUR than Consumer and
Business mail, were down 45% in the period. Business Mail has also
been heavily impacted, although less so than Advertising mail.
However, stamped traffic, supported by social mailings, and
fulfilment mailings continues to be more resilient, holding up well
in the face of declines elsewhere.
Total letter revenue decreased by 20.5%.
Adjusted operating costs
Adjusted Adjusted
26 weeks ended 26 weeks ended
27 September 29 September
(GBPm) 2020 2019 Change
============================================ =============== =============== =======
People costs (2,774) (2,495) 11.2%
============================================ =============== =============== =======
People costs excluding voluntary redundancy (2,627) (2,489) 5.5%
Voluntary redundancy costs (147) (6) 2350.0%
-------------------------------------------- --------------- --------------- -------
Non-people costs (1,183) (1,079) 9.6%
-------------------------------------------- --------------- --------------- -------
Distribution and conveyance costs (434) (390) 11.3%
Infrastructure costs (381) (381) flat
Other operating costs (368) (308) 19.5%
-------------------------------------------- --------------- --------------- -------
Total (3,957) (3,574) 10.7%
============================================ =============== =============== =======
Total adjusted operating costs increased by 10.7%.
Royal Mail adjusted people costs were 11.2% higher, primarily
due to the growth in parcel volumes, higher sick absence and agency
costs, and the cost of social distancing as a result of the
COVID-19 pandemic. Within people cost, we estimate the cost of mix
change to be GBP75 million and the cost of COVID-19 to be GBP41
million. We have managed to offset some of these cost pressures
through savings initiatives. People costs also include assumptions
on a 2020-21 frontline pay award which is still under negotiation
with CWU and may change once discussions are completed. Any
difference between our current assumptions and the final pay
agreement will be included in the second half. Transformation costs
of GBP165 million are included in people costs, comprising GBP18
million of project costs and GBP147 million of voluntary redundancy
costs relating primarily to the management restructure announced in
June 2020.
There was a net reduction of 2,430 heads to 139,036 (compared
with March 2020).
Non-people costs increased by 9.6%, reflecting the impact of
higher volume, COVID-19 and inflationary costs pressures. Within
non-people costs, we estimate the cost of mix change to be GBP20
million (mainly distribution and conveyance) and the cost of
COVID-19 to be GBP44 million (mainly the purchase of protective
equipment to safeguard our frontline employees). We have also faced
cost pressures in international conveyance costs, driven by the
shortage in airline conveyance capacity as a result of
COVID-19.
Distribution and conveyance costs increased by 11.3%. This was
largely driven by higher domestic and international conveyance
costs as a result of volume growth and the impact of COVID-19.
Terminal dues were GBP12 million lower driven by lower export
volumes which were partially offset by contracted rate rises. Total
diesel and jet fuel costs increased to GBP83 million (H1 2019-20:
GBP77 million), mainly as a result of volume related network growth
and inefficiencies driven by the impact of social distancing on our
operations. We expect diesel and jet fuel costs to be around GBP186
million in 2020-21 as these impacts continue. This is GBP21 million
higher than our previous expectation, which was communicated in the
2019-20 annual report.
Infrastructure costs were flat in the period. Depreciation and
amortisation costs were broadly in line with the prior period.
Higher property costs, driven largely by one off cost associated
with exiting some of our sites, were offset by lower IT costs in
the period.
Other operating costs increased by 19.5%, driven by the purchase
of protective equipment to safeguard our frontline employees in
response to the COVID-19 pandemic (c. GBP40 million). To date, we
have purchased 19.6 million face masks, 46.9 million pairs of
gloves, 3.7 million packets of wipes and 3.6 million bottles of
hand sanitiser. POL and compensation costs have also increased
driven by parcel volume growth. Transformation project costs of
GBP14 million (H1 2019-20: GBP20 million) are also included in
other operating costs.
Adjusted operating loss
Adjusted operating loss of GBP129 million, including voluntary
redundancy costs, compared to GBP75 million profit in the prior
period. Adjusted operating loss margin of 3.4%, down 550 basis
points compared with the first half of 2019-20.
General Logistics Systems (GLS)
Reported results
Reported Reported
6 months 6 months
30 September 30 September
Summary results (GBPm) 2020 2019
Revenue 1,870 1,537
Operating costs (1,704) (1,447)
--------------------------------------- ------------- -------------
Operating profit before specific items 166 90
Operating specific items (10) (4)
--------------------------------------- ------------- -------------
Operating profit 156 86
Operating profit margin 8.3% 5.6%
--------------------------------------- ------------- -------------
The detailed reported results are set out in the paragraph
entitled 'Segmental reported results'. GLS reported revenue grew by
GBP333 million. Operating profit before specific items increased by
GBP76 million. The operating specific items charge of GBP10 million
was due to the amortisation of acquired intangible assets. The
prior period charge largely related to the amortisation of acquired
intangible assets, partially offset by a GBP5 million provision
release. GLS operating profit was GBP70 million higher than in the
prior period.
Both the reported and the adjusted results for the first half of
2020-21 include 6 months of contribution from the acquisition of
Mountain Valley Express (MVE) and Mountain Valley Freight Solutions
businesses on 30 September 2019. There is no contribution included
in the prior period.
Adjusted results
The Group makes adjustments to reported results under IFRS to
exclude specific items as set out in the paragraph entitled
'Specific items and pension charge to cash difference adjustment'
.
Adjusted Adjusted
6 months 6 months
Summary trading results 30 September 30 September
(GBPm) 2020 2019 Change
------------------------ ============= ============= -------
Revenue 1,870 1,537 21.7%
Operating costs (1,704) (1,447) 17.8%
------------------------ ------------- ------------- -------
Operating profit 166 90 84.4%
Operating profit margin 8.9% 5.9% 300bps
(EURm)
------------------------ ------------- ------------- -------
Revenue 2,088 1,730 20.7%
Operating costs (1,903) (1,629) 16.8%
------------------------ ------------- ------------- -------
Operating profit 185 101 83.2%
Volumes (m) 387 321 21%
======================== ============= ============= =======
Volumes were up 21%. This growth was driven by COVID-19 as GLS
continues to benefit from increased B2C parcel deliveries driven by
customers ordering more products online. GLS domestic and
international volumes grew in almost all markets.
During the period, the impact of foreign exchange movements
increased revenue by GBP15 million and operating costs by GBP14
million. Consequently, there was no material foreign exchange
impact on adjusted operating profit in Sterling terms.
Revenue increased by 21.7%. Excluding acquisitions, revenue was
up 20.1% driven by higher volumes. Revenue growth was achieved in
the majority of markets, with significant growth in those markets
having an existing greater B2C exposure such as Spain, Eastern
Europe and Denmark. The three major markets (Germany, Italy and
France) accounted for 53.6% of total GLS revenue (H1 2019-20:
54.9%), with the North America markets contributing 9.6% (H1
2019-20: 9.8%).
Germany
In Germany, the largest GLS market by revenue, turnover grew by
20.7% driven by B2C growth in domestic and export markets and
improved pricing. Operating profits increased, resulting from the
scale effect from higher volumes and cost containment measures.
Italy
GLS Italy revenue grew by 12.6% driven by higher volumes, but
with some pressure on pricing due to a decline in average parcel
weights resulting from an increasing proportion of B2C volumes.
Operating margin declined slightly due price pressure, which was
not fully compensated by lower unit costs.
