Royal Mail PLC AGM Trading Statement (8987F)

TIDMRMG

RNS Number : 8987F

Royal Mail PLC

21 July 2021

Royal Mail plc

(Incorporated in England and Wales)

Company Number: 8680755

LSE Share Code: RMG

ISIN: GB00BDVZYZ77

LEI: 213800TCZZU84G8Z2M70

21 July 2021

AGM TRADING STATEMENT

Royal Mail plc (RMG.L) will hold its 2021 Annual General Meeting (AGM) today at 11.00. In line with the update published yesterday, in the interests of health and wellbeing the Board very strongly requests that shareholders do not attend in person. Royal Mail plc Chair, Keith Williams, Royal Mail Chief Executive Officer, Simon Thompson and GLS Chief Executive Officer, Martin Seidenberg will comment on the performance of the Group in 2020-21 and provide an update on the Group's progress in the first quarter of 2021-22. The results of voting at the AGM will be announced later today.

Trading update for the three months ended June 2021.

Given the unprecedented impact of the COVID-19 pandemic over this last year, we are providing both one-year and two-year comparisons for the first quarter. The two-year (pre-COVID) comparisons may prove helpful in assessing underlying trends and business performance.

Keith Williams, Chair, commented:

"The first quarter saw a strong revenue performance across the Group, with both Royal Mail and GLS reporting higher revenues than the prior year.

"For Royal Mail, as expected, parcel volumes decreased and letter volumes increased compared to the exceptional period last year encompassing the UK's first lockdown, when non-essential retailers closed for the first time. We are starting to see evidence that the domestic parcel market is re-basing to a higher level than pre-pandemic, as consumers continue to shop online.

"For GLS, as expected, parcel volume growth continued albeit at a slower rate, due to the exceptionally strong comparators from the same period in 2020-21.

"As pandemic restrictions continue to ease there is still uncertainty about levels of COVID transmission, the impact on consumer behaviour and economic factors such as GDP growth and inflation, all of which will impact on future performance. We continue to expect fluctuations in volumes as we emerge from COVID restrictions, which we will need to manage accordingly. Nonetheless we are encouraged by the revenue performance across Royal Mail and GLS in the first quarter, and notwithstanding the current uncertainty, remain confident about the full year."

Group

   --    Group revenue grew by 12.5% vs Q1 2020-21 and by 20.2% compared to Q1 2019-20; 
   --    Prospects for full year performance remain unchanged. 

Royal Mail

   --    Revenue:   Increased 12.2% vs Q1 2020-21; Increased 13.4% vs Q1 2019-20; 
   --    Parcel volumes: Decreased 13% vs Q1 2020-21; Increased 19% vs Q1 2019-20; 
   --    Parcel revenue:   Increased 3.4% vs Q1 2020-21; Increased 36.2% vs Q1 2019-20; 

-- Addressed letter volumes (excluding elections): Increased 22% vs Q1 2020-21; Decreased 18% vs Q1 2019-20;

   --    Total letter revenue: Increased 25.7% vs Q1 2020-21; Decreased 6.6% vs Q1 2019-20. 

GLS

   --    Revenue: Increased 12.4% vs Q1 2020-21; Increased 36.6% vs Q1 2019-20; 
   --    Volume: Increased 10% vs Q1 2020-21; Increased 34% vs Q1 2019-20; 

-- Reiterating full year GLS guidance: low single digit % revenue growth and c. 8% operating margin.

Royal Mail

Royal Mail revenue in the first quarter increased by 12.2% year on year, and 13.4% over two years. As previously stated, the significant short-term uncertainty as we begin to unwind from the impacts of the pandemic means we are not issuing guidance for 2021/22 at this stage.

The first quarter of last year included the UK's first lockdown when all non-essential retail was closed and people were required to stay at home. Consequently, total parcel volumes in the first quarter this current financial year decreased compared to the same period last year (-13%), with the rate of decline increasing across the quarter as lockdown measures were eased. Total parcel revenues increased (+3.4%) due to positive product mix.

The domestic parcel market remains strong. The early signs are that domestic parcel volumes appear to be re-basing at a higher level than pre-COVID as consumers continue to shop online. While domestic parcel volumes decreased 7% year on year, they increased by more than a third (+35%) compared to pre-COVID levels in 2019-20. International volumes were lower than the prior year, continuing the trend seen in the second half of 2020-21, due to a number of factors outlined previously including reduced air freight capacity and increased conveyance costs, and the transition to a new trade deal with the EU. As lockdown restrictions progressively ease, we continue to expect month-on-month fluctuations in parcel volumes. The future evolution of the pandemic, including levels of COVID transmission, consumer behaviour and economic factors such as GDP growth and inflation will impact on future performance.

