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<p>© Royal Mail plc 2013 ‘Royal Mail’ and the ‘Cruciform’ are ©, and registered trade marks of, Royal Mail Group Ltd. All rights reserved. 161763 Project PNF - Summary Prospectus.indd 1 25/09/2013 13:38 Royal Mail plc Summary Prospectus 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 1 THIS DOCUMENT, THE REGISTRATION DOCUMENT AND THE SECURITIES NOTE together comprise a prospectus (the “Prospectus”) relating to Royal Mail plc (the “Company”) prepared in accordance with the Prospectus Rules of the UK Listing Authority made under section 73A of FSMA, which has been approved by the UK Listing Authority in accordance with section 87A of FSMA and has been made available to the public in accordance with Rule 3.2 of the Prospectus Rules. This document has been prepared in connection with the Offer and Admission. The Prospectus may be obtained free of charge as set out in section 25 of Part XI (Additional Information) of the Registration Document. The Company has requested that the UK Listing Authority provides a certificate of approval, a copy of the Prospectus and a translation of this document (where applicable) to the relevant competent authority in each of Belgium, Cyprus, Germany, Gibraltar and Italy. Application will be made to the UK Listing Authority for all of the issued and to be issued Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the Ordinary Shares to be admitted to trading on the London Stock Exchange’s main market for listed securities, which together will constitute official listing on a stock exchange under the Listing Rules. No application has been made or is currently intended to be made for the Ordinary Shares to be admitted to listing or trading on any other exchange. Conditional dealings in the Ordinary Shares are expected to commence on 11 October 2013 (International Security Identification Number (ISIN): GB00BDVZYZ77). It is expected that Admission will become effective, and that unconditional dealings in the Ordinary Shares will commence, at 8.00 a.m. on 15 October 2013. Dealings on the London Stock Exchange before Admission will only be settled if Admission takes place. All dealings before the commencement of unconditional dealings will be on a “when issued” basis and will be of no effect if Admission does not take place and such dealings will be at the sole risk of the parties concerned. Prospective investors should read the whole of this document, together with the Registration Document and the Securities Note and, in particular, the discussion of certain risks and other factors that should be considered in connection with an investment in the Ordinary Shares. Prospective investors should be aware that an investment in the Company involves a degree of risk and that, if one or more of the risks described in the Prospectus were to occur, investors may find that their investment is materially adversely affected. Accordingly, an investment in the Ordinary Shares is only suitable for investors who are knowledgeable in investment matters and who are able to bear the loss of the whole or part of their investment. Royal Mail plc (incorporated in England and Wales under the Companies Act 2006 with registered number 08680755) Offer of up to 521,739,130 Ordinary Shares of 1p each at an Offer Price expected to be between £2.60 and £3.30 per Ordinary Share and admission to the premium listing segment of the Official List and to trading on the main market of the London Stock Exchange Joint Global Co-ordinator and Joint Bookrunner Goldman Sachs International Joint Global Co-ordinator and Joint Bookrunner UBS Investment Bank Joint Bookrunner and Sponsor Barclays Joint Bookrunner BofA Merrill Lynch Co-Lead Manager Investec Bank plc Co-Lead Manager Nomura Co-Lead Manager RBC Capital Markets Financial Adviser to HM Government Lazard & Co., Limited Issued ordinary share capital on Admission Issued and fully paid Ordinary Shares Number 1,000,000,000 Nominal Amount £10,000,000 This document does not constitute an offer of, or the solicitation of an offer to buy or to subscribe for, Ordinary Shares to any person in any jurisdiction to whom or in which jurisdiction such offer or solicitation is unlawful and, in particular, is not for distribution in Australia, Canada or Japan, in each case except in compliance with an exemption from applicable securities laws. The Ordinary Shares have not been and will not be registered under the US Securities Act of 1933, as amended (the “US Securities Act”) or qualified for sale under the laws of any state of the United States or under any applicable securities laws of Australia, Canada or Japan. The Ordinary Shares are being offered and sold within the United States only to persons reasonably believed to be “qualified institutional buyers” (as defined in Rule 144A under the US Securities Act) in reliance on Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and outside the United States in reliance on Regulation S under the US Securities Act. 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 2 The Ordinary Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the Ordinary Shares or the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the United States. The distribution of this document, the Registration Document and the Securities Note and the offer, sale and/or issue of Ordinary Shares in certain jurisdictions may be restricted by law. No action has been or will be taken by the Secretary of State, Postal Services Holding Company plc (the “Selling Shareholder”), the Company, the directors of the Company (the “Directors”) or any of the Underwriters to permit a public offer of Ordinary Shares or possession or distribution of this document (or any other offering or publicity material or application form relating to the Ordinary Shares) in any jurisdiction, other than in the UK and the EEA Passported Jurisdictions. Persons into whose possession this document comes are required by the Secretary of State, the Selling Shareholder, the Company, the Directors and the Underwriters to inform themselves about and to observe any such restrictions. This document does not constitute or form part of an offer to sell, or the solicitation of an offer to buy, Ordinary Shares to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful. Each of the Underwriters is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the UK and is acting exclusively for the Secretary of State, the Selling Shareholder and the Company and for no other person in connection with the Offer and will not regard any other person (whether or not a recipient of this document) as its client in relation to the Offer and will not be responsible to anyone other than the Secretary of State, the Selling Shareholder and the Company for providing the protections afforded to its clients or for providing advice in relation to the Offer or any transaction or arrangement referred to in this document. The Company consents to the use of the Prospectus by the Intermediaries in connection with the Intermediaries Offer in the UK on the following terms: (i) in respect of Intermediaries who are appointed prior to the date of this document, from the date of this document; and (ii) in