France
GLS France revenue grew by 19.2%, benefitting from higher
volumes, including new customer acquisitions and improved pricing.
Significant improvement was achieved, compared with an operating
loss of EUR11 million in the prior period. The results in the first
half of the year include net one-off effects from the COVID-19
situation. Nevertheless, initiatives to secure the improvements
visible during the period will be pursued.
Spain
GLS Spain continued its positive financial trajectory. Revenue
grew by 49.5% in the period, with the strong performance driven by
growth in B2C volumes and pricing initiatives. Operating profit
improved significantly, compared with a small loss in the prior
period. The GLS Spain business is considered stable.
North America
In the US, revenue grew by 13.5% excluding the impact of
acquisitions, 15.1% on a constant currency basis. Financial
performance has continued to improve, benefitting from the
contribution of the acquired MVE business. Profits in the first
half were around breakeven, compared with a loss of GBP3 million in
the prior period. Optimisation of the operational set-up to take
advantage of synergies provided by the MVE network are ongoing.
GLS Canada revenue declined by 6.5%, 3.0% on a constant currency
basis. GLS Canada, being a more heavily focused B2B and freight
business, was more significantly impacted by COVID-19 than pure
parcel operations in most other GLS markets. Nevertheless,
operating profit and margin improved compared with the prior period
as a result of measures introduced to streamline the cost base in
response to the crisis.
Other developed European markets (including Austria, Belgium,
Denmark, Ireland, Netherlands and Portugal)
Revenue growth was achieved in all GLS' other developed European
markets. In particular, there was good volume and revenue growth in
Denmark and The Netherlands.
Other developing/emerging European markets (including Croatia,
Czech Republic, Hungary, Poland, Romania, Slovakia and
Slovenia)
Other developing markets, where GLS has a high exposure to B2C,
continued to grow strongly with overall revenue growth of 30.6 % in
the period.
Adjusted operating costs (GBPm)
Adjusted Adjusted
6 months 6 months
30 September 30 September
(GBPm) 2020 2019 Change
----------------------------------- ============= ============= -------
People costs (398) (353) 12.7%
Non-people costs (1,306) (1,094) 19.4%
----------------------------------- ------------- ------------- -------
Distribution and conveyance costs (1,152) (959) 20.1%
Infrastructure costs (111) (96) 15.6%
Other operating costs (43) (39) 10.3%
----------------------------------- ------------- ------------- -------
Total (1,704) (1,447) 17.8%
----------------------------------- ------------- ------------- -------
Total adjusted operating costs increased by 17.8%, or 16.3%
excluding acquisitions.
People costs increased by 12.7%, or 9.8% excluding
acquisitions.
Non-people costs increased by 19.4%, or 18.4% excluding
acquisitions. Distribution and conveyance costs grew broadly line
with volume, increasing by 20.1%. Infrastructure and other
operating costs increased by 15.6% and 10.3% respectively,
including higher depreciation and repairs and maintenance costs,
partly offset by lower travel and marketing costs.
Adjusted operating profit
Adjusted operating profit was GBP166 million. There was no
material foreign exchange impact on operating profit in Sterling
terms.
Adjusted operating profit margin of 8.9% was 300 basis points
higher than the prior period.
Presentation of Results and Alternative Performance Measures
(APMs)
Presentation of results
Consolidated reported and adjusted results
The following table reconciles the consolidated reported
results, prepared in accordance with IFRS, to the consolidated 26
week adjusted results.
26 weeks ended 26 weeks ended
27 September 2020 29 September 2019
================================== ==================================
Specific Specific
items and items and
pension pension
(GBPm) Reported adjustment(1) Adjusted Reported adjustment(1) Adjusted
============================ ======== ============== ======== ======== ============== ========
Revenue 5,671 - 5,671 5,166 - 5,166
Operating costs (5,678) (44) (5,634) (5,044) (43) (5,001)
People costs (3,216) (44) (3,172) (2,891) (43) (2,848)
---------------------------- -------- -------------- -------- -------- -------------- --------
People costs (3,069) (44) (3,025) (2,885) (43) (2,842)
Voluntary redundancy (147) - (147) (6) - (6)
---------------------------- -------- -------------- -------- -------- -------------- --------
Non-people costs (2,462) - (2,462) (2,153) - (2,153)
---------------------------- -------- -------------- -------- -------- -------------- --------
Distribution and conveyance
costs (1,559) - (1,559) (1,329) - (1,329)
Infrastructure costs (492) - (492) (477) - (477)
Other operating costs (411) - (411) (347) - (347)
---------------------------- -------- -------------- -------- -------- -------------- --------
Operating (loss) /
profit before specific
items (7) (44) 37 122 (43) 165
Operating specific
items:
Impairment of assets (3) (3) - - - -
Regulatory fine - - - (51) (51) -
Employee Free Shares
charge - - - (4) (4) -
Amortisation of intangible
assets in acquisitions (10) (10) - (10) (10) -
Legacy / other credits - - - 4 4 -
Operating (loss) /
profit (20) (57) 37 61 (104) 165
Non-operating specific
items:
(Loss) / profit on
disposal of property,
plant and equipment (3) (3) - 88 88 -
(Loss) / profit before
interest and tax (23) (60) 37 149 (16) 165
Finance costs (32) - (32) (23) - (23)
Finance income 13 - 13 4 - 4
Net pension interest
(non-operating specific
item) 59 59 - 43 43 -
============================ ======== ============== ======== ======== ============== ========
Profit before tax 17 (1) 18 173 27 146
Tax (charge)/credit (3) 11 (14) (20) 15 (35)
============================ ======== ============== ======== ======== ============== ========
Profit for the period 14 10 4 153 42 111
============================ ======== ============== ======== ======== ============== ========
Earnings per share
Basic 1.4p 1.0p 0.4p 15.3p 4.2p 11.1p
Diluted 1.4p 1.0p 0.4p 15.3p 4.2p 11.1p
============================ ======== ============== ======== ======== ============== ========
Segmental reported results
The following table presents the segmental reported results,
prepared in accordance with IFRS.
26 weeks ended 26 weeks ended
27 September 2020 29 September 2019
---------------------------------------- ------------------------------------------
Royal Intragroup Royal Intragroup
(GBPm) Mail GLS Eliminations Group Mail GLS Eliminations Group
------------------------- ------- ------- ------------- ------- ------- ------- ------------- -------
Revenue 3,828 1,870 (27) 5,671 3,649 1,537 (20) 5,166
People costs (2,818) (398) - (3,216) (2,538) (353) - (2,891)
Non-people costs (1,183) (1,306) 27 (2,462) (1,079) (1,094) 20 (2,153)
------- ------- ------------- ------- ------- ------- ------------- -------
Operating (loss) /
profit before specific
items (173) 166 - (7) 32 90 - 122
Operating specific
items(1) (3) (10) - (13) (57) (4) - (61)
Operating (loss) /
profit (176) 156 - (20) (25) 86 - 61
Non-operating specific
items(1) (3) - - (3) 88 - - 88
(Loss) / earnings
before interest and
tax (179) 156 - (23) 63 86 - 149
Net finance costs (13) (6) - (19) (11) (8) - (19)
Net pension interest
(non-operating specific
item) 59 - - 59 43 - - 43
------------------------- ------- ------- ------------- ------- ------- ------- ------------- -------
(Loss) / Profit before
tax (133) 150 - 17 95 78 - 173
------------------------- ------- ------- ------------- ------- ------- ------- ------------- -------
Tax credit/(charge) 33 (36) - (3) 2 (22) - (20)
------------------------- ------- ------- ------------- ------- ------- ------- ------------- -------
(Loss) / Profit for
the period (100) 114 - 14 97 56 - 153
========================= ======= ======= ============= ======= ======= ======= ============= =======
Footnotes for Financial Review - Presentation of Results and
Alternative Performance Measures section
1. Details of specific items and the pension adjustment can be
found under 'Specific items and pension charge to cash difference
adjustment' in the Group Results section.
