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Royal Mail expects UKPIL losses and significantly reduced GLS profitability 27 March 2020

Group plans to defer the 21 May announcement of its full year results

Royal Mail has issued an update on the impact of COVID-19 on its UK and international businesses. The Company continue to expect FY2019-20 Group adjusted operating profit (before IFRS 16) of £300.0 million - £340.0 million. With significant uncertainty going forward, UKPIL is expected to be materially loss making in FY2020-21 and GLS profitability significantly reduced. To preserve cash the Board intends not to propose a final dividend.

Previously highlighted delays to the Company’s UKPIL transformation plan, when combined with uncertainty around the length and impact of the COVID-19 pandemic, mean it will now take longer to achieve the targets laid out in its Journey 2024 plan. The Board has suspended guidance for 2020-21 and beyond.

UKPIL

In the last two weeks advertising mail in particular has been significantly impacted due to the COVID-19 pandemic, as marketing campaigns have been delayed or cancelled, especially in the travel sector. Business mail volumes have been resilient to date and broadly in line with previous expectations, supported by recent customer mailings.

In Parcels, business to consumer volumes have been strong during the last two weeks, supported by an increase in eCommerce as people have shopped more online. Royal Mail Tracked 24/48 and other standard products have performed well. Tracked Returns volumes have been lower than expected due to weaker volumes from the clothing sector. Volumes through the Post Office have seen declines in the past seven days due to recent restrictions on movement and at this time it is difficult to assess how volumes will develop in the coming weeks. Business to business volumes have seen a significant negative impact, although this only accounts for a small proportion of overall parcel volumes.

International has seen lower volumes given restrictions in certain countries, especially into and out of China, and reduced air freight capacity.

GLS

The impact of COVID-19 has been very challenging, although this differs from country to country. There has been disruption in key markets, particularly in Italy, France and Spain, where the most severe restrictions on movement have been imposed. In the last two weeks Business to Business (B2B) volumes have fallen significantly in some markets. Whilst GLS has seen growth in business to consumer volumes, driven by eCommerce, this has not offset B2B declines. The Company expect the declines in B2B volumes to continue.

In all its markets, the Company is following government and local authority guidelines and advice. While levels of sickness absence vary from market-to-market, the overall trend is an increase in absence from work due to the COVID-19 pandemic.

Outlook

Following guidance from the FCA and FRC, the Group plans to defer the announcement of its Full Year Results 2019-20, previously scheduled for 21 May 2020, and will update the market with a revised date in due course.