Annual Report and Notice of AGM
Royal Mail plc
(Incorporated in England and Wales)
Company Number: 8680755
LSE Share Code: RMG
Publication of Annual Report and Financial Statements 2018-19 and 2019 Notice of Annual General Meeting
Following the release by Royal Mail plc (the Company) on 22 May 2019 of the Company's Financial Report for the Full Year Ended 31 March 2019 announcement, the Company announces that it has today published its Annual Report and Financial Statements 2018-19 (Annual Report 2018-19) on Royal Mail's website: https://www.royalmailgroup.com/investors/annual-reports/
The 2019 Annual General Meeting (AGM) will be held on Thursday 18 July 2019 at 11.00am at the Mercure Exeter Rougemont Hotel, Queen Street, Exeter, EX4 3SP. The 2019 Notice of AGM has also been published and is now available via Royal Mail's website:
In accordance with Listing Rule 9.6.1, copies of the Annual Report 2018-19, Notice of AGM and Proxy Form have been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/NSM
The Company also announces that it will provide shareholders, by their chosen communication means, the above documents.
Change to Financial Calendar
The Financial Calendar on page 231 of the Annual Report 2018-19 should read as follows:
Annual General Meeting and trading update1
18 July 2019
25 July 2019
Final Dividend Record date
26 July 2019
Final Dividend Payment date
4 September 2019
1 A trading update will be provided at the Annual General Meeting. Going forward we will not be providing detailed operating results in respect of the first three months of each financial year.
Disclosures required in accordance with DTR 6.3.5
Information on important events that have occurred during the financial year and their impact on the Annual Report 2018-19 were included in the Financial Report for the Full Year Ended 31 March 2019 announcement released on 22 May 2019. This, together with the following information, which is extracted from the Financial report for the full year ended 31 March 2019 (Financial Report) and the Annual Report 2018-19, constitutes the information required by DTR 6.3.5 to be communicated in full, unedited text through a regulatory information service. This information is not a substitute for reading the full Annual Report 2018-19. Any page or note references in the text below refer to those in the Annual Report 2018-19.
For further information, please contact:
Phone: 020 7449 8289
Email: [email protected]
Phone: 020 7449 8183
Email: [email protected]
Phone: 07435 768 549
Email: [email protected]
The Governance section describes in detail how the Group manages its risk from the Group Board level, its respective sub-committees and throughout the organisation. Further details can be found on pages 64-72.
The table below details each principal business risk, those aspects that would be impacted were the risk to materialise, our assessment of the status of the risk and how the Group mitigates it.
How we are mitigating the risk
Pensions, Pay and Pipeline Agreement and the risk of industrial action
There is extensive trade union recognition in respect of our workforce in the UK, with a strong and active trade union. As Royal Mail Group continues to transform in order to remain competitive in the letters and parcels markets, including delivering its 'turnaround and grow' plan in the UK, there remains a risk of industrial action.
There is a risk that one or more material disagreements or disputes between the Group and its trade unions could result in widespread localised or national industrial action.
The absence of major industrial action is a key assumption underpinning the 'turnaround and grow' plan in the UK. But, the plan requires a high level of operational change in an increasingly competitive market, which may put additional strain on the stability of our industrial relations.
Widespread localised or national industrial action would cause material disruption to our business in the UK and would be likely to result in an immediate and potentially ongoing significant loss of revenue for the Group. It may also cause Royal Mail to fail to meet the Quality of Service targets prescribed by Ofcom, which may lead to enforcement action and fines.
The Agenda for Growth agreement developed jointly with the Communication Workers Union (CWU) represented a fundamental change in our relationship with the CWU, and continues to promote stability in industrial relations.
In February 2018, following an industrial dispute late in 2017, we announced the Pensions, Pay and Pipeline Agreement (the '2018 Agreement') with the CWU, which the union membership subsequently ratified. As part of the Agreement, Royal Mail and the CWU committed to a broad programme of operational change, as well as pension reform, changes to pay and terms and conditions.