Alternative Performance Measures (APMs)
APMs are used by Management throughout the Annual Report and
Accounts and Financial Review, who consider them to be an important
means of comparing performance period on period and are key
measures used within the business for assessing Business
performance. APMs used in this report are consistent with the
2019-20 Annual Report. Updates to any APMs are set out in the
section below.
Earnings before interest, tax, depreciation and amortisation
(EBITDA) before specific items
EBITDA is reported operating profit before specific items with
depreciation and amortisation and share of associate company
profits added back.
Adjusted EBITDA is EBITDA before specific items with the pension
charge to cash difference adjustment added back.
The following table reconciles adjusted EBITDA to reported
operating profit before specific items.
26 weeks ended 26 weeks ended
27 September 29 September
(GBPm) 2020 2019
=================================================== ============== ==============
Reported operating (loss) / profit before specific
items (7) 122
Depreciation and amortisation 259 252
EBITDA 252 374
Pension charge to cash difference adjustment 44 43
=================================================== ============== ==============
Adjusted EBITDA 296 417
=================================================== ============== ==============
Pension charge to cash difference adjustment
This adjustment represents the difference between the IAS 19
income statement pension charge and the actual cash payments.
Management believes this adjustment is appropriate in order to
eliminate the volatility of the IAS 19 accounting charge and to
include only the true cash cost of the pension plans in the
adjusted operating profit of the Group.
For the DBCBS this represents the difference between the IAS 19
income statement pension charge rate of 19.7% (H1 2019-20 19.6%)
and the actual cash payments of 15.6% (H1 2019-20 15.6%).
In-year trading cash flow
The following table reconciles in-year trading cash flow to the
nearest IFRS measure 'net cash inflow from operating
activities'.
Reported Reported
26 weeks ended 26 weeks ended
27 September 29 September
(GBPm) 2020 2019
========================================== =============== ===============
Net cash inflow from operating activities 359 279
Adjustment for:
Other working capital movements 14 9
Cash cost of operating specific items 2 1
Purchase of property, plant and equipment (101) (78)
Purchase of intangible assets (software) (31) (35)
Net finance costs paid (24) (24)
========================================== =============== ===============
In-year trading cashflow 219 152
========================================== =============== ===============
Net debt
A reconciliation of net debt to reported balance sheet line
items is shown below.
At 27 September At 29 September
(GBPm) 2020 2019
========================== =============== ===============
Loans/bonds (957) (443)
Leases (1,142) (1,171)
Cash and cash equivalents 1,038 193
Client cash 34 29
Pension escrow (RMSEPP) 21 20
========================== =============== ===============
Net debt (1,006) (1,372)
========================== =============== ===============
Cash and cash equivalents increased by GBP845 million largely as
a result of free cash flow of GBP188 million (H1 2019-20: GBP245
million inflow) and proceeds from the EUR550 million bond issue of
GBP489 million. No dividends were paid in H1 2020-21 (H1 2019-20:
GBP169 million).
Net debt excludes GBP190 million (H1 2019-20: GBP189 million)
related to the RMPP pension scheme of the total GBP211 million (H1
2019-20: GBP209 million) pension escrow investments on the balance
sheet which is not considered to fall within the definition of net
debt.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed consolidated income statement
Reported Reported
26 weeks ended 26 weeks ended
27 September 29 September
2020 2019
Notes GBPm GBPm
Continuing operations
Revenue 2,3 5,671 5,166
Operating costs (1,2) (5,678) (5,044)
----------------------------------------------------- ----- --------------- ---------------
People costs (3,216) (2,891)
Distribution and conveyance costs (1,559) (1,329)
Infrastructure costs (492) (477)
Other operating costs (411) (347)
----------------------------------------------------- ----- --------------- ---------------
Operating (loss)/profit before specific items(2) (7) 122
Operating specific items(2)
Regulatory fine - (51)
Employee Free Shares charge - (4)
Impairment/legacy (costs)/income (3) 4
Amortisation of intangible assets in acquisitions (10) (10)
----------------------------------------------------- ----- --------------- ---------------
Operating (loss)/profit (20) 61
(Loss)/profit on disposal of property, plant
and equipment (non-operating specific item(2)
) (3) 88
---------------
(Loss)/profit before interest and tax (23) 149
Finance costs (32) (23)
Finance income 13 4
Net pension interest (non-operating specific
item(2) ) 59 43
----------------------------------------------------- ----- --------------- ---------------
Profit before tax 17 173
Tax charge 4 (3) (20)
----------------------------------------------------- ----- --------------- ---------------
Profit for the period 14 153
----------------------------------------------------- ----- --------------- ---------------
Earnings per share 5
Basic 1.4p 15.3p
Diluted 1.4p 15.3p
----------------------------------------------------- ----- --------------- ---------------
(1) Operating costs are stated before operating specific items
which include impairment/legacy (costs)/income, amortisation of
intangible assets in acquisitions, Employee Free shares charge and
the Regulatory fine.
(2) Details of Alternative Performance Measures (APMs) are
included in the Financial Review.