Addressed letter volumes (excluding elections) increased, as did total letter revenue, compared to the same period last year, when the first lockdown meant that many businesses closed for the first time. Overall the structural decline in letters continues, with volumes down 18% compared to two years ago.

Royal Mail continues to make good progress on the delivery of the CWU Pathway to Change agreement and the delivery of non-staff cost savings of GBP110m are on track. We are also benefitting from the recent introduction of new products and services to meet changing customer demands, such as the roll out of parcel deliveries on Sundays and the introduction of Parcel Collect, our doorstep parcel collection service.

GLS

GLS delivered good volume and revenue growth in the quarter, both year on year and vs. Q1 2019-20.

Volume growth in the first quarter was 10%, or 34% compared to the first quarter of 2019-20. Volume growth slowed as a result of lapping the strong volumes seen during the first COVID-19 lockdown last year and the easing of restrictions in a number of countries. We have seen the share of B2B increasing due to recovering B2B volumes, combined with slowing B2C volume growth compared to last year.

Revenue growth of 12.4% (15.6% growth in EUR) compared to 2020-21, or 36.6% (38.5% growth in EUR(1) ) compared to 2019-20, was driven by volume growth but also benefitted from improved prices and higher freight revenues, which were particularly negatively impacted by the shutdown of retail during the first COVID-19 lockdowns.

Revenue growth is expected to slow as the year progresses, due to easing of lockdown restrictions across the GLS footprint and stronger prior year comparators in the second half.

 
                           3 months ended June             % change(4) 
 Volume (m)               2021     2020    2019    2021 vs. 2020   2021 vs 2019 
                        -------                   --------------  ------------- 
 Royal Mail 
  Total Parcels           371      427      310        (13)%           19% 
                        -------  -------  ------  --------------  ------------- 
   Domestic 
    Parcels (ex. 
    international)(3)     326      352      242        (7)%            35% 
                        -------  -------  ------  --------------  ------------- 
   Addressed 
    Letters (ex. 
    elections)           1,982    1,628    2,416        22%           (18)% 
                        -------  -------  ------  --------------  ------------- 
 GLS                      216      195      160         10%            34% 
                        -------  -------  ------  --------------  ------------- 
 
 
                           3 months ended June           % change(3) 
 Revenue (GBPm)           2021     2020    2019    2021 vs.   2021 vs. 2019 
                                                     2020 
                        -------                   ---------  -------------- 
 Group (2)               3,158    2,807    2,627    12.5%         20.2% 
                        -------  -------  ------  ---------  -------------- 
 Royal Mail              2,126    1,896    1,876    12.2%         13.4% 
                        -------  -------  ------  ---------  -------------- 
   Total Parcels         1,192    1,153     875      3.4%         36.2% 
                        -------  -------  ------  ---------  -------------- 
   Domestic 
    Parcels (ex. 
    international)(2)     979      918      668      6.6%         46.5% 
                        -------  -------  ------  ---------  -------------- 
   Letters                934      743     1,000    25.7%        (6.6)% 
                        -------  -------  ------  ---------  -------------- 
 GLS                     1,039     924      760     12.4%         36.6% 
                        -------  -------  ------  ---------  -------------- 
 

1. Growth vs. Q1 2019-20 includes the benefit of the Mountain Valley Express acquisition which added c. 2.0 percentage points to the 2 year growth rate.

2. Royal Mail and GLS revenue does not add to Group revenue due to the elimination of intragroup trading.

   3.     Domestic Parcels excludes Royal Mail and Parcelforce Worldwide import and export. 
   4.     % changes based on reported numbers. 

A further update on letter and parcel volumes for July and August will be published on 23 September 2021. Interim results for the 6 months to the end of September 2021 will be published on 18 November 2021.

 
 
  Financial Calendar 
Ex-dividend date*         29 July 2021 
Dividend record date*     30 July 2021 
Dividend payment date*    6 September 2021 
 July & August update      23 September 2021 
 2021-22 Interim Results   18 November 2021 
 

* subject to approval at AGM.

Enquiries:

Investor Relations

John Crosse

Email: [e-mail]

Royal Mail investor relations line: 020 7449 8183

Media Relations

Helen Reynoldson

Phone: [phone]

Email: [e-mail]

Jenny Hall

Phone: [phone]

Email: [e-mail]

Royal Mail press office: [e-mail]

Company Secretary

Mark Amsden

Email: [e-mail]

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.

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July 21, 2021 02:00 ET (06:00 GMT)