The after effects of the industrial dispute, delayed implementation of cost avoidance projects and the complexity involved in implementing elements of the Agreement contributed to our announcement in October 2018 that we would not deliver our productivity and cost avoidance targets for 2018-19.
Subsequent analysis of the productivity and efficiency opportunities under the 2018 Agreement found that a step change was required in the form of a new transformation plan to fund the overall cost of the Agreement to the Company. While the overall operational direction set out in the Agreement is right the review found that the initiatives so far designed to fund it were not enough in themselves to do so; nor were they all at the appropriate stage of readiness. Hence, the need for a new transformation plan.
Our Agenda for Growth agreement with the CWU provides a joint commitment to improved industrial relations and to resolving disputes at pace in a way that is beneficial to both employees and Royal Mail.
Our transformation plan will be carefully sequenced, with a foundation period, including parcels automation in all our existing Mail Centres, followed by the embedding of the new work tools across our UK operations and the deployment of a new network design. We have informed our unions about our plan. We will work closely with them on strategy, detailed design and deployment. We are committed to working corroboratively through these changes - including new ways of working new trials and more flexibility - with them.
Under the Agenda for Growth, there is a prescribed resolution process for disputes which requires trained mediators nominated by and representing both the CWU and the business. This must be followed before any industrial action can take place. The Agenda for Growth agreement has legally binding protections for the workforce in respect of future job security and our employment model. These can be rescinded in a number of circumstances, including in the event of national industrial action.
We recognise that pension benefits are important to our people and that we need to continue to provide sustainable and affordable pensions arrangements that are acceptable to our people and unions.
There is a risk that we may be unable to obtain the necessary legislative changes to enable us to implement the UK's first Collective Defined Contribution (CDC) pension scheme as agreed with the CWU.
-The Royal Mail Pension Plan closed to future accrual in its Defined Benefit form on 31 March 2018. A new Defined Benefit Cash Balance Scheme was put in place from 1 April 2018.
The overall ongoing cash cost of both the transitional arrangements and the proposed CDC scheme are expected to continue to be around £400 million per annum.
The Government has published its response to the consultation on CDC pension schemes. It has committed to bringing forward necessary legislative changes to enable CDC pensions as soon as Parliamentary time allows.
We are continuing to work with Government to make the necessary legislative and regulatory changes required to introduce the CDC pension scheme.
Royal Mail must become more efficient and flexible in order to compete effectively in the parcel and letter markets.
The success of our strategy relies on the effective control of costs across all areas of the business and the delivery of efficiency benefits.
We continue to operate a tight balance between achieving efficiency improvements whilst delivering high service levels. This requires careful management of efficiency and Quality of Service.
Royal Mail is launching its 'turnaround and grow' plan in the UK. There is a risk we will not be able to deliver our transformation programme and meet our required cost avoidance and productivity improvement targets during the life of the plan.
In recent years, the profits generated by our UK business have been in decline and our costs have increased. Our productivity has slowed appreciably due to the absence of both new working tools and network enhancements.
The 'turnaround and grow' plan is about a renewed focus on our efficiency and productivity and our UK network through a range of new, digitally enabled work tools, operational excellence and targeted investments. This five-year plan will enable us to maximise the benefits, particularly in delivery and processing, of joint letter and parcel delivery, and facilitate our transition to become a parcels-led business where letters in the UK continue to be important. There will be an even greater emphasis on standardised processes to drive efficiency gains.
Our 'turnaround and grow' programme in the UK is about a renewed focus on our efficiency and productivity and our UK network through a range of digitally enabled work tools and targeted investments. Operational excellence is another key feature of the plan.
This is a demanding change programme. We have informed our unions about our plan. We will work closely with them on strategy, detailed design and deployment (See 'Industrial Action' above). Change underpins our future, with the absence of major industrial action a key turnaround assumption. Our ambition is to deliver around £1 billion of costs avoided, and a cumulative productivity improvement of 15-18 per cent over the life of the plan.
