Royal Mail plcHalf Year 2015-16 Results

19 November 2015

Royal Mail plc

Forward-Looking Statements

This presentation contains various statements and graphic representations (together, ‘forward-looking

statements’) that reflect management's current views and projections with respect to future events and financial

and operational performance. The words ‘target’, ‘objective’, ‘growing’, ‘scope’, ‘platform’, ‘future’, ‘forecasts’,

‘expected’, ‘estimated’, ‘accelerating’, ‘expanding’, ‘continuing’, ‘potential’ and ‘sustainable’ and similar

expressions or variations on such expressions identify certain of these forward-looking statements. Others can

be identified from the context in which the statements or graphic representations are made. These

forward-looking statements, as well as those included in any other material discussed as part of this

presentation, involve known and unknown risks, uncertainties, assumptions, estimates and other factors, which

may be beyond Royal Mail's control and which may cause actual results or performance to differ materially

from those expressed or implied from such forward-looking statements. All statements (including

forward-looking statements) contained herein are made as of the date of this presentation and Royal Mail

disclaims any obligation to update any forward-looking statements, whether as a result of new information,

future events or results or otherwise. There can be no assurance that forward-looking statements will prove to

be accurate, as actual results and future events could differ materially from those anticipated in such

statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the

inherent uncertainty therein.

1

Moya GreeneChief Executive Officer

Royal Mail plc

• Accelerated cost savings programme and better than expected performance in GLS delivered

Group operating profit before transformation costs of £342m

• Group revenue flat

• UKPIL revenue down 1%

– Parcel volumes up 4%, revenue up 1% in challenging environment

– Addressed letter volumes down 4% - better end of forecast range - total letter revenue down

3% due to impact of mix largely offsetting price increases

• UKPIL underlying operating costs down 1% benefiting from impact of management

reorganisation programme

• GLS performed better than expected - volumes up 9%, revenue up 8%

• Interim dividend of 7.0p, in line with stated policy

Note: Adjusted results exclude specific items. The figures exclude the results of DPD SL, a subsidiary of GLS Germany sold on 31 March 2015. Underlying change is calculated after adjusting for movements in foreign exchange in

GLS, working days in UKPIL and other one-off items that distort the Group’s underlying performance. For volumes, underlying movements are adjusted for working days in UKPIL and exclude elections in letter volumes.

Strategic focus on costs driving performance

H1 2015-16 Results Overview

3

Royal Mail plc

UK addressable market³ volume growth on average of c.1-2%⁴ annually in short term

4,700

7,700

16,000

22,100

0

5,000

10,000

15,000

20,000

25,000

2010 2012 2014 2015

1 Verdict E-retail in the UK 2015, projected value e-retail growth vs. overall retail, 2013-2020 2 Competitors include: Collect+, myHermes, UPS Access Point, DHL service points and others, excludes ByBox lockers previously used

for B2B overnight deliveries, degree of overlap is not thought to be material 3 Defined as individually addressed parcels and packets weighing up to 30kg, that do not require special handling and comprise goods that have been

ordered based on Triangle Management Services/RMG Fulfilment Market Measure (December 2014). Excluding identifiable international volumes 4 Internal estimate based on Triangle Management Services/RMG Fulfilment

Market Measure (December 2014), Verdict E-retail in the UK 2014 and RMG market insight.

4

UK Parcels Market – Highly Competitive Environment

• E-retail continues to drive market growth

• Faster growing sectors include clothing & footwear and returns

• Estimated c.20% spare capacity (annualised) combined with

reduced addressable market growth puts pressure on prices

• Technology changing relationship between parcel carriers and

customers

• Total competitor customer collection locations² have more than

quadrupled

• In-store ‘click-and-collect’ growing but comes with cost and not yet

impacting overall addressable market growth rate

• Same day delivery, a premium sector of parcels market, growing in

popularity

• New entrants in international space overcoming previous barriers to

entry and competing for market share

> 4x

Current trendsUK e-retail vs. overall retail growth¹

Competitor customer collection locations²

13% 15%18%

0

100

200

300

400

2013 2015 2020

Overa

ll R

eta

il V

alu

e

(£bn)