Condensed consolidated statement of comprehensive income
Reported Reported
26 weeks 26 weeks
ended ended
27 September 29 September
2020 2019
Notes GBPm GBPm
------------------------------------------------------------ --------- ------------- -------------
Profit for the period 14 153
Other comprehensive (expense)/income for the
period from continuing operations:
Items that will not be subsequently reclassified
to profit or loss:
Amounts relating to pensions accounting (822) 312
------------------------------------------------------------ --------- ------------- -------------
Withholding tax adjustment relating to defined
benefit surplus 6 358 (206)
Remeasurement (losses)/gains of the defined
benefit surplus in RMPP and RMSEPP 6 (1,078) 550
Remeasurement losses of the defined benefit
deficit in DBCBS 6 (126) (39)
Deferred tax 24 7
------------------------------------------------------------ --------- ------------- -------------
Items that may be subsequently reclassified
to profit or loss:
Foreign exchange translation differences 14 18
------------------------------------------------------------ --------- ------------- -------------
Exchange differences on translation of foreign
operations (GLS) 25 33
Net loss on hedge of a net investment (EUR500
million bond) (10) (13)
Net loss on hedge of a net investment (Euro-denominated
lease payables) (1) (2)
-------------
Designated cash flow hedges 3 (4)
------------------------------------------------------------ --------- ------------- -------------
Losses on cash flow hedges deferred into equity (4) (2)
Losses/(gains) on cash flow hedges released
from equity to income 12 (3)
Loss on cross currency swap cash flow hedge
deferred into equity (6) -
Loss on cross currency swap cash flow hedge
released from equity to income - interest payable 4 -
Loss on cost of hedging deferred into equity (1) -
Gain on cost of hedging released from equity
to income - interest payable (1) -
Tax on above items (1) 1
------------------------------------------------------------ --------- ------------- -------------
Total other comprehensive (expense)/income
for the period (805) 326
------------------------------------------------------------ --------- ------------- -------------
Total comprehensive (expense)/income for the
period (791) 479
------------------------------------------------------------ --------- ------------- -------------
Condensed consolidated balance sheet
Reported Reported
At 27 September At 29 March
2020 2020
Notes GBPm GBPm
--------------------------------------------- ----- ---------------- ------------
Non-current assets
Property, plant and equipment 2,980 3,120
Goodwill 399 390
Intangible assets 526 558
Investments in associates 5 5
Financial assets 8
Pension escrow investments 211 201
RMPP/RMSEPP retirement benefit surplus - net
of withholding tax payable 6 2,950 3,614
Other receivables 10 12
Deferred tax assets 168 110
--------------------------------------------- ----- ---------------- ------------
7,249 8,010
--------------------------------------------- ----- ---------------- ------------
Assets held for sale 139 25
--------------------------------------------- ----- ---------------- ------------
Current assets
Inventories 18 19
Trade and other receivables 1,402 1,282
Income tax receivable 3 6
Financial assets 8
Investments - 30
Derivatives 2 5
Cash and cash equivalents 1,072 1,640
--------------------------------------------- ----- ---------------- ------------
2,497 2,982
--------------------------------------------- ----- ---------------- ------------
Total assets 9,885 11,017
--------------------------------------------- ----- ---------------- ------------
Current liabilities
Trade and other payables (2,120) (2,041)
Financial liabilities 8
Interest-bearing loans and borrowings - (700)
Lease liabilities (193) (201)
Derivatives (23) (35)
Income tax payable (21) (5)
Provisions 9 (248) (113)
--------------------------------------------- ----- ---------------- ------------
(2,605) (3,095)
--------------------------------------------- ----- ---------------- ------------
Non-current liabilities
Financial liabilities 8
Interest-bearing loans and borrowings (957) (935)
Lease liabilities (949) (987)
Derivatives (21) (32)
DBCBS retirement benefit deficit 6 (345) (177)
Provisions 9 (114) (112)
Other payables (6) (4)
Deferred tax liabilities (56) (54)
--------------------------------------------- ----- ---------------- ------------
(2,448) (2,301)
Total liabilities (5,053) (5,396)
--------------------------------------------- ----- ---------------- ------------
Net assets 4,832 5,621
--------------------------------------------- ----- ---------------- ------------
Equity
Share capital 10 10
Retained earnings 4,819 5,625
Other reserves 3 (14)
--------------------------------------------- ----- ---------------- ------------
Total equity 4,832 5,621
--------------------------------------------- ----- ---------------- ------------
Condensed consolidated statement of changes in equity
Foreign
currency
Share Retained translation Hedging Total
capital earnings reserve reserve equity
GBPm GBPm GBPm GBPm GBPm
-------------------------------------------------- -------- --------- ------------ -------
Reported at 31 March 2019 10 4,576 27 6 4,619
IFRS 16 transition adjustment - 1 - - 1
-------------------------------------------------- -------- --------- ------------ --------- -------
Reported at 1 April 2019 on transition
to IFRS 16 10 4,577 27 6 4,620
-------------------------------------------------- -------- --------- ------------ --------- -------
Profit for the period - 153 - - 153
Other comprehensive income/(expense)
for the period - 312 18 (4) 326
-------------------------------------------------- -------- --------- ------------ --------- -------
Total comprehensive income/(expense)
for the period - 465 18 (4) 479
Transactions with owners of the Company,
recognised directly in equity
Dividend paid to equity holders of the
parent Company - (169) - - (169)
Share-based payments
Employee Free Shares issue - 7 - - 7
Long-Term Incentive Plan (LTIP) - 1 - - 1
Deferred Share Bonus Plan (DSBP) - 2 - - 2
Purchase of own shares(1) - (3) - - (3)
-------------------------------------------------- -------- --------- ------------ --------- -------
Reported at 29 September 2019 10 4,880 45 2 4,937
-------------------------------------------------- -------- --------- ------------ --------- -------
Profit for the year - 8 - - 8
Other comprehensive income/(expense)
for the year - 810 (15) (45) 750
-------------------------------------------------- -------- --------- ------------ --------- -------
Total comprehensive income/(expense)
for the year - 818 (15) (45) 758
Transactions with owners of the Company,
recognised directly in equity
Gains on cash flow hedges released from
equity to the carrying amount of non-financial
assets - - - (1) (1)
Dividend paid to equity holders of the
Parent Company - (75) - - (75)
Share-based payments
Long--Term Incentive Plan (LTIP) - 1 - - 1
Deferred tax on share-based payments - 1 - - 1
-------------------------------------------------- -------- --------- ------------ --------- -------
Reported at 29 March 2020 10 5,625 30 (44) 5,621
-------------------------------------------------- -------- --------- ------------ --------- -------
Profit for the period - 14 - - 14
Other comprehensive (expense)/income
for the period - (822) 14 3 (805)
-------------------------------------------------- -------- --------- ------------ --------- -------
Total comprehensive (expense)/income
for the period - (808) 14 3 (791)
Transactions with owners of the Company,
recognised directly in equity
Share-based payments
Long-Term Incentive Plan (LTIP) - 1 - - 1
Deferred Share Bonus Plan (DSBP) - 1 - - 1
Reported at 27 September 2020 10 4,819 44 (41) 4,832
-------------------------------------------------- -------- --------- ------------ --------- -------
(1) Purchase in respect of employee share schemes.
Condensed consolidated statement of cash flows
Reported Reported
26 weeks 26 weeks
ended ended
27 September 29 September
2020 2019
Notes GBPm GBPm
------------------------------------------------------ ----- ------------- -------------
Cash flow from operating activities
Profit before tax 17 173
Adjustment for:
Net pension interest (59) (43)
Net finance costs 19 19
Loss/(profit) on disposal of property, plant
and equipment 3 (88)
Regulatory fine - 51
Impairment/legacy costs/(income) 3 (4)
Amortisation of intangible assets in acquisitions 10 10
Employee Free Shares charge - 4
Operating (loss)/profit before specific items(1) (7) 122
Adjustment for:
Depreciation and amortisation 259 252
EBITDA before specific items(1) 252 374
Working capital movements 80 (114)
------------------------------------------------------ ----- ------------- -------------
Decrease/(increase) in inventories 1 (1)
(Increase)/decrease in receivables (111) 19
Increase/(decrease) in payables 68 (123)
Net decrease in derivatives (16) -
Increase/(decrease) in provisions (non-specific
items) 138 (9)
------------------------------------------------------ ----- ------------- -------------
Pension charge to cash difference adjustment 6 44 43
Share-based awards (LTIP and DSBP) charge 3 3
Cash cost of operating specific items (2) (1)
------------------------------------------------------ ----- ------------- -------------
Cash inflow from operations 377 305
Income tax paid (19) (29)
Research and development expenditure credit 1 3
------------------------------------------------------ ----- ------------- -------------
Net cash inflow from operating activities 359 279
------------------------------------------------------ ----- ------------- -------------
Cash flow from investing activities
Finance income received 12 4
Proceeds from disposal of property (excluding
London Development Portfolio), plant and equipment
(non-operating specific item) 2 5
London Development Portfolio net (costs)/proceeds
(non-operating specific item) (14) 99
Purchase of property, plant and equipment (101) (78)
Purchase of intangible assets (software) (31) (35)
Payment of deferred consideration in respect
of prior years' acquisitions (3) (1)
Sale of financial assets investments (current) 30 -
Net cash outflow from investing activities (105) (6)
------------------------------------------------------ ----- ------------- -------------
Net cash inflow before financing activities 254 273
------------------------------------------------------ ----- ------------- -------------
Cash flow from financing activities
Finance costs paid (36) (28)
Purchase of own shares - (3)
Payment of capital element of obligations under
lease contracts (91) (92)
Cash received on sale and leasebacks - 2
Repayment of loans and borrowings (700) (1)
Dividends paid to equity holders of the parent
Company - (169)
Net cash outflow from financing activities (827) (291)
------------------------------------------------------ ----- ------------- -------------
Net decrease in cash and cash equivalents (573) (18)
Effect of foreign currency exchange rates on
cash and cash equivalents 5 4
Cash and cash equivalents at the beginning of
the period 1,640 236
------------------------------------------------------ ----- ------------- -------------
Cash and cash equivalents at the end of the period 1,072 222
------------------------------------------------------ ----- ------------- -------------
(1) Details of Alternative Performance Measures (APMs) are
included in the Financial Review.