Customer expectations and Royal Mail's responsiveness to market changes
The industry sectors in which we operate remain highly competitive, with customers demanding more and our competitors responding quickly to these changing demands.
Customer expectations and Royal Mail's responsiveness to market changes
Changes in customer expectations and changes in the markets in which the Group operates, could impact the demand for our products and services.
Given the major cultural shift underway in UK society - more e-commerce and therefore fewer letters and more parcels - it is very important that Royal Mail changes too.
While we expect to handle many more parcels in the years to come, work we commissioned from external consultants indicates we should expect domestic letter volumes to fall by about 26 per cent over the next five years or so. This structural decline will continue to be driven by e-substitution, lower GDP, the impact of GDPR and business uncertainty.
Our renewed focus on productivity, through operational excellence and key work tools, is vital to remaining competitive in the UK parcels market - one of the most developed e-commerce markets in the world. So too is our network extension, which, in combination with productivity gains, should enable us to future proof our UK business against a backdrop of significant changes in customer demand.
The impact of GDPR led to a reduction in marketing mail volumes. We expect addressed letter volumes (excluding political parties' election mailings) to decline by five-seven per cent in 2019-20, due to the impact of GDPR and continued market uncertainty. We expect addressed letter volume declines to return to our medium term forecast range of four-six per cent thereafter. The rate could move outside of this range if economic conditions falter or business uncertainty deteriorates.
Competition in the UK domestic and international parcels markets is intense, with competitors offering innovative solutions that include convenient, reliable delivery and return options, improved tracking services and features that put recipients increasingly in control of their deliveries.
Our UK Network review found that our existing network has many strengths. It provides us with good economics, particularly in letters and small parcels, with the latter accounting for most of our parcel volumes. The review established that our network is not optimised for the anticipated increase in the proportion of next day delivery and larger parcels, including our current reliance on manual sortation and a two-sort approach. Our approach is to therefore seek the best of all worlds. This means maintaining our existing network for letters and small, parcels, and a greater proportion of next day delivery items extending our network to handle large parcels more cheaply and more competitively.
We plan to leverage the Parcels technology investments of recent years by bringing to market new features that improve convenience and customer control of parcel deliveries, such as the Estimated Delivery Window feature we have just launched or the Inflight Redirection feature that forms part of this coming year's development plan.
Our 'turnaround and grow' plan underpins the future of our UK business - never forgetting the importance of letters - as e-commerce and other societal changes profoundly impact on how we all go about our daily lives.
We are extending our UK network to a) maximise the benefits of delivering letters and small parcels together and b) handle more next day delivery and larger parcels more efficiently. This will facilitate e-commerce growth and increase demand for our services. We are targeting UK parcel volume growth at above the expected UK addressable parcel market growth rate, underpinned by continued investment in customer-led features and channels.
We will continue to promote the case for mail in a post GDPR environment. During the year, we helped expand the usage and availability of JIC MAIL data (Joint Industry Committee) to offer standardised data on the reach and frequency of mail through all mainstream media and campaign planning tools. JIC MAIL data helps demonstrate more clearly to the market how consumers interact with all mail types and the commercial benefits this drives for brands.
Economic and political environment
Historically, there has been a correlation between economic conditions and the level of letter and B2B parcel volumes. Low rates of economic growth could impact our ability to maintain and grow revenue, either by reducing volumes or encouraging customers to adopt cheaper products or formats for sending letters and parcels.
The UK voted to leave the EU in 2016. The shape of the future relationship between the UK and the EU remains unclear.
The Labour party's 2017 manifesto included a pledge to bring a number of private companies, including Royal Mail, back into public ownership
The Board continues to monitor the economic and wider external environment in the UK and the Group's other markets. Specific areas of focus include:
- Business uncertainty, with the recent slowdown in economic activity, this may be an indicator that business customers will look to reduce costs and compete aggressively for contracts, impacting letter volumes, in particular marketing mail.
- A decline in the value of Sterling, which impacts our International business in terms of the exchange rate effect on imports and exports, higher inflation resulting from increases in the prices of UK imported goods and services, increase terminal dues and wage increases.