respect of Intermediaries who are appointed after the date of this document, from the date on which they are appointed to participate in the Intermediaries Offer and agree to adhere to and be bound by the terms of the Intermediaries Terms and Conditions, in each case until the closing of the Intermediaries Offer. The Company accepts responsibility for the information contained in the Prospectus with respect to any purchaser of Ordinary Shares pursuant to the Offer. Any Intermediary that uses the Prospectus must state on its website that it uses this document in accordance with the Company’s consent. Intermediaries are required to provide the terms and conditions of the Intermediaries Offer to any prospective investor who has expressed an interest in participating in the Intermediaries Offer. Any application made by investors to any Intermediary is subject to the terms and conditions imposed by each Intermediary. For a description of restrictions on the offer, sale and transfer of the Ordinary Shares and distribution of this document, see section 15 of Part III (Information About the Offer) of the Securities Note. Please note that by receiving this document, purchasers shall be deemed to have made certain representations, acknowledgements and agreements set out in the Prospectus including, without limitation, those set out in section 15 of Part III (Information About the Offer) of the Securities Note and, in the case of investors who submit an Application Form, those set out in section 17.8 of Part III (Information About the Offer) of the Securities Note. Apart from the responsibilities and liabilities, if any, which may be imposed on the Underwriters by FSMA, or the regulatory regime established thereunder, or under the regulatory regime of any other jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Underwriters nor the Secretary of State nor the Selling Shareholder accept any responsibility whatsoever or make any representation or warranty, express or implied, for the contents of this document, including its accuracy, completeness or verification, or for any other statement made or purported to be made by any of them, or on behalf of them, the Company or any other person in connection with the Company, the Ordinary Shares or the Offer and nothing contained in this document is or shall be relied upon as a promise or representation in this respect, whether as to the past or future. Each of the Underwriters, the Secretary of State and the Selling Shareholder accordingly disclaims all and any responsibility or liability whether arising in tort, contract or otherwise (save as referred to above) which any of them might otherwise have in respect of this document or any such statement. Certain terms used in this document are defined in the Schedule (Definitions and Glossary) to this document. References to the singular in this document shall include the plural and vice versa, where the context so requires. The terms “subsidiary”, “subsidiary undertaking” and “undertaking” have the meanings given to them by the Companies Act 2006. The contents of the websites of the Group and the Offer Website do not form part of this document, and prospective investors should not rely on them. All references to time in this document are to UK time unless otherwise stated. The date of this document is 27 September 2013. 2 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 3 SUMMARY Summaries are made up of disclosure requirements known as “Elements”. These Elements are numbered in Sections A – E (A.1 – E.7). This summary contains all the Elements required to be included in a summary for this type of security and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of security and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of ‘not applicable’. SECTION A – INTRODUCTION AND WARNINGS A.1 Warning to investors This summary should be read as an introduction to the Prospectus. Any decision to invest in the Ordinary Shares should be based on a consideration of the Prospectus as a whole by the investor. Where a claim relating to the information contained in the Prospectus is brought before a court, a plaintiff investor might, under the national legislation of the European Economic Area member states, have to bear the costs of translating the Prospectus before the legal proceedings are initiated. Civil liability attaches to the Directors and the Company, who are responsible for this summary including any translation thereof, but only if this summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or if it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in the Ordinary Shares. A.2 Consent for intermediaries The Company consents to the use of the Prospectus by the Intermediaries in connection with the Intermediaries Offer in the UK on the following terms: (i) in respect of Intermediaries who are appointed prior to the date of this document, from the date of this document; and (ii) in respect of Intermediaries who are appointed after the date of this document, from the date on which they are appointed to participate in the Intermediaries Offer and agree to adhere to and be bound by the terms of the Intermediaries Terms and Conditions, in each case until the closing of the Intermediaries Offer. Prospective investors interested in participating in the Intermediaries Offer should apply for Ordinary Shares through the Intermediaries by following their relevant application procedures by no later than 8 October 2013. Any Intermediary that uses the Prospectus must state on its website that it uses this Prospectus in accordance with the Company’s consent. Intermediaries are required to provide the terms and conditions of the Intermediaries Offer to any prospective investor who has expressed an interest in participating in the Intermediaries Offer to such Intermediary. Any application made by investors to any Intermediary is subject to the terms and conditions imposed by each Intermediary. SECTION B – ISSUER B.1 Legal and commercial name The legal name of the Company is Royal Mail plc. B.2 Domicile/legal form/legislation/country of incorporation The Company is domiciled in the UK. It was incorporated in England and Wales on 6 September 2013 and is registered as a public company limited by shares under registered number 08680755. The Company operates under the UK Companies Act 2006. 