Royal Mail, GP profit but Parcelforce still in red

The UK’s Royal Mail has released its annual results for 2004 showing a significant turnaround in its fortunes. Whereas the postal operator made a loss of £197m (€288m) in 2003 it achieved operating profits of £220m (€321m) in 2004. Its revenues rose by 4% to £6.3bn (€9.2bn) compared with the year before.

Management of the company put the improved performance down to a number of factors. Most importantly it implemented a 1p rise in the costs of stamps which resulted in additional revenues of £200m. Its much publicized recovery plan as yet has contributed only a small amount to the result through gains in efficiency, job cuts and new distribution policies. However staff numbers have fallen considerably and 27,100 employees have so far left the company through a combination of voluntary redundancy (10,900), natural turnover (8,000) and outsourcing (8,200).

Despite the improvements in its financial performance the company still attracted criticism due to its inability to meet service levels. It failed to achieve any of the 15 service criteria to which it was committed and may now face the prospect of having to pay compensation as well as fines from the industry regulator, Postcomm of up to £80m (€117m). Management insisted that the major cause of service problems had been industrial action by workers.

Royal Mail’s express subsidiary Parcelforce Worldwide continued to undergo re-structuring with the reduction of its depots to around 50, about 50% of previous levels. Its losses fell by almost £100m (€146m) compared to the previous year although in total it still lost £102m (€148m) on a turnover of £245m (€358m). Its revenues were 17% lower than the previous year due to the company’s decision to withdraw from ‘standard’ (non-express products.

However there was better news for its European parcel subsidiary General Logistics Systems, owner of General Parcel. It increased its revenue by £32m (€46.7m) to £818m (€1195m), a rise of 4%, and more than doubled its operating profits to £25m (€36.5m). The improved performance resulted from strong growth in core parcel volumes particularly in Central Europe.