Notes to the condensed consolidated financial statements
1. Basis of preparation
The comparative figures for the 52 weeks ended 29 March 2020 are
not the Company's statutory accounts for that financial period.
Those accounts have been reported on by the Company's auditor and
delivered to the registrar of companies. The report of the auditor
was (i) unqualified; (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their report; and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
This condensed consolidated set of unaudited financial
statements has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union (EU).
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the EU. As required by the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority, this
condensed consolidated set of financial statements has been
prepared applying the accounting policies and presentation that
were applied in the preparation of the Group's published
consolidated financial statements for the 52 weeks ended 29 March
2020, except for any changes detailed below.
Going Concern
In assessing the going concern status of the Group, the
Directors are required to look forward a minimum of 12 months from
the date of approval of these financial statements to consider
whether it is appropriate to prepare the financial statements on a
going concern basis.
The Directors have reviewed both the current business
projections and downside scenarios and assessed these against
committed and undrawn funding facilities of GBP925 million at 27
September 2020 through the bank syndicate loan facility and other
liquid resources available to the Group (cash at bank GBP385
million and cash equivalent investments of GBP687 million at 27
September 2020).
The downside scenarios included a continued economic downturn
resulting from further COVID-19 restrictions and Brexit; increased
competition in the UK parcels sector; and the potential impact of
industrial action.
These risks were quantified to create a downside scenario that
took into account the levels of committed capital and expenditure,
as well as other short-term cost and cash actions which could
mitigate the impact of the risks. Mitigating actions included the
continued suspension of the dividend; reducing variable hours and
cost of sales; removing discretionary pay; reducing our internal
investment; and reducing our one-off projects.
Consideration was also given to the large fixed cost base
required to deliver the Universal Service Obligation in its current
form. The downside scenarios were tested to determine whether the
Group would remain solvent. The Directors have made their
assessment based on the best view of the severe but plausible
downside scenarios that the Group might face. If outcomes are
significantly worse, the Directors would need to consider what
additional mitigating actions would be needed, for example
assessing the value of our asset base to support liquidity.
Consequently, the Directors have concluded that to stress test a
level of increased severity (beyond the downside scenario) is not
currently reasonable.
The Group had net current liabilities of GBP108 million at 27
September 2020, which included GBP267 million deferred income,
representing an obligation to deliver a service, which is not a
cash liability. The financial statements have therefore been
prepared on a going concern basis, which the Directors consider to
be appropriate.
The Directors have a covenant waiver from its bank syndicate
which removes the bank syndicate loan facility net debt/EBITDA and
EBITDA/interest covenant tests for September 2020, March 2021 and
September 2021, but which are replaced by a minimum liquidity
covenant of GBP250 million. The Group still retains access to, but
has not used, the COVID Corporate Finance Facility (CCFF), however
changes introduced by the Bank of England (which affect all
counterparties) have had the following impacts:
-- Maximum maturity date of 19 May 2021 unless an extension is
requested from the Bank of England by 31 December; and
-- Facility size has been reduced to GBP300 million.
1. Basis of preparation (continued)
The downside scenarios indicate that the Group would not need to
draw on both the CCFF and the bank syndicate loan facility at the
same time in order to maintain sufficient liquidity.
Consequently, the Directors are confident that the Group will
have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the
financial statements and therefore have prepared the financial
statements on a going concern basis.
Presentation of results and accounting policies
In some instances, Alternative Performance Measures (APMs) are
used by the Group. This is because Management is of the view that
these APMs provide a more meaningful basis on which to analyse
business performance, and are consistent with the way that
financial performance is measured by Management and reported to the
Board. Details of the Group's APMs are included in the Financial
Review.
New accounting standards and interpretations in 2020-21
No new UK Accounting Standards, which affect the presentation of
these condensed consolidated financial statements, have been
issued.
Key sources of estimation uncertainty and critical accounting
judgements
The preparation of the condensed consolidated financial
statements requires management to make certain estimates and
judgements that can have a significant impact on the financial
statements. These estimates and judgements are continually
evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances.
The significant judgements and estimates applied by the Group in
these condensed consolidated financial statements are consistent
with those applied in the Annual Report and Financial Statements
2019-20.
2. Segment information
The Group's operating segments are based on geographic business
units whose primary services and products relate to the delivery of
parcels and letters. These segments are evaluated regularly by the
Royal Mail plc Board - the Chief Operating Decision Maker (CODM) as
defined by IFRS 8 'Operating Segments' - in deciding how to
allocate resources and assess performance.
The key measure of segment performance is operating profit
before specific items (used internally for the Corporate Balanced
Scorecard). This measure of performance is disclosed on an
'adjusted' basis e.g. excluding specific items and the pension
charge to cash difference adjustment, which is consistent with how
financial performance is measured internally and reported to the
CODM.
Segment revenues have been attributed to the respective
countries based on the primary location of the service
performed.
Seasonality
Parcel and letter volumes are subject to seasonal variation. The
Group's busiest period is from September to December, when there
is: typically an increase in marketing mail as businesses seek to
maximise sales in the period leading up to Christmas; an increase
in parcel volumes as a result of online Christmas shopping; and an
increase in addressed letter volumes as a result of the delivery of
Christmas cards. During this period, the Group would expect to
record higher revenue as greater volumes of parcels and letters are
delivered through its networks. It also incurs higher costs, as
Royal Mail hires large numbers of temporary workers to assist in
handling the increased workload.
Other seasonal factors that can affect the Group's results
include the Easter period, the number of bank holidays in a
reporting period and weather conditions.
During the reporting period, trading has been significantly
impacted by COVID-19 restrictions. The Financial Review and Outlook
sections provide further details.