3 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 4 B.3 Current operations and principal activities The Group is the leading provider of postal and delivery services in the UK, with significant operations in continental Europe. Royal Mail’s origins date back nearly 500 years to the time of King Henry VIII. Today, the Group’s core business is the collection, sorting, transportation and delivery of parcels and letters in the UK, leveraging its unique networks and powerful brands, which underpin leading positions in the UK’s parcel and letter delivery markets. It is the UK’s designated universal postal service provider and delivers a “one price goes anywhere” service on a range of parcel and letter products in the UK. The Group’s UK business is complemented by its ownership of GLS (General Logistics Systems), which operates one of the largest ground-based deferred parcel delivery networks in Europe. In FYE 2013, the Group handled approximately 17.4 billion letters and approximately 1.4 billion parcels across all of its networks. The Group operates through two core divisions, UKPIL (UK Parcels, International and Letters) and GLS. UKPIL collects and delivers parcels and letters predominantly through two networks: the Royal Mail Core Network and Parcelforce Worldwide. It provides collection and delivery services under the “Royal Mail” and “Parcelforce Worldwide” brands. The functions of Royal Mail Group Limited (“RMG”) as the UK’s designated universal postal service provider are discharged through UKPIL. Through the Royal Mail Core Network, Royal Mail delivers parcels and letters, and has the capability to deliver to more than 29 million addresses in the UK six days a week (excluding UK public holidays). Parcelforce Worldwide is a separate UK network, which collects and delivers express parcels. UKPIL also generates revenue from international parcels and letters exported from, and imported into, the UK. At the end of Q1 FYE 2014, UKPIL employed approximately 150,000 employees. GLS comprises the Group’s European parcel business and is focused on the deferred parcels segment. GLS operates in 22 European countries and nation states through wholly-owned members of the GLS Group and franchisees, and covers an additional 15 European countries and nation states through network and service partners of the GLS Group, which include Parcelforce Worldwide in the UK. The GLS Network is one of the largest ground-based deferred parcel delivery networks in Europe. GLS’s main markets are Germany, Italy and France, and in FYE 2013 revenue generated in these markets contributed 71 per cent. of GLS’s total revenue. The Group’s ownership of GLS delivers a number of strategic benefits for the Group, including geographic earnings diversification, its ability to generate cash which can be used to fund investment in other parts of the Group’s business, a means to capture growth in cross-border parcels and opportunities for sharing operational excellence within the Group. At the end of Q1 FYE 2014, the GLS Group employed approximately 14,000 employees. “Royal Mail” is a household name in the UK that customers rely on for the delivery of parcels and letters. The Group is a trusted partner for consumers and businesses across the UK and Europe. Since FYE 2008, Royal Mail has been undergoing a major transformation programme which has covered every aspect of its operations, namely: collection, processing, logistics, sorting and delivery. The transformation programme has focused on enabling Royal Mail to deliver letters and parcels more efficiently and adapting the Royal Mail Core Network so that it can carry more parcels. The Group has improved the productivity and effectiveness of the Royal Mail Core Network, which has traditionally been focused on the delivery of letters and is now well positioned to benefit further from predicted levels of growth in the overall UK parcel market while continuing to deliver high levels of service as the UK’s universal postal service provider. In recent years, the operating environment for the Group has changed following the transition to a new and more supportive regulatory framework in the UK, the development of improved relationships with trade unions representing the Group’s employees in the UK and the transfer to HM Government of the Group’s pre-1 April 2012 pension liabilities (based on service and pay up to that date) and certain pension assets relating to the Royal Mail Pension Plan. In April 2012, RMG transferred Post Office Limited (“POL”) to the Selling Shareholder. POL operates the UK’s network of more than 11,500 Post Office branches. The Group and POL have entered into the Mails Distribution Agreement, a long-term distribution agreement, under which POL sells Royal Mail postage stamps and the Group’s retail products (under the “Royal Mail” and “Parcelforce Worldwide” brands) to customers across the UK’s Post Office branch network. POL currently sells Royal Mail postage stamps and the Group’s retail products as agent of RMG and customers contract 4 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 5 with RMG through the agency of POL. Under the agreement, POL receives separate remuneration from RMG for each product sold plus an additional fee payable periodically. In FYE 2013, approximately £1.7 billion of the Group’s revenue was generated through the sale of the Group’s postage stamps and products by POL on the Group’s behalf. In FYE 2013, the Group made payments of £371 million to POL, including the annual fee and other remuneration payable under the Mails Distribution Agreement as well as payments in respect of other operational items. Following Admission, POL will remain, subject to the PSA, in the ownership of HM Government. In FYE 2013, the Group generated revenue of £9,279 million and operating profit after transformation costs of £440 million. In FYE 2013, UKPIL accounted for 83 per cent. (£7,633 million) of the Group’s revenue and 73 per cent. (£294 million) of its operating profit after transformation costs, in each case on an adjusted 52-week basis. In the same period, GLS accounted for 16 per cent. (£1,498 million) of the Group’s revenue and 25 per cent. (£101 million) of its operating profit after transformation costs, in each case on an adjusted 52-week basis. In FYE 2013, 48 per cent. of the Group’s revenue (£4,477 million) was generated from parcels. In Q1 FYE 2014, the Group generated revenue of £2,304 million and operating profit after transformation costs of £164 million. In Q1 FYE 2014, UKPIL accounted for 82 per cent. (£1,898 million) of the Group’s revenue and 80 per cent. (£132 million) of its operating profit after transformation costs. In the same period, GLS accounted for 17 per cent. (£402 million) of the Group’s revenue and 19 per cent. (£31 million) of its operating profit after transformation costs. Trading in the first quarter of FYE 2014 was slightly ahead of the Group’s expectations. The Group’s trading typically begins strongly at the beginning of the financial year but then slows due to the summer holiday season. The Group’s year-on-year parcel volume growth in the second quarter of FYE 2014 is expected to be further impacted by a temporary slow-down in online retailing due to the good summer weather in the UK, as well as the reaction to the introduction of size-based pricing by Royal Mail. Consequently, with respect to the first half of FYE 2014, the Group anticipates that UKPIL’s parcel revenue will be substantially ahead of the same period last year while UKPIL’s parcel volumes are expected to remain broadly unchanged compared with the same period last year. Historically, the Group has experienced stronger parcel growth in the third quarter of its financial year due to Christmas, and in the UK, Royal Mail is well placed to take advantage of increases in trading and online retailing in the run-up to Christmas 2013. There are several one-time exceptional items associated with the Offer and Admission, which, together with the Pensions Reform, will impact the Group’s reported results for the first half of FYE 2014 and for the full