Royal Mail plc - TRADING UPDATE FOR THE FIRST QUARTER APRIL TO JUNE 2022

Royal Mail plc (RMG.L) will hold its 2022 Annual General Meeting (AGM) at 11.00 and is providing an update on trading for the first quarter, April to June 2022.

Royal Mail1:

Revenue down 11.5% year on year in the first quarter, reflecting weakening retail trends, lower test kit volumes and a return to structural decline in letters

Adjusted operating loss of GBP92 million, reflecting inflexibility in the cost base to adjust to lower volumes and disappointing performance on delivery of further efficiencies

Progress on Pathway to Change stalled, creating GBP100 million risk to GBP350 million of benefits identified for FY 2022-23; other cost saving programmes on track, albeit with headwinds from recent increases in absence due to COVID-19

Q1 performance emphasises the need to act now to make the most of our new infrastructure, find more flexible ways of matching resource to workload and ensure we have a more agile and sustainable relationship with the CWU

Now moving ahead with actions where we do not need further union agreement, notably revisions and Scan-in Scan-out (SISO) in Delivery

Outlook for FY 2022-23: weaker parcels market and lower than anticipated efficiency savings in-year. Provided progress can be made on above actions, now likely to be around breakeven at adjusted operating profit level, excluding any impact from industrial action.

GLS:

Volume declined 3% year on year in the first quarter; revenue growth of 7.8% in Sterling, (9.8% in Euros), including acquisitions2, benefitted from better pricing and higher freight revenues

Given current inflationary environment and COVID-19 restrictions in place during Q1 2021-22, some margin compression year on year, as expected

Operating profit of GBP94 million (EUR112 million), broadly in line with prior year

Maintaining FY 2022-23 outlook: revenue growth year on year of high single digit % in Euros and operating profit in the range of EUR370 to EUR410 million

Group:

Holding company Royal Mail plc to be renamed International Distributions Services plc to reflect the group structure of two separate companies (Royal Mail and GLS). Our intention is to have clearer financial separation with no cross subsidy, reflecting the increased importance of GLS to the group and our position in the wider logistics and distribution markets

No impact on Royal Mail and GLS brands

In the event that significant operational change within Royal Mail in the UK is not achieved, the Board will consider all options to protect the value and prospects of the Group, including separation of the two companies.

Keith Williams, Chair, commented: 'Whilst GLS delivered a solid performance in the first quarter, the performance of Royal Mail was disappointing with an adjusted operating loss of GBP92 million resulting from of a decline in parcel volumes post the pandemic and a lack of progress in delivering efficiencies.'

'The pandemic boom in parcel volumes bolstered by the delivery of test kits and parcels is over. Royal Mail is currently losing one million pounds per day and the efficiency improvements which are needed for long term success have stalled.'

'We can however be a long-term success story. We have advantages in scale and reach and a strong balance sheet and asset base which are the foundations for a successful future. We need to act now in moving to that future in the interests of all stakeholders, employing those advantages to the maximum.'

Simon Thompson, CEO Royal Mail, commented: 'We have made progress building the infrastructure we need for Royal Mail to compete, especially given the growing demand for more larger parcels, delivering the next day - including Sundays - and in a more environmentally friendly way. But building the infrastructure is not enough. We have to transform the way we work too. We need to change - and change now. This is how we can give our team the job security that they deserve for tomorrow and not just for today. I am ready to talk about pay and change at any time. But it has to be both.'

Martin Seidenberg, CEO GLS, commented: 'GLS continues to deliver a good performance, with weaker B2C volumes partly offset by growth in B2B. Pricing actions have mitigated volume declines and revenue grew by 9.8% year on year in Euro terms. Given inflationary pressures, operating profit margin contracted, as expected. Whilst we anticipate further cost pressures in the second half, we are maintaining our full year outlook.'

Contact:

Greg Sage

Phone: [phone]

Email: [e-mail]

E: [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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