2. Segment information (continued)
Specific items
26 weeks ended 27 September and pension
2020 Adjusted adjustment Reported
------------------------------------ ------------------------------------------ ---------------- --------
Royal Royal
Mail GLS Eliminations(1) Group Mail GLS Group
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ ------- ------- --------------- ------- -------- ------ --------
Revenue 3,828 1,870 (27) 5,671 - - 5,671
People costs(2) (2,774) (398) - (3,172) (44) - (3,216)
Non-people costs (1,183) (1,306) 27 (2,462) - - (2,462)
------------------------------------ ------- ------- --------------- ------- -------- ------ --------
Operating (loss)/profit
before specific items (129) 166 - 37 (44) - (7)
Operating specific items
Impairments - - - - (3) - (3)
Amortisation of intangible
assets in acquisitions - - - - - (10) (10)
------------------------------------ ------- ------- --------------- ------- -------- ------ --------
Operating (loss)/profit (129) 166 - 37 (47) (10) (20)
Loss on disposal of property,
plant and equipment (non-operating
specific item) - - - - (3) - (3)
------------------------------------ ------- ------- --------------- ------- -------- ------ --------
(Loss)/profit before interest
and tax (129) 166 - 37 (50) (10) (23)
Finance costs (28) (7) 3 (32) - - (32)
Finance income 15 1 (3) 13 - - 13
Net pension interest (non-operating
specific item) - - - 59 - 59
------------------------------------ ------- ------- --------------- ------- -------- ------ --------
(Loss)/profit before tax (142) 160 - 18 9 (10) 17
------------------------------------ ------- ------- --------------- ------- -------- ------ --------
Specific items
26 weeks ended 29 September and pension
2019 Adjusted adjustment Reported
------------------------------- ------------------------------------------- ---------------- --------
Royal Royal
Mail GLS Eliminations(1) Group Mail GLS Group
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------- ------- ---------------- ------- ------- ------- --------
Revenue 3,649 1,537 (20) 5,166 - - 5,166
People costs(2) (2,495) (353) - (2,848) (43) - (2,891)
Non-people costs (1,079) (1,094) 20 (2,153) - - (2,153)
------------------------------- ------- ------- ---------------- ------- ------- ------- --------
Operating profit before
specific items 75 90 - 165 (43) - 122
Operating specific items
Regulatory fine - - - - (51) - (51)
Employee Free Shares
charge - - - - (4) - (4)
Legacy (costs)/income - - - - (1) 5 4
Amortisation of intangible
assets in acquisitions - - - - (1) (9) (10)
------------------------------- ------- ------- ---------------- ------- ------- ------- --------
Operating profit 75 90 - 165 (100) (4) 61
Profit on disposal of
property, plant and equipment
(non-operating specific
item) - - - - 88 - 88
------------------------------- ------- ------- ---------------- ------- ------- ------- --------
Profit before interest
and tax 75 90 - 165 (12) (4) 149
Finance costs (20) (9) 6 (23) - - (23)
Finance income 9 1 (6) 4 - - 4
Net pension interest
(non-operating specific
item) - - - - 43 - 43
------------------------------- ------- ------- ---------------- ------- ------- ------- --------
Profit before tax 64 82 - 146 31 (4) 173
------------------------------- ------- ------- ---------------- ------- ------- ------- --------
(1) Revenue and non-people costs eliminations relate to
intragroup trading between Royal Mail and GLS, due to Parcelforce
Worldwide being GLS's partner in the UK. Finance costs/income
eliminations relate to intragroup loans between Royal Mail and
GLS.
(2) People costs include GBP147 million (H1 2019-20: GBP6
million) in relation to voluntary redundancy costs, including
GBP140 million for the management restructure (see Note 9 for
further details).
3. Revenue
This disclosure provides a disaggregation of Group revenue by
type. Revenue recognised is net of Value Added Tax and principally
relates to the rendering of services derived from contracts with
customers.
26 weeks ended 27 September Royal Mail GLS Intragroup Group
2020 GBPm GBPm revenue(1) GBPm
GBPm
----------------------------- ----------- ------ ------------ ------
Letters and other revenue 1,369 - - 1,369
Advertising Letters 160 - - 160
Parcels 2,299 1,870 (27) 4,142
----------------------------- ----------- ------ ------------ ------
Total 3,828 1,870 (27) 5,671
----------------------------- ----------- ------ ------------ ------
26 weeks ended 29 September Royal Mail GLS Intragroup Group
2019 GBPm GBPm revenue(1) GBPm
GBPm
----------------------------- ----------- ------ ------------ ------
Letters and other revenue 1,617 - - 1,617
Advertising Letters 306 - - 306
Parcels 1,726 1,537 (20) 3,243
----------------------------- ----------- ------ ------------ ------
Total 3,649 1,537 (20) 5,166
----------------------------- ----------- ------ ------------ ------
(1) Eliminations relate to intragroup revenue from trading
between Royal Mail and GLS. This is due to Parcelforce Worldwide
being GLS' partner in the UK.
4. Taxation
The Group reported tax charge is GBP3 million (H1 2019-20: GBP20
million) on a reported profit before tax of GBP17 million (H1
2019-20: GBP173 million). This consists of a tax credit in the UK
of GBP33 million (H1 2019-20: GBP2 million) on a reported loss
before tax of GBP133 million (H1 2019-20: GBP95 million profit) and
a tax charge in GLS of GBP36 million (H1 2019-20: GBP22 million) on
a reported profit before tax of GBP150 million (H1 2019-20: GBP78
million).
The tax credit in the UK relates to the recognition of a
deferred tax asset in respect of the reported loss. The effective
tax rate on the credit is higher than the UK statutory tax rate
mainly due to there being no tax charge on the 'net pension
interest income'. The GLS effective tax rate is higher than the UK
statutory tax rate mainly due to higher tax rates in the countries
in which it operates.
Details of the adjusted tax results and effective tax rates are
provided in the Financial Review.
5. Earnings per share
26 weeks ended 27 September 26 weeks ended 29 September
2020 2019
----------------------------------
Specific Specific
items items
and pension and pension
Reported adjustment(1) Adjusted Reported adjustment(1) Adjusted
----------------------------------- -------- -------------- -------- -------- -------------- --------
Attributable to equity holders
of the parent Company
Profit from continuing operations
(GBP million) 14 10 4 153 42 111
Weighted average number of
shares issued (million) 1,002 n/a 1,002 1,000 n/a 1,000
Basic earnings per share (pence) 1.4 n/a 0.4 15.3 n/a 11.1
Diluted earnings per share
(pence) 1.4 n/a 0.4 15.3 n/a 11.1
----------------------------------- -------- -------------- -------- -------- -------------- --------
(1) Details of Alternative Performance Measures (APMs) are
included in the Financial Review.
The diluted earnings per share for the 26 weeks ended 27
September 2020 is based on a weighted average number of shares of
1,002,184,169 (H1 2019-20: 999,572,008) to take account of the
potential issue of 1,242,463 (H1 2019-20: 601,714) ordinary shares
resulting from the Deferred Share Bonus Plan (DSBP) and 1,574,342
(H1 2019-20: nil) ordinary shares resulting from the Long Term
Incentive Plan (LTIP). Management have historically elected to
settle this scheme using shares purchased from the market.
The 632,636 (H1 2019-20: 1,029,706) shares held in an Employee
Benefit Trust for the settlement of options and awards to current
and former employees are treated as treasury shares for accounting
purposes. The Company, however, does not hold any shares in
treasury.