year. These one-time exceptional items include the expenses associated with the Offer and Admission and certain charges associated with the accounting treatment of the Employee Free Shares Offer. In addition, the Pensions Reform will result in a material one-time non-cash exceptional credit to be recorded in the first half of FYE 2014. The Group’s key value drivers remain the objectives for the Group. B.4a Significant recent trends affecting the Group and the industries in which it operates Macro-economic environment in the UK and Europe The Group’s performance and results of operations are significantly influenced by macro-economic trends and conditions as the volume of deliverable, traded goods and the number of business and transactional communications made by letter and parcel are closely linked to levels of economic activity and economic growth in general. Following on from the global economic crisis, in recent years, the UK and the Eurozone have experienced periods of modest GDP growth and have also suffered periods of GDP contraction. New regulatory regime – greater commercial freedom to set prices The UK postal activities of Royal Mail (excluding Parcelforce Worldwide) are regulated by the provisions of the Postal Services Act 2011 (“PSA”), which implements the third EU Postal Directive. Ofcom, the regulator for postal services in the UK, introduced a new regulatory framework with effect from March 2012, which gave Royal Mail greater commercial freedom to set prices for its services. Under the previous regime, approximately 60 per cent. of Group revenue was subject to direct price control by the postal regulator whereas, under the new regime, direct price control affected only five per cent. of Group revenue in FYE 2013, although approximately 50 per cent. of Group revenue (including revenue subject to direct price control) is subject to Ofcom oversight relating to the USO and network access (including the margin squeeze price control on mandated network access). 5 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 6 Industrial relations For the three years ended with FYE 2013, the Group experienced stable relations with its UK employees predominantly as a result of the Business Transformation Agreement with the CWU, which was signed in 2010. The agreement established a collaborative framework for pay and modernisation within RMG, including the establishment of local employee incentive schemes. Elements of the agreement, including pay, were due for renegotiation in April 2013. RMG has been discussing a new agreement with the CWU since 2011 and continues to engage in discussions with the CWU to reach agreement on relevant matters. However, both the CWU and the CMA are opposed to, and the CWU, in particular, has publicly campaigned against, the privatisation of Royal Mail. On 20 September 2013, the CWU notified RMG that it intended to ballot relevant employees of RMG who are members of the CWU, including those working in Royal Mail and Parcelforce Worldwide, for industrial action and that the ballot would open on 27 September 2013 and close on 16 October 2013. The sample ballot paper provided to RMG by the CWU indicates that industrial action will take the form of a national strike. The Group expects that the members of the CWU will vote for national strike action in this ballot. Potential investors should therefore assume for the purposes of making any decision to purchase Ordinary Shares that national strike action and other forms of industrial action will take place across the whole of UKPIL’s activities in the UK during the period immediately after, and may take place during, the Offer Period. Structural changes to the Group’s business due to e-substitution and e-commerce Since 2005, letter and parcel volumes have been significantly affected by e-substitution, having a negative impact on letter volumes, and the increase in online shopping, having a positive impact on parcel volumes. Since 2005, letter volumes have been declining primarily due to the shift towards substitution of paper communication by electronic methods, which has occurred across letter segments and is expected to continue in the foreseeable future. The reasons for e-substitution vary and include, among others, corporate cost pressures, convenience, environmental considerations, broadband penetration and internet usage, and governmental initiatives to reduce paper-based communications and move them online. In FYE 2013, addressed letter volumes in the UK declined by eight per cent. and the Group forecasts that letter volumes in the UK (including inland and international letters but excluding election material) will decline by approximately four to six per cent. per year over the period ending with FYE 2016. In recent years, parcel volumes have grown primarily as a result of a shift by consumers towards online shopping. Growth in parcel volumes, however, has been partially offset by the digital substitution of certain products previously distributed by parcel such as books, films, music and video games. The Group forecasts that in the three financial years ending with FYE 2016, UK parcel volumes within the B2C segment will grow at approximately five to six per cent. per annum and that, when aggregated, parcel volumes within the B2C and C2X segments will grow at approximately 4.5 to 5.5 per cent. per annum. In addition, the Group forecasts that parcel volumes within the UK’s B2B segment will grow at slightly above UK GDP per annum in the three financial years ending with FYE 2016. B.5 Group structure The Company is the holding company of the Group. The Company has five principal subsidiaries: Royal Mail Group Limited, Royal Mail Investments Limited, Royal Mail Estates Limited, GLS B.V. and Romec Limited. Royal Mail Group Limited operates the letter and parcel business of the Group in the UK (through UKPIL) and is the UK’s designated universal provider of postal services. Royal Mail Investments Limited is an intermediate holding company which holds the Group’s overseas businesses. Royal Mail Estates Limited holds many of the Group’s property interests. GLS B.V. is the holding company for the Group’s European parcel business (GLS). Romec Limited is a joint venture entity largely providing facilities management services to the Group. B.6 Selling Shareholder As at the date of this summary Postal Services Holding Company plc (the “Selling Shareholder”) owns 100 per cent. of the issued ordinary share capital of the Company. The Selling Shareholder is wholly- owned by the Secretary of State. Pursuant to the Offer, the Selling Shareholder is currently expected 6 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 7 to sell between 401,000,000 and 521,739,130 Ordinary Shares, representing between 40.1 per cent. and 52.2 per cent. of the issued ordinary share capital of the Company on Admission. In addition, up to a further 78,260,870 Ordinary Shares (representing 7.8 per cent. of the issued ordinary share capital of the Company on Admission) may be sold by the Selling Shareholder pursuant to the Over- allotment Arrangements. The number of Ordinary Shares sold by the Selling Shareholder pursuant to the Offer is expected to be set within the Offer Size