Overall Retail E-retail

- E-retail

CAGR 7%

- Overall

retail

CAGR 3%

retail

Royal Mail plc

• Continuing to migrate customers to

2D barcodes

• Rolled out 3,000 finger scanners

across all mail processing centres

• First installation of automated parcel

sortation machine in December

2015, expecting to complete roll-out

over next 2 years

• Selected Delivery Offices piloting

outdoor scanning for 2D barcodes

• Rolling out 76,000 new PDAs,

complete in 2016-17

• Extending strategic partnership with

Alibaba to speed up delivery to UK

for Chinese exporters

• ‘Click & Drop’ launched international

services to 200 destinations

• Extended tracked services to new

destinations

• Extended acceptance time for Royal

Mail Tracked 48® to midnight

• Adding more products to weekend

collection services

• Winning new contracts in faster

growing sectors and from well known

retailers e.g. John Lewis,

Waterstones, House of Fraser, The

Book People, The Hut Group, ASOS

• Increasing focus on same day

services

5

Driving through product innovations and service improvements at pace

Strategic Approach to Maintaining our Pre-eminent Position in Parcels

Business

InternationalConsumer/

SMEs

• Local Collect now available at

c.11,700 locations including c.1,200

RM Enquiry Offices

• Trialling doorstep collections for

marketplace sellers/SMEs in NW

England

• New online returns portal for

consumers

Network

Royal Mail plc

Mailmark®

• Increased customer take up

• Targeting 90% of relevant addressed machine-readable

business, advertising and publishing mail

– Over 25% of relevant mail now bears a Mailmark®

• Customer benefits: cheaper postage rates, better

understanding of delivery performance, transparent billing

• Royal Mail benefits: increased visibility of supply chain,

better management information, revenue protection

Meet the MAILMENAdding value to mail

• Benefits entire UK mail market and helps raise the

profile of mail

• Second campaign ‘This time it’s personal’ highlights

the value consumers place on mail

• Advertisers who would consider using mail in next 12

months increased from 56% to 61%

• Direct mail growing whilst other forms of print media

are in decline¹1 WARC UK expenditure report January-June 2015.

6

Through a combination of product improvement and customer focus, letters provide key

revenue support to USO despite structural decline

Securing the Future of Letters

Keep Me Posted

• 85 leading UK charities, consumer organisations, trade

unions and businesses involved including Money Advice

Trust, Citipost, Age Scotland

• Ensure consumers can choose how they are contacted by

banks, utility and media companies, without unfair charges

Royal Mail plc

1 Cumulative over financial years 2012-13, 2013-14 and 2014-15 2 Cumulative over financial years 2015-16, 2016-17 and 2017-18 3 Collections, processing and delivery in UKPIL core network.

7

Avoided c.£200m of costs over last 3 years¹

Increasing pace of change and targeting to avoid c.£500m more annualised costs by 2017-18²

Strategic Approach to Costs

Distribution and conveyance

• Reducing costs in logistics

• Improving fleet management

• Adopting better route planning

• Promoting better driver behaviour through telemetry

Infrastructure

• IT services transformation

• Optimising property portfolio

• Improving facilities management

Other

• Increasing cross functional working/centralisation

• Reducing overhead costs

• Continuing to embed a ‘cost conscious’ culture

• Targeting productivity improvements in range of 2.0-3.0%³

p.a.

– 2.9%³ achieved in H1 2015-16

• c.3,000 net employees left in H1 2015-16

• Optimising indoor and outdoor processes

• Improving underperforming Delivery Offices

• Progressing on closure of 2 Mail Centres: Ipswich and

Portsmouth

• Introducing new ways of working

– ‘Collections on Delivery’

People costs Non-people costs

Targeting at least 1% lower UKPIL underlying operating costs in 2015-16

Royal Mail plc

• Seeking opportunities to leverage existing assets and capabilities to develop non-mail revenue

streams

– Data: chosen as partner for GOV.UK identity verification programme

– Fleet management: trialling third-party vehicle fleet servicing at 6 locations including Leeds,

Derby and North London

• Enhanced in-house IT capability through purchase of Storefeeder

• Secured stake in Market Engine which integrates the world’s largest e-commerce sites and enables

businesses to manage online shop fronts in global marketplaces

• Investment in Mallzee to help align business with the rapid growth in mobile retail purchases