- Economic growth in the Eurozone has recently shown signs of weakening in some countries (notably Germany and Italy). The Board will continue to monitor this position in terms of the impact on our international parcel volumes, including those handled by GLS.
More broadly, Royal Mail's business performance remains closely aligned to UK economic growth. We assume that GDP growth will remain below average in the near-term, and return to a typical growth rate in the medium-term.
While the shape of the future relationship between the UK and the EU remains unclear, it is not possible to predict with any degree of accuracy the impact the UK's departure from the EU could have on the Group. The main issues relate to any potential economic downturn, and changes associated with customs and VAT processing. We believe the immediate risk to our domestic operations is low. We are working with key suppliers to ensure our supply chain remains secure.
We continue to monitor the development of Labour Party policy on nationalisation closely. We continue to monitor the development of Labour Party policy on nationalisation closely.
Macroeconomic risk assessments are embedded within the monthly Letters forecasting processes.
The Group also has the following strategies in place:
- A cost avoidance programme to respond to possible revenue headwinds. -Business initiatives that are responding to fluid competitive pressures.
- A possible, absorbable reduction in investment in the short term to protect the cash and indebtedness position of the business.
Internal procedures are in place to monitor and manage ongoing risks associated with the UK leaving the EU. Material risks are reported to and handled through a Brexit steering group. This is led by the Group's Chief Risk and Governance Officer and is comprised of senior executives.
The impact on cross-border parcel volumes will depend on the nature of the UK's future trading relationships, and what the future EU/UK customs and VAT arrangements will be. In a 'no deal' situation, we expect the rules which apply to non-EU imports to be extended to EU items. Similarly, we would expect the EU to treat UK imports as it does non-EU imports today.
We are well placed to manage the impact of changes to customs processing. We are working closely with Government to put in place systems to ensure the movement of cross-border parcels continues to operate effectively. We have developed a new model for the collection of taxes and duties with Government. We are also engaging with Ofcom and the Department for Business, Energy, and Industrial Strategy (BEIS) on the applicability of Quality of Service targets after the UK leaves the EU.
Royal Mail engages regularly with politicians and policy makers, and closely monitors the potential impact of political and policy changes on the company. The Company runs an extensive public affairs programme of engagement with politicians and policy makers. We regularly demonstrate the significant progress that the company has made since privatisation in 2013.
Growing in new areas
Our success in growing in new areas of business is dependent on such factors as our continued ability to identify new profitable and sustainable areas of business, implementing appropriate investments, and having in place suitable structures to support continued transformation of the business.
Royal Mail Group is well positioned to grow in new markets through its subsidiary, GLS. It has a replicable and scalable business model founded on the development of strong regional businesses.
Through increasing its footprint and focusing on growth opportunities in areas such as the deferred parcels space and B2C parcels market, GLS is well positioned to support Royal Mail Group's overall strategy.
Royal Mail and GLS together currently generate £1.7 billion in annual revenue from cross-border parcels and letters. The cross-border parcels market is a large, attractive growth opportunity for the Group,
We are continuing to seek opportunities to develop a broader revenue base and growth in the UK and overseas.
Our five-year transformation programme aims to build a parcels-led, more balanced, more diversified business. This includes increasing the proportion of Group revenue generated by parcels and increasing our geographical diversification programme through our 'scale up and grow' plan for GLS and our cross-border parcels strategy. These are two of our three strategic priorities.
Our strategy is designed to ensure that GLS builds on its strong, 30-year track record and makes a major contribution to the Group's product and geographical diversification over the next five years. The focus will be on profitable revenue growth, including focused yield management.
We will combine the best of Royal Mail and GLS to offer a global proposition in smaller and larger cross-border parcels.
Regulatory and legislative environment
The business operates in a regulated environment. Changes in legal and regulatory requirements could impact our ability to meet our targets and goals.