Range, but could be set above or below the Offer Size Range (subject to the minimum free float requirements of the UK Listing Authority). In addition to the Offer, a separate Employee Free Shares Offer has been made to Eligible Employees. Pursuant to the Employee Free Shares Offer, 10 per cent. of the issued share capital of the Company plus an additional 160,000 Ordinary Shares will be transferred to the trustee of the Royal Mail Share Incentive Plan on or immediately after Admission, subject to HMRC approval of the Royal Mail Share Incentive Plan. Each Eligible Employee will then automatically be awarded a number of Employee Free Shares on or around Admission, unless the Eligible Employee completes and submits to Equiniti Limited an opt-out form by 9.00 a.m. on 7 October 2013. The expected interests of the Selling Shareholder in the Ordinary Shares following Admission are set out in Element E.5 below. The Ordinary Shares owned by the Selling Shareholder after Admission will rank pari passu with other Ordinary Shares in all respects. There is a relationship agreement in place between the Company, the Secretary of State and the Selling Shareholder that will have effect from Admission. B.7 Selected historical key financial information The table below summarises the development in certain key financial and operating measures for the Group in Q1 FYE 2014, Q1 FYE 2013, FYE 2013, FYE 2012 and FYE 2011. Q1 Q1 Reported Adjusted Reported Reported £ million FYE FYE 53 weeks 52 weeks 52 weeks 52 weeks 2014 2013 2013 2013(1) 2012 2011 (unaudited) Revenue 2,304 2,168 9,279 9,146 8,764 8,415 UKPIL 1,898 1,798 7,766 7,633 7,189 6,885 GLS 402 364 1,498 1,498 1,562 1,485 Other(2) 4 6 15 15 13 45 Growth %(3) 3% – – 5% 4% – Net operating costs (2,109) (2,065) (8,644) (8,548) (8,383) (8,205) Growth %(3) 1% – 3% 2% Transformation costs(4) (31) (39) (195) (195) (229) (192) Total net operating costs after transformation costs (2,140) (2,104) (8,839) (8,743) (8,612) (8,397) Growth % 1% – – 2% 2% – Operating profit/(loss) after transformation costs 164 64 440 403 152 18 UKPIL 132 36 331 294 33 (110) GLS 31 26 101 101 128 118 Other 1 2 8 8 (9) 10 Operating profit margin after transformation costs %(5) 5.0% 3.0% 4.7% 4.4% 1.7% 0.2% nm(7) UKPIL(6) 4.4% 2.0% 4.3% 3.9% 0.5% GLS 7.7% 7.1% 6.7% 6.7% 8.2% 7.9% EBITDA before transformation costs(8) 258 172 915 878 681 493 Free cash flow 110 289 334 NM 154 (246) Notes: (1) FYE 2013 was a 53-week financial year. In order to provide a meaningful comparison with FYE 2012, revenue, operating profit after transformation costs and operating margin after transformation costs are also presented on an adjusted 52-week basis, which removes the revenue earned and associated costs incurred in the 53rd week. (2) Other revenue includes revenue from the Group’s separately managed non-core division which holds its interests in two subsidiaries and an associate (for reporting purposes) which provide facilities management, catering and associated cleaning services, consulting and project management services to the Group. (3) Changes in revenue and costs at the Group level for FYE 2013 are calculated on an adjusted 52-week basis and the impact of foreign currency movements. Changes in revenue and costs at the Group level for Q1 FYE 2014 are adjusted for the impact of two additional working days in Q1 FYE 2014 and foreign currency movements. (4) Transformation costs are costs which fall outside the Group’s normal trading activity and are disclosed separately to provide greater visibility of the underlying results of the revenue. The costs represent people and non-people related costs associated with the Transformation Programme. (5) Operating profit margin after transformation costs is calculated as operating profit after transformation costs to revenue. Operating profit margin after transformation costs at the Group level for Q1 FYE 2014 is adjusted for the impact of two additional working days in Q1 FYE 2014 and foreign currency movements. (6) Operating profit margin after transformation costs at the UKPIL level for Q1 FYE 2014 is adjusted for the impact of two additional working days in Q1 FYE 2014. (7) Not meaningful. (8) EBITDA before exceptional items is defined as operating profit before exceptional items plus depreciation less share of post-tax profits from associates. 7 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 8 The Group’s revenue in FYE 2013, FYE 2012 and FYE 2011, was £9,279 million, £8,764 million and £8,415 million, respectively. Revenue in FYE 2013 increased by five per cent. compared with FYE 2012 on a like-for-like basis, reflecting revenue growth at UKPIL and GLS. Revenue in FYE 2012 increased by four per cent. compared with FYE 2011, reflecting revenue growth at UKPIL and GLS. The Group’s revenue in Q1 FYE 2014 and Q1 FYE 2013 was £2,304 million and £2,168 million, respectively. Adjusting for the impact of the two additional working days in Q1 FYE 2014 and foreign exchange movements, revenue increased by three per cent., which was attributable to revenue growth at UKPIL and GLS. Operating profit after transformation costs in FYE 2013, FYE 2012 and FYE 2011 was £440 million, £152 million and £18 million, respectively. Operating profit margin after transformation costs was 4.4 per cent. (on an adjusted 52-week basis), 1.7 per cent. and 0.2 per cent. in each of FYE 2013, FYE 2012 and FYE 2011, respectively. The increase from FYE 2011 to FYE 2012 and from FYE 2012 to FYE 2013 was primarily attributable to the increase in revenue, which, in each period, grew at a faster rate than the increase in operating costs including transformation costs. Operating profit after transformation costs in Q1 FYE 2014 and Q1 FYE 2013 was £164 million and £64 million, respectively. Operating profit margin after transformation costs was five per cent. (adjusting for the impact of the two additional working days in Q1 FYE 2014 and foreign exchange movements) in Q1 FYE 2014 and three per cent. in Q1 FYE 2013. The increase was primarily attributable to the increase in revenue, which grew at a faster rate than the increase in the Group’s operating costs including transformation costs. EBITDA before transformation costs was £915 million in FYE 2013, compared with £681 million in FYE 2012 and £493 million in FYE 2011. The increase in FYE 2013 compared with FYE 2012 and FYE 2011 was primarily attributable to the improved operating performance of UKPIL. EBITDA before transformation costs in Q1 FYE 2014 was £258 million compared with £172 million in Q1 FYE 2013. This increase was primarily attributable to the improved operating performance of UKPIL. Free cash flow was a cash inflow of £334 million in FYE 2013, £154 million in FYE 2012 and a cash outflow of £246 million in FYE 2011. Free cash flow increased from FYE 2011 to FYE 2012 and from FYE 2012 to FYE 2013 due to the Group’s improved trading performance in each of those periods. Free cash flow in Q1 FYE 2014 was a cash inflow of £110 million compared with a cash inflow of £289 million in Q1 FYE 2013. The decrease in free cash flow from Q1 FYE 2013 to Q1 FYE 2014 was due to the impact of one-off items that caused a working capital inflow in Q1 FYE 2013, which items were