8

Prudent approach to enhancing our capabilities and leveraging our assets

Investing in Growth and Innovation

Digital

innovation and

building

e-commerce

capability

Leveraging our

existing assets

• Looking to fill gaps in our parcel offering e.g. enhance existing same day services, specialist

networks

• Agreed to acquire eCourier, a leading same day delivery company, to create a significant player in

national same day delivery market

Broadening our

parcel offering

Royal Mail plc

• Mean Business Customer Satisfaction Score¹

of 76 in H1 2015-16 (FY 2014-15: 76)

• Net Promoter Score¹ for business customers of

31 in H1 2015-16 (FY 2014-15: 29)

1 Royal Mail business customer satisfaction survey conducted by Ipsos MORI 2 Regulated measures.

9

Driving strong customer satisfaction to increase customer loyalty in core markets

Being Customer Focused

Providing a

high quality

service

Improving our

online

channels

Focus on

better ways of

bringing

parcels and

people

together

• Rolled out booking-in tool to c.460 Enquiry

Offices in time for Christmas 2015

• Over 3 years since launch of ‘Delivery To

Neighbour’

– ‘Nominate a Neighbour’ now RM standard

• Rolling out new ‘With your Neighbour’ slips

• New business portal launched for SMEs to

improve awareness of RM products and help

promote cross-selling

• Improved online claims process to resolve

claims faster

Target H1 2015-16

First Class 93.0% 92.9%

Second Class 98.5% 98.9%

Quality of Service²

Royal Mail plc

Regulation

10

• 16 June - Ofcom announced fundamental review of the regulation of Royal Mail

• September - Royal Mail submitted response

• Review expected to be completed and revised regulatory framework in place during 2016

• 28 July - Ofcom’s Statement of Objections issued

• Royal Mail believes the Competition Act investigation is unfounded and we will continue to submit evidence to defend our

position

Fundamental Review of Regulation

Competition Act investigation

Royal Mail plc 11

Continued good performance

Being a Successful Parcels Business - GLS

Italy

Group

Germany

France

• Given H1 performance, we now expect margin decline

to be at the better end of 50-100bps range in

2015-16

• Good volume growth, benefiting from strong growth

in international volumes

• Good revenue growth but lags volume growth due to

pricing pressure and mix, impacted by lower parcel

weights

• Profit impacted by effect of German minimum wage,

partly mitigated by:

– Better than expected volumes from new and

existing customers

– Planning and operational initiatives

• Continued revenue growth

• Losses reduced to €8m (H1 2014-15: €9m)

• Growth rate ahead of expectations

• Stable franchise system and competitor disruptions

likely to have driven market share gains

• Continuing to implement initiatives to mitigate impact

of German minimum wage e.g. pre-sorting parcels

• Formed ParcelLock GmbH with DPD and Hermes to

develop and introduce parcel box systems

– Field tests commenced in Germany with go-live

expected later in 2016-17

• Ongoing franchisee acquisition strategy

• Next phase of turnaround is more challenging

Going forwardH1 2015-16

Matthew LesterChief Finance Officer

Royal Mail plc

Note: Adjusted results exclude specific items. H1 2014-15 figures exclude the results of DPD SL, a subsidiary of GLS Germany sold on 31 March 2015. Underlying change is calculated after adjusting for movements in foreign

exchange in GLS, working days in UKPIL and other one-off items that distort the Group’s underlying performance 1 Continuing operations.

13

H1 2015-16 Financial Summary

• Group operating profit before transformation

costs flat driven by tight cost control in

UKPIL and better than expected

performance in GLS

• Group operating profit margin after

transformation costs of 5.6% due to higher

voluntary redundancy costs

• Free cash flow down £68m due to higher

voluntary redundancy costs partly offset by

DPD SL proceeds

• Net debt up £94m from FY 2014-15 mainly

due to dividend payments

£mAdjusted

H1 2015-16

Adjusted

H1 2014-15

Underlying

change

Revenue 4,395 4,478 Flat

Operating profit

before transformation costs342 348 Flat

Operating profit margin

before transformation costs7.8% 7.8% Flat

Operating profit

after transformation costs248 301 (16%)

Operating profit margin

after transformation costs5.6% 6.7% (110bps)