Absence of a sustainability framework to sustain the USO
USO finances are fragile. The regulatory system applies some constraints to Royal Mail's ability to compete for traffic to support the costs of the Universal Service network. These may impact our revenues and our ability to compete in the highly competitive sectors in which we operate. This could ultimately impact our ability to deliver the Universal Service on a sustainable basis.
Given the continuing structural decline in addressed letter volumes, and broader changes in the parcels market, Ofcom is enhancing its monitoring of Royal Mail. It is bringing forward some of the work it plans to undertake as part of its next review of the regulation of Royal Mail, which, overall, will be completed by 2022. The work it will undertake includes: a) a review of Royal Mail's efficiency, designed to give more insights into the future sustainability of the Universal Postal Service; and b) research to review the extent to which the postal market is meeting the reasonable needs of users and consumers and SMEs.
Ofcom will continue to be focused on monitoring Royal Mail's efficiency. It will complete its delivery cost model to help inform Ofcom's view on how delivery costs might change over time under different scenarios. Ofcom intends to extend this detailed cost modelling work to other parts of Royal Mail's operations.
The Universal Service, as we have stressed to Ofcom and Government, needs to meet the 21st century requirements of consumers and SMEs. In short, a contemporary USO is required. We have also noted the importance of considering the revenue pools needed to sustain the Universal Service, alongside the legitimate needs of consumers and SMEs. Given that the USO has high, fixed costs, irrespective of volume, it is also crucial to focus on underpinning USO and non-USO revenue pools to fund it. We have made all of these points both to Ofcom and Government.
We have been engaging Ofcom to introduce supportive changes to the regulatory environment that will help to keep the Universal Service market funded. Ofcom has not taken forward our proposal for a proactive sustainability framework. It has also not taken forward the opportunity to raise consumer protection standards across the industry.
A key part of our 'turnaround and grow' plan for our UK business is to underpin the sustainability of the Universal Service. The plan will be challenging to execute, and we will be asking Ofcom for its support, wherever possible, to facilitate its delivery. In doing so, we will note that our transformation is designed to future proof our UK business by enabling us to become even more efficient and better placed to respond to changing customer demands. We will stress the power and economic value of the Universal Service as it makes commerce happen across the UK and connects customers, companies and countries. We will also renew our request to Ofcom for a level playing field across the whole industry, including higher consumer protection standards in parcels and lifting labour standards across the delivery sector.
We undertake extensive engagement with Ofcom across all workstreams, including the cost modelling. We will actively engage with Ofcom on both its efficiency and user needs work. We will also engage with the relevant Government departments and consumer interest groups.
Competition Act investigation
On 14 August 2018, Ofcom announced its decision following its investigation into whether Royal Mail had breached competition law. The investigation was launched in February 2014, following a complaint brought by TNT Post UK (now Whistl). Ofcom found that Royal Mail had abused its dominant position in the market for bulk mail delivery services in the United Kingdom by issuing Contract Change Notices on 10 January 2014 which introduced discriminatory prices. It fined Royal Mail £50 million.
Royal Mail is very disappointed by Ofcom's decision to impose a fine of £50 million. The decision relates to a price change announced in 2014, which was never implemented or paid under Royal Mail's Access Letters Contract.
Royal Mail strongly refutes any suggestion that it has acted in breach of the Competition Act, and considers that the decision is without merit and fundamentally flawed.
Royal Mail Group lodged an appeal with the Competition Appeal Tribunal (CAT) on 12 October 2018 to have both Ofcom's decision and fine overturned. The main hearing for the appeal to the CAT will take place in Summer 2019. A final decision is not expected from the CAT until around six to nine months after this hearing. No fine is payable until the appeals process is exhausted.
Royal Mail Group will continue to robustly defend our conduct in the hearing before the CAT.
Strategic workforce planning
Workforce planning could be adversely impacted as the demographic of our workforce changes alongside the availability of people with the right skills to join our organisation.
We have added this risk to our Principal Risks to reflect its strategic importance.
As our workforce ages, our physically demanding roles may become more difficult to fulfil. Advancement in technology is leading to increased automation, which requires a different specialist skillset.