not repeated in Q1 FYE 2014. Save for: (i) the separation of Post Office Limited from the Group; (ii) the transfer of the pre-1 April 2012 pension liabilities (based on service and pay up to that date for active members) and certain pension assets of the Royal Mail Pension Plan to HM Government; (iii) the insertion of the Company as the holding company of the Group; and (iv) the impact of the Pensions Reform, there has been no significant change in the financial condition or operating results of the Company or the Group during or, as at the date of this document, subsequent to the periods covered by the selected historical key financial information set out in the table above. B.8 Selected key pro forma financial information The summary unaudited pro forma statement of financial position of the Group as at 30 June 2013 set out below has been prepared to illustrate the effect of the Corporate Reorganisation, the expenses of the Offer incurred by the Group and the refinancing of certain Group debt on the financial position of Royal Mail Group Limited and its subsidiaries as if each of the foregoing had taken place or, in the case of the Group’s expenses, been incurred on 30 June 2013. The summary unaudited pro forma statement of financial position is based on the audited historical financial information of Royal Mail Group Limited for the 13 weeks ended 30 June 2013. The summary unaudited pro forma statement of financial position has been prepared on a basis consistent with the accounting policies of the Company and on the basis set out in the notes below, and in accordance with Annex I and Annex II to the Prospectus Directive Regulation. It should be read in conjunction with the notes below. The summary unaudited pro forma statement of financial position has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and, therefore, does not represent the Group’s actual financial performance or results. It may not, therefore, give a true picture of the Group’s financial position or results nor is it indicative of the results that may or may not be expected to be achieved in the future. 8 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 9 Adjustments ––––––––––––––––––––––––––––––––––––––––––––––––––– Royal Mail Pro forma Group Limited Group statement as at 30 June The Corporate Offer Refinancing of Group financial 2013 Reorganisation expenses of Group debt position as at (note 1) (note 2) (note 3) (note 4) 30 June 2013 £m £m £m £m £m Non-current assets 3,058 – – – 3,058 –––––––– –––––––– –––––––– –––––––– –––––––– Current assets 1,525 – (14) (373) 1,138 –––––––– –––––––– –––––––– –––––––– –––––––– Total assets 4,583 – (14) (373) 4,196 –––––––– –––––––– –––––––– –––––––– –––––––– Current liabilities (1,784) – – – (1,784) –––––––– –––––––– –––––––– –––––––– –––––––– Non-current liabilities (1,423) – – 373 (1,050) –––––––– –––––––– –––––––– –––––––– –––––––– Total liabilities (3,207) – – 373 (2,834) –––––––– –––––––– –––––––– –––––––– –––––––– Net assets 1,376 – (14) – 1,362 –––––––– –––––––– –––––––– –––––––– –––––––– Equity Share capital – 10 – – 10 Share premium – – – – – Retained earnings 1,299 (10) (14) – 1,275 Other reserves 73 – – – 73 –––––––– –––––––– –––––––– –––––––– –––––––– Equity attributable to equity holder of parent company 1,372 – (14) – 1,358 Non-controlling interest 4 – – – 4 –––––––– –––––––– –––––––– –––––––– –––––––– Total Equity 1,376 – (14) – 1,362 –––––––– –––––––– –––––––– –––––––– –––––––– Notes: (1) The consolidated statement of financial position of Royal Mail Group Limited at 30 June 2013 has been extracted without material adjustment from the Historical Financial Information. (2) The Company was incorporated on 6 September 2013 with share capital of £150 divided into 100 ordinary shares of 150 pence each. In connection with Admission, the Group undertook a corporate reorganisation between 12 September 2013 and 19 September 2013 that included the Company becoming the holding company of the Group (the “Corporate Reorganisation”). The Corporate Reorganisation included the following steps: (A) pursuant to a transfer scheme made in accordance with section 8 of the Postal Services Act 2011 on 12 September 2013, the transfer of all ordinary shares in RMG by the Selling Shareholder to the Company, and, in consideration for such transfer, the allotment and issue of 999,999,900 ordinary shares of 150 pence each in the capital of the Company to the Selling Shareholder; and (B) the share capital of the Company was reduced from £1,500 million to £10 million by the cancellation of 149 pence from the nominal value of each issued ordinary share of the Company. The reduction of capital created distributable reserves of £1,490 million in the Company, which, on consolidation, are offset against the £1,500 million carrying value of the investment in RMG, with the remaining £10 million deducted from retained earnings. On Admission, the Company's share capital will comprise 1,000 million Ordinary Shares with a nominal value of 1p each and an aggregate nominal value of £10 million. (3) As a result of, or incidental to, the Admission and Offer, the Group estimates that it has incurred additional costs of £14 million, which were not accrued as at 30 June 2013. (4) On Admission, drawn amounts under the Mails Facilities, the GLS Facility and the Subordinated Facility (the “Existing Facilities”) will be repaid in full. This will be funded by a combination of the Group’s existing cash resources and drawing down under the New Facilities. The New Facilities comprise two term loan facilities of £300 million each and an £800 million revolving credit facility. Based on the level of draw down on the Existing Facilities at Admission, which is not expected to be materially different from that as at 30 June 2013, the Group’s cash balance will decrease by £373 million and non-current interest bearing loans will reduce to £600 million. The £600 million balance on non-current interest bearing loans and borrowings is drawn down from the total £1.4 billion available under the New Facilities. However, the actual amount of cash available to the Group at the time of Admission will depend on operational cash requirements and, as a result, there may be a need to draw down further under the New Facilities. (5) In connection with the Employee Free Share Offer, 10 per cent. of the issued share capital of the Company plus an additional 160,000 Ordinary Shares will be transferred to the trustee of the Royal Mail Share Incentive Plan on or immediately after Admission. This will be accounted for as a capital contribution by the Company, at the fair value of the shares transferred to the trustee, with an equal and offsetting amount shown as a deduction within equity as Treasury shares. At this stage, it is not possible to determine the fair value of the relevant shares and therefore the amount of any adjustment. There will be no impact on assets, liabilities or total equity. (6) No adjustment has been made to reflect any trading or other transactions undertaken by the Company or Royal Mail Group Limited since 30 June 2013. B.9 Profit forecasts Not applicable; the Group has not made any profit forecasts which remain outstanding as at the date of this document. B.10 Report on Historical Financial Information – qualifications Not applicable; Ernst & Young LLP’s report in respect of the Historical Financial Information was unqualified. B.11 Working capital – qualifications Not applicable; the Company is of the opinion that, taking into account the debt facilities available to the Group, the Group has sufficient working capital for its present requirements (that is, for at least the next 12 months from the date of the publication of this document). 