Profit before tax 240 287

Earnings per share 18.1p 21.7p

Free cash flow 49 117 (68)

Net debt (369)

Dividend per share 7.0p 6.7p 4%

£mH1 2015-16

Reported Adjusted

Operating profit before

transformation costs208 342

Profit before tax 116 240

EPS¹ 8.8p 18.1p

Royal Mail plc

UKPIL Results

• Revenue down 1%

– 1% increase in parcel revenue

partially offset 3% decline in total letter

revenue

• Tight cost control delivered 1% reduction in

operating costs

• Higher transformation costs driving 130bps

reduction in operating profit margin after

transformation costs

£mAdjusted

H1 2015-16

Adjusted

H1 2014-15

Underlying

change

Revenue 3,651 3,703 (1%)

Operating costs (3,367) (3,415) 1% lower

Operating profit

before transformation costs284 288

Operating profit margin

before transformation costs7.8% 7.8% Flat

Transformation costs (94) (47)

Operating profit

after transformation costs190 241

Operating profit margin

after transformation costs5.2% 6.5% (130bps)

14

Note: Adjusted results exclude specific items. Underlying change is calculated after adjusting for movements in working days in UKPIL and other one-off items that distort the Group’s underlying performance.

Royal Mail plc

1%

15

UKPIL Revenue

Parcels - Revenue £1,479m Volume 518m

• Growth in account and low AUR import parcels more than offset

decline in higher AUR consumer/SME and export volumes

• Strong Parcelforce volume growth of 17% driven by business

wins from new and existing customers, but prices under pressure

• Performance in part reflects relatively weak comparative period

• Price/mix remain under pressure due to competitive environment

• H2 2015-16: tougher comparative period and will depend on our

performance during Christmas trading period

Letters - Revenue £2,172m Volume 6,195m¹

• Addressed letter volume decline 4%, better end of forecast range,

return of direct delivery volumes had +1ppt impact

• Declines in higher AUR consumer/SME and export letters, and

unaddressed letters largely offset impact of price increases

• Marketing mail revenue of £0.6bn, up 3%

• Reduction in door-to-door marketing spend in certain sectors

impacted unaddressed volumes, down 14%

3,7033,663 3,663

3,721

3,651 3,651

40

805810

3,500

3,550

3,600

3,650

3,700

3,750

H1 2014-15 Parcel priceand mix

Parcelvolume

Letter price,mix, elections and

unaddressed

Addressedletter volume

H1 2015-16

1%

(4%)(3%)

£m

(3%)

(1%)

4%

Note: Adjusted results exclude specific items. Underlying change is calculated after adjusting for movements in working days in UKPIL and other one-off items that distort the Group’s underlying performance. For volumes,

underlying movements are adjusted for working days in UKPIL and exclude elections in letter volumes 1 Addressed letter volumes.

Royal Mail plc 16

UKPIL People Costs

• Productivity improvements of 2.9%¹, top end of our target

range

• Pay and other includes frontline pay award of 2.8%, lower

pay increases in other functions and volume driven costs in

Parcelforce

• Management reorganisation programme savings of £32m

– Achieved c.£80m annualised savings

2,331

2,285 2,2852,301 2,301

46 3248

2,240

2,250

2,260

2,270

2,280

2,290

2,300

2,310

2,320

2,330

2,340

H1 2014-15Adjusted

Average hoursreduction

Payand other

Management reorganisationprogramme

H1 2015-16Adjusted

Productivity

improvements

2.9%¹

Pay award and

Parcelforce£m

(1%)

• People costs down 1%, of which:

– Pay award offset by productivity

improvements (c.0.5%)

– Volume driven costs in Parcelforce c.0.5%

– Management reorganisation programme (c.1%)

FY 2016-17: c.£70m increase in National Insurance due to

single-tier state pension scheme

Note: Adjusted results exclude specific items. Underlying change is calculated after adjusting for movements in working days in UKPIL and other one-off items that distort the Group’s underlying performance 1 Collections,

processing and delivery in UKPIL core network.