6. Retirement benefit plans
Summary pension information
26 weeks 26 weeks
ended ended
27 September 29 September
2020 2019
GBPm GBPm
========================================================= ============= =============
Ongoing UK pension service costs
UK defined benefit plans (including administration
costs)(1) (187) (189)
UK defined contribution plan (52) (47)
UK defined benefit and defined contribution plans'
Pension Salary Exchange (PSE) employer contributions(2) (91) (88)
========================================================= ============= =============
Total UK ongoing pension service costs (330) (324)
GLS defined contribution plan costs (4) (4)
========================================================= ============= =============
Total Group ongoing pension service costs (334) (328)
========================================================= ============= =============
Cash flows relating to ongoing pension service costs
UK defined benefit plans' employer contributions(3) (143) (146)
Defined contribution plans' employer contributions (56) (51)
UK defined benefit and defined contribution plans'
PSE employer contributions (91) (88)
========================================================= ============= =============
Total Group cash flows relating to ongoing pension
service costs (290) (285)
========================================================= ============= =============
Pension charge to cash difference adjustment (44) (43)
--------------------------------------------------------- ------------- -------------
(1) These pension service costs are charged to the income
statement. They represent the cost (as a percentage of pensionable
payroll - 19.7% for the DBCBS (2019-20: 19.6%) of the increase in
the defined benefit obligation due to members earning one more half
year's worth of pension benefits. They are calculated in accordance
with IAS 19 and are based on market yields (high quality corporate
bonds and inflation) at the beginning of the reporting period.
Pensions administration costs for the RMPP of GBP5 million (H1
2019-20: GBP5 million) and the DBCBS of GBP2 million (H1 2019-20:
GBP1 million) continue to be included within the Group's ongoing UK
pension service costs.
(2) Eligible employees who are enrolled into PSE opt out of
making employee contributions to their pension and the Group makes
additional contributions in return for a reduction in basic
pay.
(3) The employer contribution cash flow rate forms part of the
payroll expense and is paid in respect of the DBCBS (15.6%)
(2019-20: 15.6%). This includes payments into RMPP pension escrow
investments. The contribution rate is set following each actuarial
funding valuation, usually every three years. These actuarial
valuations are required to be carried out on assumptions determined
by the Trustee and agreed by Royal Mail, and will be required in
respect of the DBCBS.
Accounting and actuarial (deficit)/surplus position (DBCBS, RMPP
and RMSEPP)
The plans' assets and liabilities are shown below
DBCBS DBCBS RMPP and RMSEPP RMPP and RMSEPP
Accounting (IAS Actuarial funding Accounting (IAS Actuarial funding
19) 19)
======================= ===================== ===================== ===================== =====================
At 27 At At 30 At At 27 At At 30 At
September 29 March September 31 March September 29 March September 31 March
2020 2020 2020 2020 2020 2020 2020 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================= ========== ========= ========== ========= ========== ========= ========== =========
Fair value of
plans' assets(4,5) 967 730 959 735 12,375 11,989 12,433 11,700
Present value
of plans' liabilities (1,312) (907) (935) (717) (7,837) (6,429) (12,147) (11,116)
======================= ========== ========= ========== ========= ========== ========= ========== =========
(Deficit)/surplus
in plans (pre
withholding
tax payable)(6) (345) (177) 24 18 4,538 5,560 286 584
Withholding
tax payable n/a n/a n/a n/a (1,588) (1,946) n/a n/a
======================= ========== ========= ========== ========= ========== ========= ========== =========
(Deficit)/surplus
in plans(7) (345) (177) 24 18 2,950 3,614 286 584
----------------------- ---------- --------- ---------- --------- ---------- --------- ---------- ---------
(4) The difference between accounting and actuarial funding
asset fair values arises from the different period end dates used
for the valuation of the assets under each method.
(5) An agreement has been made with the Pension Trustee to
ringfence certain RMPP employer contributions in an escrow
arrangement. These contributions are not considered to be Plan
assets as the Trustee does not have any control over the
assets.
(6) Any reference to a withholding tax adjustment relates to
withholding tax payable on the distribution of a pension
surplus.
(7) On an actuarial funding basis, the excess of DBCBS assets
over liabilities is as a result of the risk reserve.
6. Retirement benefit plans (continued)
Major long-term assumptions used for accounting (IAS 19)
purposes - RMPP, RMSEPP and DBCBS
The major assumptions used to calculate the accounting position
of the pension plans are as follows:
RMPP and RMPP and
DBCBS RMSEPP DBCBS RMSEPP
At 27 September At 27 September At 29 March At 29 March
2020 2020 2020 2020
====================================== ================= ================ ============= =============
Retail Price Index (RPI) 2.9% 2.8% 2.6% 2.5%
Consumer Price Index (CPI) 2.1% 2.0% 1.8% 1.7%
Discount rate(8)
- nominal 1.5% 1.7% 2.2% 2.2%
- real (nominal less RPI)(9) (1.4)% (1.1)% (0.4)% (0.3)%
Constructive obligation for increases 4.1% - 3.8% -
-------------------------------------- ----------------- ---------------- ------------- -------------
(8) The discount rate setting methodology, used by the Group's
actuary, has been revised in the current year, in particular, the
method used to decide which individual bonds are included in the
model that is used to set the assumption. The impact of the change
for the DBCBS scheme at 27 September 2020 is an increase in the
discount rate of 10 bps at a 15 year duration which results in a
GBP20 million decrease in the defined benefit obligation. For the
RMPP the impact as at 27 September 2020 is an increase in the
discount rate of 20 bps at a 25 year duration which results in a
GBP390 million decrease in the defined benefit obligation.
(9) The real discount rate used reflects the average duration of
the RMPP of around 27 years and the DBCBS of 15 years.
7. Assets held for sale
The balance sheet values for non-current assets held for sale
during the reporting period are shown below.
At 27 September At 29 March
2020 2020
GBPm GBPm
-------------------------- ---------------- ------------
Property assets held for
sale 139 25
-------------------------- ---------------- ------------
Total 139 25
-------------------------- ---------------- ------------
Non-current assets held for sale of GBP139 million at 27
September 2020 relate to land and buildings which are expected to
be sold within the next 12 months. The carrying value of GBP139
million at 27 September 2020 mainly relates to separation and
enabling works at the Mount Pleasant site (Calthorpe Street plot)
prior to its sale to Taylor Wimpey UK Ltd in 2021, and the
remaining plots at the Nine Elms Park site.
An assessment of the fair value of all the properties was made
at the time of their reclassification to 'held for sale' and no
adjustment to the carrying amount of these properties was
necessary.
8. Financial assets and liabilities
Classification, carrying amount and fair value of financial
assets and liabilities
The following table shows the classification, carrying amount
and fair value of the Group's financial assets.
At 27 At 27 At 29 At 29
September September March March
2020 2020 2020 2020
Carrying Fair Carrying Fair
amount value amount value
Level Classification GBPm GBPm GBPm GBPm
---------------------------- ------ -------------- ---------- ---------- --------- ------
Financial assets
Cash 1 385 385 230 230
Cash equivalent investments 1 687 687 1,410 1,410
============================ ====== ============== ========== ========== ========= ======
Money market funds FVTPL 627 627 1,370 1,370
Amortised
Short-term deposits - bank cost 60 60 40 40
============================ ====== ============== ========== ========== ========= ======
Cash and cash equivalents 1 1,072 1,072 1,640 1,640
Current asset investments - Amortised
short-term deposits - bank 1 cost - - 30 30
Pension escrow investments 1 FVTPL 211 211 201 201
Amortised
Trade and other receivables 2 cost 1,402 1,402 1,282 1,282
Derivative assets (current) 2 FVTPL 2 2 5 5
Total financial assets 2,687 2,687 3,158 3,158
---------------------------- ------ -------------- ---------- ---------- --------- ------
8. Financial assets and liabilities (continued)
The following table shows the classification, carrying amount
and fair value of the Group's financial liabilities.