9 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 1 0 SECTION C – SECURITIES C.1 Description of class of the securities The Ordinary Shares will have International Security Identification Number (ISIN) GB00BDVZYZ77 and Stock Exchange Daily Official List (SEDOL) number BDVZYZ7. It is expected that the Ordinary Shares will be traded on the London Stock Exchange under the ticker symbol “RMG”. The Ordinary Shares will, on Admission, comprise the entire issued and to be issued ordinary share capital of the Company. C.2 Currency of the securities issue The Ordinary Shares are denominated in Pounds Sterling. C.3 Number of issued and fully paid Ordinary Shares On Admission, there will be 1,000,000,000 Ordinary Shares of 1p each in issue. All Ordinary Shares will be fully paid. C.4 Rights attaching to the Ordinary Shares The Ordinary Shares rank pari passu in all respects with each other, including for voting purposes and in full for all dividends and distributions on Ordinary Shares declared, made or paid after their issue and for any distributions made on a winding-up of the Company. Subject to the provisions of the Companies Act 2006, any equity securities issued by the Company for cash must first be offered to Shareholders in proportion to their holdings of Ordinary Shares. The Companies Act 2006 and the Listing Rules allow for the disapplication of pre-emption rights which may be waived by a special resolution of the Shareholders, either generally or specifically, for a maximum period not exceeding five years. Except in relation to dividends which have been declared and rights on a liquidation of the Company, the Shareholders have no rights to share in the profits of the Company. The Ordinary Shares are not redeemable. However, the Company may purchase or contract to purchase any of the Ordinary Shares on- or off-market, subject to the Companies Act 2006 and the requirements of the Listing Rules. C.5 Description of restrictions on free transferability of the Ordinary Shares Save as described in the paragraph below, there are no restrictions on the free transferability of the Ordinary Shares. Transfer restrictions under the Companies Act 2006 The Company may, under the Companies Act 2006, send out statutory notices to those it knows or has reasonable cause to believe have an interest in its shares, asking for details of those who have an interest and the extent of their interest in a particular holding of shares. When a person receives a statutory notice and fails to provide any information required by the notice within the time specified in it, the Company can apply to the court for an order directing, among other things, that any transfer of shares which are the subject of the statutory notice is void. Transfer restrictions under the Articles The Company’s board of directors (the “Board”) can decline to register any transfer of any share which is not a fully paid share. The Board may also decline to register a transfer of a certificated share unless the instrument of transfer: • is duly stamped or certified or otherwise shown to the satisfaction of the Board to be exempt from stamp duty and is accompanied by the relevant share certificate or such other evidence of the right to transfer as the Board may reasonably require; • is in respect of only one class of share; and • if to joint transferees, is in favour of not more than four such transferees. Registration of a transfer of an uncertificated share may be refused in the circumstances set out in the uncertificated securities rules (as defined in the Articles) and where, in the case of a transfer to joint holders, the number of joint holders to whom the uncertificated share is to be transferred exceeds four. 10 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 1 1 The Board may decline to register a transfer of any of the Company’s certificated shares by a person with an interest of 0.25 per cent. or more of the existing Ordinary Shares (exclusive of any shares held in treasury) if such a person has been served with a restriction notice (as defined in the Articles) after failure to provide the Company with information concerning interests in those shares required to be provided under the Companies Act 2006, unless the transfer is shown to the Board to be pursuant to an arm’s length sale (as defined in the Articles). C.6 Applications for admission to trading on regulated markets Application will be made for the entire issued and to be issued ordinary share capital of the Company to be admitted to the premium segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange’s main market for listed securities. No application has been made or is currently intended to be made for the Ordinary Shares to be admitted to listing or trading on any other exchange. C.7 Dividend policy The Directors have adopted a dividend policy that supports the Group’s aim of generating value for Shareholders while ensuring that it retains sufficient capital to invest in growing the business. In respect of FYE 2014, in the absence of unforeseen circumstances, the Directors intend to propose a final dividend only, to be paid in July 2014, of £133 million. This amount is approximately two-thirds of the notional full-year dividend of £200 million that the Directors believe they would have proposed if the Company had been listed throughout FYE 2014. As described in Element D.1 (A) below, investors should assume that national strike action and other forms of industrial action will take place across the whole of UKPIL’s activities during the period immediately after, and may take place during, the Offer Period. Element D.1 (A) below, describes the risks that the Group would face as a result of any such national industrial action and investors should read that section. The Directors do not currently expect any such action to reduce the amount of the final dividend for FYE 2014, provided that the financial impact of any such action does not compromise the Group’s capital structure policy, including targeting financial metrics consistent with an investment grade credit profile. In subsequent financial years the Directors intend to pursue a progressive dividend policy having regard to the normalised earnings progression of the Group. Given the seasonality of the Group’s business, the Directors expect to pay an interim dividend each year equal to approximately one third of the prior financial year’s total dividend (in the case of setting the FYE 2015 interim dividend, calculated on the basis of the notional full year dividend described above) and to set the final dividend for each year in the light of the full year outturn; accordingly, the ratio of interim and final dividends may vary over time. It is envisaged