Royal Mail plc 17

UKPIL Non-people Costs

Distribution and conveyance costs £361m

• Down 2%

• Lower terminal dues driven by lower export volumes

• Improved fleet management – lower vehicle maintenance

and fuel costs

Infrastructure costs £413m

• Reduced property spend due to better facilities management

• Impacted by reclassification of internal costs, excluding

which, infrastructure costs down 2%

Other costs £292m

• Impacted by reclassification of internal costs, excluding

which, other costs down 1%

Ongoing

• Continue to target non-people costs in strategic manner

1,0841,078

1,051 1,051

1,066

15

6

27

1,030

1,040

1,050

1,060

1,070

1,080

1,090

H1 2014-15Adjusted

Distribution andconveyance

Infrastructure Other H1 2015-16Adjusted

£m

Note: Adjusted results exclude specific items. Underlying change is calculated after adjusting for movements in working days in UKPIL and other one-off items that distort the Group’s underlying performance.

(2%)

Royal Mail plc

£21m£30m

£19m

£63m

£7m

H1 2014-15 H1 2015-16 FY 2015-16

Business transformation payments Voluntary redundancy Project costs

£1m

≥ £180m

18

Transformation Costs – Income Statement

H1 2015-16

• Higher transformation costs due to

increased voluntary redundancy costs

associated with better people cost savings

FY 2015-16

• Accelerated efficiency improvements mean

transformation costs expected to be at least

£180m

£94m

£47m

Royal Mail plc

Note: H1 2014-15 excludes revenue €59m, costs €58m and volumes 22m from DPD SL, a subsidiary of GLS Germany sold on 31 March 2015.

19

GLS Results

• Good revenue growth

• Reported results impacted by 12%

strengthening of Sterling vs. Euro

• Strong performances in Italy and Poland,

partially offset by lower profits in Germany

• Operating losses in France reduced to €8m

(H1 2014-15: €9m)

• 30bps margin decline due to impact of

German minimum wage legislation

• Given H1 performance, we now expect

margin decline to be at the better end of

50-100bps range in 2015-16

€mH1

2015-16

H1

2014-15Change

Revenue 1,029 949 8%

Operating costs (957) (880) 9%

Operating profit 72 69

Operating profit margin 7.0% 7.3% (30bps)

Volume (m) 204 186 9%

Average £1 = € 1.39 1.24 12%

£mH1

2015-16

H1

2014-15

Revenue 741 766

Operating costs (689) (710)

Operating profit 52 56

Royal Mail plc 20

GLS Revenue

• Revenue growth across all markets except Portugal

• Competitive pricing and lower parcel weights impacting

price/mix

• No one customer represents more than c.1% of GLS Group

Note: H1 2014-15 excludes revenue €59m from DPD SL, a subsidiary of GLS Germany sold on 31 March 2015.

766

684

741

82

9

66

620

640

660

680

700

720

740

760

780

H1 2014-15 FX Priceand mix

Volume H1 2015-16

£m

8%

• Germany revenue up 5%, driven by higher volumes from

new and existing customers

• Continued good revenue growth in Italy, up 15%

• France continues to grow top line, up 6%

• H2 2015-16: lapping strong comparative period

Royal Mail plc

Note: H1 2014-15 excludes costs €58m from DPD SL, a subsidiary of GLS Germany sold on 31 March 2015.

21

GLS Costs

• People costs up 8% due to:

– Semi-variable costs

linked to volume c.4.0%

– Pay inflation/incentives c.3.5%

– Acquisitions c.0.5%

• Distribution and conveyance costs up 9%

due to higher volumes and German

minimum wage impact

• Infrastructure costs higher largely due to

depreciation and amortisation costs from

IT investments

€mH1

2015-16

H1

2014-15Change

People costs 233 216 8%

Distribution and conveyance costs 628 577 9%

Infrastructure costs 69 62 11%

Other operating costs 27 25 7%

Operating costs 957 880 9%

Royal Mail plc

Note: Adjusted results exclude specific items. H1 2014-15 figures exclude the results of DPD SL, a subsidiary of GLS Germany sold on 31 March 2015.

22

Group Profit After Tax

£mAdjusted

H1 2015-16

Adjusted

H1 2014-15

Operating profit after transformation costs 248 301

Finance costs (9) (16)

Finance income 1 2

Net finance costs (8) (14)

Profit before taxation 240 287

Tax charge (57) (70)

Profit for the period from continuing operations 183 217

Earnings per share from continuing operations 18.1p 21.7p

Royal Mail plc

1 Including RMSEPP deficit payment of £5m 2 Calculated based on value of Employee Free Shares of c.£555m (including National Insurance) pro-rated over the period of vesting, adjusted for level/mix of leavers.