Availability of people to fill frontline roles may decline as more people enter Further and Higher Education.
Economic trends and the impact of Brexit may influence the availability of workers.
We monitor the demographic of our workforce, and track key external metrics such as the employment rate and demographic.
We undertake market research and analysis, and perform industry benchmarking.
We review our workforce with an active programme of recruitment to fill vacancies as and when they arise.
Health, Safety and Wellbeing
The health, safety and wellbeing of our employees, contractors, agency workers and members of the public is of the utmost importance to us. There is a risk that a health and safety incident or failure of our processes could result in the serious injury, ill health or death of employees, contractors, agency workers or members of the public.
Such an incident may lead to criminal prosecution or fines by the enforcing authority or civil action by the injured party resulting in large financial losses and reputational damage for the Group.
Similarly, inadequate arrangements for effectively managing the health and wellbeing of our employees could also lead to financial losses and reputational damage through increased sickness absence, lower productivity, civil action or criminal prosecution.
The business has a large number of employees including seasonal staff and agency workers. It also operates a very large fleet, employs a large number of contractors and interacts extensively with members of the public. A large proportion of our employees spend most of their time working outdoors, on foot or driving, where the environment cannot be controlled. Due to this wide reach and the number of people affected by the business' undertakings, the risk of serious harm to people cannot be totally mitigated. We acknowledge that every health and safety incident has a human impact.
A full review of the integrated Safety, Health and Environment Management System (SHEMS) has been carried out in 2018-19 to identify gaps in legal compliance or risk controls, and identify opportunities for simplification to make the SHEMS more accessible for managers.
We will continue to review SHEMS to identify any further opportunities for streamlining and simplification. We are investing in improved technology so that our risk assessment processes can be completed more easily by managers and better meet the needs of our business.
Operational implementation of SHEMS is monitored via an annual audit programme and a professional and independent SHE function is in place to provide advice, support and guidance on the implementation of standards.
There is an annual SHE initiative and communications plan in place. This is informed by a review of compliance data, risk data, KPI performance and legislative requirements.
Employees have access to health and wellbeing assistance through our Feeling First Class website, First Class Support helpline and Occupational Health provision.
SHE performance is discussed and reviewed by the Board and senior leaders are committed to driving full compliance to SHEMS.
Major breach of information security, data protection regulation and/or cyber
We are subject to a range of regulations, contractual obligations, and customer expectations around the governance and protection of various classes of data.
In common with all major organisations, we are the potential target of cyber-attacks that could threaten the confidentiality, integrity and availability of data in our systems. A cyber security incident could trigger material service and / or operational interruption.
A major breach of data protection regulation is also considered a risk that could result in financial and reputational damage, including loss of customer confidence.
While no material losses related to cyber security or data breaches have been identified, given the increasing sophistication and evolving nature of this threat, and our reliance on technology and data for operational and strategic purposes, we consider cyber security and/or a breach of data protection regulation a principal risk.
As external threats become more sophisticated, and the potential impact of service disruption increases, we continue to invest in cyber security. Recognising that this risk cannot be eliminated, we continuously review our security enhancement and investment plans to reflect the changes in the threats we face. We are undertaking activities across the Group to ensure compliance with GDPR. This includes protecting us from loss of data, managing information rights and managing our marketing permissions correctly.
Talent and capability
Our performance, operating results and future growth depend on our ability to attract and retain talent with the appropriate level of expertise.
The capability, experience and cohesion of senior management is integral to delivering our transformation programme.
Voluntary turnover in senior management continues at similar levels to previous years but remains a business risk.
The Group's remuneration policy sets out that the overall remuneration package should be sufficiently competitive to attract, retain and motivate executives with the commercial experience to run a large, complex business in a highly challenging context.
We operate a succession planning process and have in place talent identification and development programmes.
Environment and sustainability
Climate change and governmental actions to reduce its impact may have adverse operational, financial and reputational consequences.