that interim dividends will be paid in December or January of the relevant financial year and final dividends in July or August of the following financial year. The ability of the Company to pay dividends is dependent on a number of factors, including the availability of sufficient distributable reserves, and there is no assurance that the Company will pay dividends, or if a dividend is paid, what the amount of such dividend will be. The Board may revise the Company’s dividend policy from time to time. SECTION D – RISKS D.1 (A) Key information on the key risks relating to the Group’s business • The use of letters as a medium of communication has declined in recent years as a result of greater use of electronic forms of communication, including email and text messaging, which have become increasingly important, especially for businesses. This is known as e-substitution. Letter volumes in the UK may decline at a faster rate than forecast. The decline in letter volumes at the rates forecast by the Group, if not appropriately managed by the Group, or the decline in letter volumes at a faster rate than forecast by the Group, would have a material adverse effect on the Group’s results of operations, financial condition and prospects. 11 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 1 2 • While the Group aims to increase revenue in its parcel businesses to mitigate the continued decline in letter volumes and the slow or declining growth in letter revenue, such increase is contingent on continued growth in both the UK and the European parcel markets. It is possible that parcel volumes in the UK and Europe may fail to grow as forecast by the Group, grow at rates different from the Group’s forecasts or decline. If parcel volumes in the UK and Europe fail to grow as fast as forecast by the Group or decline, the Group’s results of operations, financial condition and prospects would be materially adversely affected. • The link between letter and parcel volumes in the UK and Europe and the level of GDP of the relevant market is expected to continue. As a result, continued weak economic conditions in the UK and European economies in particular could have a material adverse effect on the results of operations of the Group. Low levels of economic growth may adversely affect the business of the Group, including as a result of customers adopting cheaper service options for the transmission of letters and parcels or ceasing to send letters and parcels. The Group’s performance is dependent on a number of macro-economic factors outside the control of the Group. • The Group is exposed to changes in the behaviour of its customers and changes to the markets in which it sells its products and services. Such changes have resulted, and could result, in reduced demand for the Group’s products and services and require the Group to devote significant energy, resources and expenditure to change its services offering, adapt its business and operations, modify and renew its operating and IT systems and/or retrain or hire new people. The failure by the Group to deliver to the service quality standards expected by customers may lead to customers using alternative delivery providers. • In the future the Group may not be able to recover all of its costs, including the costs it incurs in providing the USO. The Group’s ability to implement price rises in relation to services it delivers within, and outside, the scope of the USO may be limited as a result of market factors as well as the provisions of general competition law. As many of the costs of operating the Group are fixed, together with its obligation to maintain the Royal Mail Core Network to provide the USO, the failure of the Group to reduce its costs or implement price rises in order to recover all of the costs which it incurs in providing the relevant and required services may have a material adverse effect on its financial condition, results of operations and prospects. • In order to increase productivity and manage the Group’s costs, the Group has implemented a number of efficiency programmes and linked the remuneration of frontline employees within Royal Mail and Parcelforce Worldwide to productivity levels. There can be no assurance that the Group will be successful in implementing its productivity improvement programmes, or that the benefits the Group is targeting to achieve from such programmes will be realised during the expected time frame or at all. Any failure by the Group to realise the targeted benefits of these productivity improvement programmes or any material non-budgeted spending on such programmes could have a material adverse effect on its business, financial condition, results of operations and prospects. • Since FYE 2008, the Group has been implementing its Transformation Programme which has covered every aspect of the operations of Royal Mail in the UK. The ability of the Group to continue to implement the Transformation Programme depends to an extent on its relationships with its employees and the trade unions. The successful completion of the Transformation Programme is an important part of the Group’s strategy and any failure to achieve the benefits of the programme could have a material adverse effect on the Group’s business, results of operations, financial condition and prospects. The Royal Mail Core Network may experience operational inefficiencies and an increase in costs if the mix of letters and parcels in the network changes more quickly than forecast or if the mix changes differently from how the Group expects. • The Group’s business is labour-intensive and necessitates a large workforce. The Group is reliant on its staff for the management, operation, creation, maintenance, repair and upgrading of its business, operations and systems. The size of, and high fixed employment costs associated with, the Group’s workforce in the UK may make the Group less competitive compared with other postal operators in the UK. • The Group has established certain financial objectives. These objectives are forward-looking statements and the Group’s achievement of these objectives is subject to a range of sensitivities and external factors. There can be no assurance that the Group will achieve these objectives. In 12 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) _ 1 6 1 8 0 5 P r o j e c t P N F - F u l l P r o s p e c t u s ( S u m m a r y ) 2 6 / 0 9 / 2 0 1 3 1 7 : 3 0 P a g e 1 3 particular, the Group’s earnings in the future could be highly volatile. As many of the Group’s costs are fixed, any material reduction in volumes and revenue may have a material adverse effect. • There is extensive trade union recognition in respect of the Group’s workforce in the UK and 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. Both the CWU and the CMA are opposed to, and the CWU, in particular, has publicly campaigned against, the privatisation of Royal Mail. On 20 September 2013, the CWU notified RMG that it intended to ballot relevant RMG employees who are members of the CWU, including those working in Royal Mail and Parcelforce Worldwide, for industrial action and that the ballot would open on 27 September 2013 and close on 16 October 2013. The sample ballot pape</p>