23

Specific Items

• Difference in pension charge and actual

cash paid out is £134m

– Expected to be c.£255m for FY

2015-16

• Lower Employee Free Shares charge due

to timing and reduction in accelerated good

leavers charge

– Charge for FY 2015-16 expected to be

c.£160m² including effect of additional

1% shares allocated to employees in

October 2015 by Government

• FY 2015-16 pension interest credit now

expected to be £113m due to restatement

of accounting surplus following change in

accounting policy

• £31m profit on sale of DPD SL

£mH1

2015-16

H1

2014-15

Pension charge to cash difference¹ (134) (69)

Employee Free Shares charge (76) (91)

Legacy costs 2 (25)

Total operating specific items (208) (185)

Profit on disposal of property, plant & equipment 27 27

Net pension interest 57 38

Profit on disposal of discontinued operations 31 -

Total non-operating specific items 115 65

Total specific items before tax (93) (120)

Royal Mail plc

1 Including RMSEPP deficit payment of £5m 2 Cash tax paid quarterly in arrears therefore different to income statement amount 3 Cash collected on behalf of customers, payment on delivery.

24

Group Free Cash Flow

• In-year trading cash flow down £79m mainly

driven by:

– Higher transformation opex spend due

to voluntary redundancy payments

– Phasing of capex

• Proceeds from the sale of DPD SL of £41m

£mH1

2015-16

H1

2014-15

EBITDA before transformation costs 343 416

Pension charge to cash difference¹ 134 69

Adjusted EBITDA 477 485

Trading working capital movements (159) (153)

Share-based award charge to cash difference 2 -

Investment (299) (237)

Income tax paid² (9) (6)

Net finance costs paid (11) (9)

In-year trading cash inflow 1 80

Other working capital movements (10) 17

Cash cost of operating specific items (2) (2)

Proceeds from disposal of property, plant & equipment 34 34

Proceeds from disposal of discontinued operations 41 -

Acquisition of business interests (7) (4)

London property portfolio costs (8) (8)

Free cash flow 49 117

£mH1

2015-16

H1

2014-15

Stamps used but

purchased in prior

periods/deferred revenue

(6) (29)

Timing of payroll

payments for monthly

paid staff

- 45

Client cash in GLS³ (4) 1

Other working capital (10) 17

Royal Mail plc

£66m £74m

£72m£89m

£99m

£136m

H1 2014-15 H1 2015-16

• Transformation opex:

• Replacement capex largely in relation to IT and

property projects

• Growth capex includes spend on parcel systems

and parcels automation

• Acceleration of efficiency programme results in

increased transformation costs leading to net

investment in FY 2015-16 of c.£620m

25

Group Investment – Cash

£mH1

2015-16

H1

2014-15

Business

transformation payments1 7

Voluntary redundancy

– Management reorganisation

programme

- 39

Voluntary redundancy

– Ongoing105 29

Project costs 30 24

Total 136 99

Net

£265m

Net

£203m

(£34m) (£34m)

Transformationopex

Growthcapex

Replacementcapex

Operational asset disposals

Royal Mail plc

1 €500m liabilities net of discount and fees at spot rate €/£0.73, revalued at balance sheet date 2 Including arrangement/commitment fees and finance leases 3 Includes client cash of £16m.

26

Group Net Debt and Liquidity

• S&P investment grade rating:

BBB stable outlook

• Blended interest rate on gross debt

expected to be c.3%² in 2015-16

• Net debt:

£m

Loans/bonds (364)

Finance leases (224)

Cash and cash equivalents³ 199

Pension escrow (RMSEPP) 20

Net debt at 27 September 2015 (369)