At 27 At 27 At 29 At 29
September September March March
2020 2020 2020 2020
Carrying Fair Carrying Fair
Amount Value Amount Value
Level Classification GBPm GBPm GBPm GBPm
--------------------------------------- ----- -------------- ---------- ---------- --------- -------
Financial liabilities
Bank syndicate loans (current Amortised
loans and borrowings) 2 cost - - (700) (701)
Amortised
EUR500 million bond 2 cost (456) (491) (446) (467)
Amortised
EUR550 million bond 2 cost (501) (503) (489) (465)
Amortised
Obligations under leases (current) 2 cost (193) (193) (201) (201)
Amortised
Obligations under leases (non-current) 2 cost (949) (983) (987) (982)
Amortised
Trade and other payables 2 cost (2,120) (2,120) (2,041) (2,041)
Derivative liabilities (current) 2 FVTPL (23) (23) (35) (35)
Derivative liabilities (non-current) 2 FVTPL (21) (21) (32) (32)
--------------------------------------- ----- -------------- ---------- ---------- --------- -------
Total financial liabilities (4,263) (4,334) (4,931) (4,924)
--------------------------------------- ----- -------------- ---------- ---------- --------- -------
Net total financial liabilities (1,576) (1,647) (1,773) (1,766)
--------------------------------------- ----- -------------- ---------- ---------- --------- -------
Derivatives that do not qualify for hedge accounting are
classified as fair value through profit and loss (FVTPL) and any
gains or losses arising from changes in fair value are taken
directly to the income statement in the period.
The main purpose of these financial instruments is to raise
finance and manage the liquidity needs of the business' operations.
The Group has various other financial instruments such as trade
receivables and trade payables which arise directly from operations
and are not considered further in this Note.
No speculative trading in financial instruments has been
undertaken during the current or comparative reporting periods, in
line with Group policy.
Fair value measurement of financial instruments
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a
whole:
Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The fair value of quoted investments is determined by reference
to bid prices at the close of business on the balance sheet
date.
Where there is no active market, fair value is determined using
valuation techniques. These include using recent arm's length
market transactions; reference to the current market value of
another instrument which is substantially the same; and discounted
cash flow analysis and pricing models.
The Group determines whether any transfers have occurred between
levels in the hierarchy by reassessing categorisation at the end of
each reporting period. For the purposes of disclosing the Level 2
fair value of investments held at amortised cost in the balance
sheet, in the absence of quoted market prices, fair values are
calculated by discounting the future cash flows of the financial
instrument using quoted equivalent interest rates as at close of
business at the balance sheet date. For the EUR500 million and
EUR550 million bonds, the disclosed fair value is calculated as the
closing market bond price converted to Sterling using the closing
spot Sterling/Euro exchange rate.
For the purposes of comparing carrying amounts to fair value,
fair values have been calculated using current market prices (bond
price, interest rates, forward exchange rates and commodity prices)
and discounted using appropriate discount rates.
9. Provisions
Below is a summary of the Group's provisions for liabilities and
charges.
Specific items Other Total
GBPm GBPm GBPm
----------------------------- -------------- ----- -----
At 29 March 2020 (144) (81) (225)
----------------------------- -------------- ----- -----
Arising during the period:
Charged in operating costs - (172) (172)
Utilised in the period 1 34 35
At 27 September 2020 (143) (219) (362)
----------------------------- -------------- ----- -----
Disclosed as:
Current (57) (191) (248)
Non-current (86) (28) (114)
----------------------------- -------------- ----- -----
At 27 September 2020 (143) (219) (362)
----------------------------- -------------- ----- -----
Disclosed as:
Current (57) (56) (113)
Non-current (87) (25) (112)
----------------------------- -------------- ----- -----
At 29 March 2020 (144) (81) (225)
----------------------------- -------------- ----- -----
On 25 June 2020 the Company announced a management restructure,
subject to consultation with Unite/CMA, with the expectation of a
reduction of circa 2,000 roles out of a total population of circa
9,700 roles in 2020-21, with the largest reductions in senior
executive roles and non-operational functions.
Following that announcement and extensive work to shape the new
organisational design, a provision has been recognised for GBP140
million, representing voluntary redundancy compensation and
associated costs. A range of possible outcomes for the provision
have been considered, due to the assumptions used in respect of the
demographic of the population expected to take voluntary
redundancy. Sensitivity analysis has been undertaken to determine
the impact of a change in these assumptions, for example:
over-subscription of certain manager grades; a higher number of
leavers than expected as the functional structures evolve; and the
age profile of leavers. The range of outcomes from possible changes
to any of these assumptions is not considered to be material.
It is expected that the provision will be substantially utilised
by the reporting year end date of 28 March 2021.
Other provisions utilised in the period mainly relate to
voluntary redundancy in the UK operation.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF
YEAR FINANCIAL REPORT
The Directors confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and gives a true and fair view of the assets, liabilities,
financial position and profit or loss of Royal Mail plc as required
by DTR 4.2.4R; and
-- the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
Group during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
The Directors of Royal Mail plc are as listed in the Royal Mail
plc Annual Report and Financial Statements 2019-20.
A list of current Directors is maintained on our corporate
website www.royalmailgroup.com .
By order of the Board
Stuart Simpson
Interim Chief Executive Officer of Royal Mail
18 November 2020
INDEPENT REVIEW REPORT TO ROYAL MAIL PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
26 weeks ended 27 September 2020 which comprises the Condensed
consolidated income statement, the Condensed consolidated statement
of comprehensive income, the Condensed consolidated balance sheet,
the Condensed consolidated statement of changes in equity, the
Condensed consolidated statement of cash flows and the related
explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 26 weeks ended 27
September 2020 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in Note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The Directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Ian Griffiths
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
18 November 2020
FORWARD-LOOKING STATEMENTS
This document contains certain forward-looking statements
concerning the Group's business, financial condition, results of
operations and certain Group's plans, objectives, assumptions,
projections, expectations or beliefs with respect to these items.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
'anticipates', 'aims', 'due', 'could', 'may', 'will', 'would',
'should', 'expects', 'believes', 'intends', 'plans', 'potential',
'targets', 'goal', 'forecasts' or 'estimates' or similar
expressions or negatives thereof.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the Group's actual
financial condition, performance and results to differ materially
from the plans, goals, objectives and expectations set out in the
forward-looking statements included in this document.
All written or verbal forward-looking statements, made in this
document or made subsequently, which are attributable to the Group
or any persons acting on its behalf are expressly qualified in
their entirety by the factors referred to above. Accordingly,
readers are cautioned not to place undue reliance on
forward-looking statements. No assurance can be given that the
forward-looking statements in this document will be realised;
actual events or results may differ materially as a result of risks
and uncertainties facing the Group. Subject to compliance with
applicable law and regulation, the Group does not intend to update
the forward-looking statements in this document to reflect events
or circumstances after the date of this document, and does not
undertake any obligation to do so.
This information is provided by RNS, the news service of the
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END
IR BPBTTMTMBTJM
(END) Dow Jones Newswires
November 19, 2020 02:00 ET (07:00 GMT)
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