The Road to Transaction
Sue Whalley and Dirk-Jan Vanderbroeck
Four key messages
There’s a lot going on to prepare the company for a potential IPO.
We will give you as much information as we can
1. Access to capital through the right investors underpins our future
2. The journey to IPO confirms our strategy is the right one for growth
3. Under new ownership, many things stay the same but we control our destiny
4. Your involvement and leadership are critical
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A reminder of why we need to privatise
The Hooper Report 2008: 4 Policy recommendations
Accelerated modernisation
“The company urgently needs commercial confidence, capital and corporate experience
to modernise quickly and effectively.”
Improved
industrial
relations
“Royal Mail must develop a more constructive working relationship in which both are
engaged in the long-term strategic future of the company.”
Government should tackle the
historic pension deficit
Regulatory reform
“..amongst the largest of any UK company.”
Hooper Report Update
Private sector capital will inject private sector
disciplines into the company and will reduce the
risk of political intervention in commercial
decisions, thus accelerating modernisation.
“A new regulatory reform is needed to place postal regulation within the broader context of
the communications market.”
“Now the time has come for Government to step back from Royal Mail and allow its management to focus wholeheartedly on growing the business and planning for the future.
This Government will give Royal Mail the real commercial freedom that it has needed for a long time” Michael Fallon, MP
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Recent Comments
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A Royal Mail freed from Government control will be able to
innovate and compete for new business.
Parliamentary report
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"
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The company now needs the commercial disciplines associated with external
shareholders and the long-term ability to access flexible private capital
Parliamentary report
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But Royal Mail in the public sector has its hands tied in a way its
competitors here and in Europe do not. It cannot be right for
Royal Mail to come cap in hand to Ministers each time it wants to
invest and innovate.
The public will always want government to invest in schools and
hospitals ahead of Royal Mail.
"
The key objective of our reforms to the postal market is to
protect the one price goes anywhere, six days a week service
that businesses and communities throughout the country rely
upon.
Vince Cable
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Sale of shares: Final step to implementing Postal Services Act 2011
June 2011
Postal Services Act
• To secure the future of Royal Mail
Group and Post Office Limited by:
• Creating a framework for RMG to gain
ongoing access to external capital
• Regulatory reform
• Planned pension transfer
• Planned separation from POL
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March 2012
2013/14
• Historical pension deficit transferred
to HMG
• Strong financial results in 2012/13
gives us a platform for IPO
• New regulator: Ofcom
• Potential sale of shares of Royal
Mail Group
• New regulatory framework
• Separation from POL
• New long term agreements
• 10% of the shares to be set aside
for employees, on or before
Government’s shareholding
falls to zero
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Choosing the appropriate 'capital' for Royal Mail
Different Forms of Capital
Private Loan
Public Bond
Royal Mail Focus
• Has to be repaid
• Contractual cost (interest)
• Limited Governance
• Limited benefit from Royal Mail growth
• Minimise financial risk to Royal Mail
• Provide long-term access to capital
Unlisted Shares
Listed Shares
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• No need to be repaid
• No contractual payments (dividend)
• Governance rights
• Strong benefit from Royal Mail growth
• Seek stable and supportive investors
Finding the appropriate shareholder base for Royal Mail
Many different shareholders
Pension Funds
Royal Mail focus
• Long term investors
• Good understanding of our Company
Insurance Companies
• Aware of industry challenges and
opportunities
Other Asset Managers
• Supportive of our ongoing strategy
Individuals
• Committed to the success of Royal
Mail
Employees
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Support large UK companies
Preparing the company for an IPO is a valuable process
Competitive dynamics
Strategic priorities
Deliver operating KPIs
Financial performance
We have successfully articulated our strategy, better aligned the business and are balancing our improved profitability with
ongoing need for investment
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A Royal Mail transaction will be unique
• First major UK privatisation by way of IPO since the early 90s
• Largest free share scheme to employees in any major UK privatisation
• Complexity of our business requires us to educate investors and analysts
• Other European postal companies have or are looking to move from Government ownership
• Increased internal communications activity as we seek to educate our own people
The size, importance and visibility of Royal Mail will put us in the spotlight once again
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We will also be subject to some new policies and processes
• Higher external scrutiny
• Increased attention through share price
• Balance stakeholder interests
• Public statement of targets
• More regular financial reporting
• Listing rules and regulations
• New policies
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From Government to private ownership
Many things will remain the same
•
•
•
•
Level of job security
Terms and conditions
Pension risk
Strategy
• Growing parcels
• Managing decline in letters
• Customer experience
• Same USO
• 6 days
• One price goes anywhere
• High service standards
• Universal Service
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From Government to private ownership
Many things will remain the same
•
•
•
•
Level of job security
Terms and conditions
Pension risk
Strategy
• Growing parcels
• Managing decline in letters
• Customer experience
• Same USO
• 6 days
• One price goes anywhere
• High service standards
• Universal Service
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Some will be different
• Shareholders focused only on the company
• Different lens on what we should do – we are all owners
• Signals future is in our hands
• No room for spending time on what’s not important or
controversies
What we need from you as leaders
What we need from you
• Raise the questions you have so we can get answers
• Specific briefing packs will be provided
• Break down the concerns you have
• Further information and training where applicable will be provided
nearer the time
• Communicate information to your teams
• Lead – leadership needs to replace administration and
management
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What we will give you
• Ongoing updates to communicate and answer questions from
teams
Four key messages
There’s a lot going on to prepare the company for a potential IPO.
We will give you as much information as we can
1. Access to capital through the right investors underpins our future
2. The journey to IPO confirms our strategy is the right one for growth
3. Under new ownership, many things stay the same but we control our destiny
4. Your involvement and leadership are critical
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