275

369

143

49

0

50

100

150

200

250

300

350

400

At29 March

2015

Freecash flow

Dividend At27 September

2015

Facility RateFacility

£m

Drawn

£m

Facility

end date

Euro bond¹ 2.5% 364 364 2024

Revolving

credit facility

LIBOR

+0.55%1,050 – 2020

Total 1,414 364

Movement in net debt

£m

Royal Mail plc 27

Pensions

• Estimated actuarial surplus of £1.5bn at

September 2015 vs. £1.8bn at March 2015

• 2015 triennial valuation commenced

• Liabilities projected to accrue to March

2018 have been hedged in advance

against movements in interest rates and

inflation rates

– c.£500m of surplus relates to

liabilities yet to be recognised

• Expect no material actuarial surplus or

deficit by March 20183.4

3.1

0.2

0.1

3.0

3.0

3.1

3.1

3.2

3.2

3.3

3.3

3.4

3.4

3.5

RestatedAccounting surplus at

29 March 2015

Movementin assets

Movementin liabilities

Accounting surplus at27 September 2015

Accounting basis Actuarial basis

£bn

• Accounting surplus at March 2015 restated

for change in accounting policy

– Pension liabilities no longer include

an estimate of future pension

administration costs

– £188m liabilities at March 2015

moved into reserves, ongoing charge

will continue to be recognised through

income statement

Royal Mail plc 28

Exploring options and adopting a flexible approach to realise value

Property

Site Acres Key features Action

Nine Elms 13.9 • Large site with outline planning consent for up to 1,870

residential units

• Rapidly evolving area with considerable potential

• Asset held for sale

• Continue to market site

• Reprovision spend required

• Beginning enabling works to maintain

planning permission

Mount

Pleasant

8.6 • Full planning permission received for up to c.680 residential

units

• Significant further investment

required to separate operational site

• Beginning separation works

Paddington proceeds reinvested into larger London sites to optimise value

Moya GreeneChief Executive Officer

Royal Mail plc 30

Responding at Pace to Challenging Market Conditions

Driving through product innovations and service improvements

Enhancing our capabilities and leveraging our assets

Accelerating cost savings and efficiency programme

Investing in technology and driving operational improvements to support pace of change

Appendix

Royal Mail plc

Note: Adjusted results exclude specific items. H1 2014-15 figures exclude the results of DPD SL, a subsidiary of GLS Germany sold on 31 March 2015. Underlying change is calculated after adjusting for movements in foreign

exchange in GLS, working days in UKPIL and other one-off items that distort the Group’s underlying performance 1 These objectives do not represent any forecast, target or expectation as to future results or performance.

H1 2015-16 Value Drivers (adjusted basis)

Revenue Operating costs Transformation costsProfit after

transformation costsCash

People costs

down 1%

Non-people

costs

up 1%

Transformation costs

£94m

EBITDA

£477m

down £8m

Cash investment

£299m

up £62m

Low single digit

revenue growth

Net operating cost growth below

rate of revenue growthDrives margin expansion

Drives growth in

free cash flow

Flat 1% Growth Down 110bps

Free cash flow

£49m

down £68m

Profit after

transformation costs

£248m

Margin

5.6%

UK parcels

up 1%

UK letters

down 3%

UKPIL

down 1%

GLS

up 8%

Objective¹H1 2015-16

33

Royal Mail plc 34

Segmental Summary

£mAdjusted

H1 2015-16

Adjusted

H1 2014-15

Underlying

change

Revenue

UKPIL 3,651 3,703 (1%)

GLS 741 766 8%

Other 3 9

Total 4,395 4,478 Flat

Operating profit before transformation costs

UKPIL 284 288

GLS 52 56

Other 6 4

Total 342 348

Operating profit after transformation costs

UKPIL 190 241

GLS 52 56

Other 6 4

Total 248 301

Note: Adjusted results exclude specific items. H1 2014-15 figures exclude the results of DPD SL, a subsidiary of GLS Germany sold on 31 March 2015. Underlying change is calculated after adjusting for movements in foreign

exchange in GLS, working days in UKPIL and other one-off items that distort the Group’s underlying performance.