The cost of operations is likely to increase as we adapt our business in response to government action to reduce the effect of harmful emissions such as the introduction of Clean Air Zones in UK cities.
An increase in the frequency of extreme weather events may result in disruption to our operational pipeline and impact our ability to meet USO requirements. We may also see price rises as a result of resource scarcity such as water shortages.
This risk is now being included as a principal risk given its major significance both internally and externally.
With the UK's largest 'feet on the street' network of around 90,000 postmen and women, Royal Mail plays a key role in keeping carbon emissions low.
We have a requirement to maintain a large fleet of vehicles. Growth in parcels is also driving up our energy demand. We recognise our responsibility to reduce the energy we use and emissions associated with our fleet to help improve air quality in the communities in which we operate.
We are investing in new vehicles and technologies, changing driving styles, and making our transport network more efficient. We are undertaking trials and initiatives in our current fleet to drive down fuel consumption. Our fleet also includes electric and liquefied natural gas vehicles. Over time, we plan to increase the number of alternative fuel or advanced technology vehicles to meet current and future legislation.
We are also taking proactive steps to reduce our energy and water consumption and to reduce the amount of waste we send to landfill.
RELATED PARTY INFORMATION
This Note provides details of amounts owed to and from related parties, which include the Group's defined benefit pension plans (RMPP and RMSEPP), the Group's associate companies, and payments to key management personnel. Details of the Group's principal subsidiaries and associates are also provided.
Related party transactions
During the reporting year the Group entered into transactions with related parties as follows:
RMPP (administration and investment service recharge)
Associate undertaking (Quadrant Catering Limited)
Amounts owed to:
Associate undertaking (Quadrant Catering Limited)
Amounts owed from:
1 In December 2018 Royal Mail Group Ltd, a subsidiary of Royal Mail plc, agreed to a loan of £7,750,000 being made from the RMSEPP escrow to the Trustees of that Plan. This facilitated completion of the purchase of a buy-in policy of insurance. This loan is unsecured and is being repaid with the proceeds from the sale of Plan investments, as they are received by the Trustees. The loan is due to be repaid by 21 September 2019, or such later date as the Company agrees. At 31 March 2019, £6,200,200 is still outstanding. The outstanding loan is included as a non-current asset as it will be repaid to the pension escrow investment - money market funds.
The sales to and purchases from related parties are made at normal market prices. Balances outstanding at the year end are unsecured, interest free and settlement is made by cash.
Key management compensation
Short-term employee benefits
Associate undertaking (Quadrant Catering Limited)
Key management are considered to be the Executive and Non-Executive Directors of Royal Mail plc, all other members of the Executive Board (formerly the Chief Executive's Committee see pages 90 to 91) and the remainder of the Persons Discharging Manageria--l Responsibilities.
The ultimate parent and principal subsidiaries
Royal Mail plc is the ultimate parent Company of the Group. The consolidated financial statements include the financial results of Royal Mail Group Limited and the other principal subsidiaries listed below. The reporting year end for these entities is 31 March 2019 unless otherwise indicated
Country of incorporation
General Logistics Systems B.V.2
Parcel services holding company
Royal Mail Estates Limited
Royal Mail Investments Limited
RM Property and Facilities Solutions Limited
The Company has complied with section 410 of the Companies Act 2006 by including, in these financial statements, a schedule of interests in all undertakings (see Note 28)
2 GLS' reporting year end date is 31 March each year. No adjustment is made in the financial statements in this regard on the basis that, irrespective of the Group's reporting year end date (last Sunday in March) a full year of GLS results is consolidated into the Group.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS 2018-19
The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent Company financial statements on the same basis.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable, relevant and reliable;
· state whether they have been prepared in accordance with IFRSs as adopted by the EU;
· assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
· use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and function are set out on pages 88-89 confirm that, to the best of their knowledge:
· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
· the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
We consider the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
This responsibility statement is approved by the Board of directors and is signed on its behalf by:
Group Chief Executive Officer
Chief Finance and Operations Officer
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