Consignia announces operating loss of 100 million pounds before exceptional items

Consignia today announced a half year operating loss of £100 million before exceptional items, compared to a restated loss of £20 million for the same period a year ago. After accounting for exceptional items, the post-tax loss for the half year is £281 million, compared with a £113 million loss (restated) for the previous half year.

The exceptional costs relate to the impairment of the loss-making parcels operations, together with £20 million from redundancy costs.

The summary 2001/2002 half year results are:

2001/2002 2000/2001
Half year 1 Half year (restated)
Sales £4,007 million £3,902 million
Operating loss £100 million £20 million
Exceptional items £221 million £100 million
Post-tax loss after
exceptional items £281 million £113 million

1Period 26 weeks ending 23 September 2001

Consignia's Chairman, Neville Bain, said the figures underlined the urgency behind the company's recent announcement that it was seeking on-going savings of £1.2 billion by April 2003, equivalent to a 15% reduction in its ongoing cost base.

"Turnover in our core mails and parcels markets is still increasing but the rate of sales growth at 2.7% is just a third of the 7.7% increase in turnover at the previous half year, amid signs of a slowdown in the economy and pressure on margins," he said.

Neville Bain said second half year performance, which includes Christmas mail volumes, was traditionally better than in the first six months.
"But with a potential economic downturn in prospect, making any profit at year end – even before exceptional items – will be challenging," he said.

"The urgent need for structural changes in Parcelforce Worldwide is underlined by its continuing cash consumption, which is expected to approach £200 million by the end of this year. This follows a decade of losses and is a position we cannot sustain. We are determined to take the action necessary to give Parcelforce Worldwide a profitable future."

John Roberts, Consignia's Chief Executive, said he was disappointed at the modest gains in productivity in Royal Mail. Postmen and women continue to deliver increasing volumes of mail but the pressing need is to improve productivity further following the £100 million upfront investment in the Way Forward programme, and to boost quality of service through changed working practices," he said.

"The key signal from the results is that our costs are running ahead of income. We have got to improve efficiency if we are to return to profit.

"Additional revenue has been outstripped by a £65 million rise in Consignia's overall pay bill compared to previous half year, £17 million in higher transport costs, and £48 million higher operating costs from investment in technology.

He added: "Consignia has an unrivalled distribution network and the Post Office network is by far the UK's biggest retailing chain. Our brands are among the best known in the market and no-one can match our reach in the community.

"However, we need to recognise that trading conditions remain tough and that competition is increasing. It is, therefore, imperative that we get £1.2 billion of on-going cost savings by April 2003 to re-shape the business for success in a very competitive environment.

"I am confident that if we fully achieve our target, Consignia will have a successful and profitable future."

www.consignia.com