Royal Mail plc 35

UKPIL Data

H1 2015-16 FY 2014-15 Target

Gross hours (2.7%) (2.3%)

Workload 0.2% 0.1%

Productivity 2.9% 2.5% 2.0-3.0%

Leavers Joiners Net

Natural attrition/joiners (c.4,000) c.3,000 (c.1,000)

Voluntary redundancy (c.2,000) (c.2,000)

Total (c.6,000) c.3,000 (c.3,000)

People

LettersH1

2015-16

H1

2014-15

Volumes (m)

Non-access 2,501 2,763

Mandatory access 3,463 3,457

International 231 246

Total addressed 6,195 6,466

Change (4%) (3%)

Unaddressed 1,347 1,560

Change (14%) 4%

Revenue (£m) 2,172 2,242

Change (3%) 1%

ParcelsH1

2015-16

H1

2014-15

Volumes (m)

Royal Mail core network 473 459

Change 3% 2%

Parcelforce 45 39

Change 17% 9%

Total volume 518 498

Change 4% 2%

Revenue (£m) 1,479 1,461

Change 1% (1%)

Volumes and Revenue

Note: Adjusted results exclude specific items. Underlying change is calculated after adjusting for movements in working days in UKPIL and other one-off items that distort the Group’s underlying performance. For volumes,

underlying movements are adjusted for working days in UKPIL and exclude elections in letter volumes.

Royal Mail plc

1 Pension Salary Exchange (PSE) was introduced in August 2015 2 Non-operating specific item 3 Set based on year end bond rates and RPI 4 Average employer contribution rate for the period.

36

Pensions

£mH1

2015-16

H1

2014-15

RMPP (320) (265)

RMDCP (22) (17)

GLS (2) (3)

PSE¹ (23) -

People costs (367) (285)

Pension costs relating to VR (26) 7

Total EBIT pension costs (393) (278)

Pension interest credit² 57 38

Total net PBT pension costs (336) (240)

Pensionable payroll (£bn) – RMPP 1.1 1.1

Income statement rate (%)³

Number of active

members

RMPP 29.8% 23.6%

RMDCP 6% 5%

RMPP c.96,000 c.103,000

RMDCP c.40,000 c.37,000

£mH1

2015-16

H1

2014-15

RMPP (181) (192)

RMDCP (22) (16)

GLS (2) (3)

PSE¹ (23) -

RMSEPP deficit (5) (5)

Cash contributions (233) (216)

Pension payments relating to VR (36) (11)

Total cash payments (269) (227)

Pensionable payroll (£bn) – RMPP 1.1 1.1

Cash rate (%)

RMPP 17.1% 17.1%

RMDCP 6% 5%

Cash flowIncome statement

Royal Mail plc 37

Group Taxation

Income statement tax

UK

• Adjusted: broadly in line with UK statutory rate

• Reported: lower rate mainly due to profits made on

operational property disposals offset by reinvestment relief

– Only expect to incur tax on property disposals if there

are insufficient reliefs to shield profits

GLS

• Adjusted: rate reduced marginally (H1 2014-15 33%) due to

lower French losses, for which no deferred tax asset is

recognised, and a change in tax rules in certain territories

Cash tax

UK

• Low tax payments in UK mainly due to utilisation of brought

forward losses and capital allowances

– Now expected to normalise by 2018-19 mainly due to

relief available from additional Employee Free Shares

allocations

GLS

• Cash tax rate lower than income statement rate due to

timing of tax payments in Europe

£mReported H1 2015-16¹ Adjusted H1 2015-16

UK GLS Group UK GLS Group

Profit before tax 66 50 116 190 50 240

Income statement tax charge 10 16 26 41 16 57

Effective tax rate 15% 32% 22% 22% 32% 24%

Cash tax payments/(receipts) 1 8 9 n/a n/a n/a

Cash tax rate 2% 16% 8% n/a n/a n/a

1 Continuing operations only.

Royal Mail plc 38

Deferred Tax – Balance Sheet

201

8 8 613 30 442

(700)

(600)

(500)

(400)

(300)

(200)

(100)

0

100

200

• UK deferred tax assets arise due to brought forward tax losses and capital allowances

– Tax losses are expected to reverse in the short term and capital allowances in the medium term

• Gross deferred tax liability of £643m comprises future tax charges in respect of:

– Employee Free Shares, £42m – full tax relief in H1 2015-16 for additional Employee Free Shares allocations, unwinds over

vesting period

– Pensions, £571m – mainly due to pension surplus. Expected to unwind over a longer period as the surplus reduces

– GLS – mainly due to goodwill

UK GLS Group

£412m

net

liabilityUnable to net off

deferred tax asset and

liabilities across

different territories

£m