CONSIGNIA ANNOUNCES FIRST MOVES IN THREE YEAR RENEWAL PLAN

25 March 2002

CONSIGNIA ANNOUNCES FIRST MOVES IN
THREE YEAR RENEWAL PLAN

 RESTRUCTURE OF LOSS MAKING PARCELS BUSINESS
 RATIONALISATION OF TRANSPORT OPERATIONS TO CREATE MORE EFFICIENT SINGLE NETWORK
 COMBINED COST SAVING OF £460 MILLION
 FURTHER MANAGEMENT, SUPPORT SERVICE AND OPERATIONAL SAVINGS IDENTIFIED
 15,000 JOBS TO GO, 13,000 THROUGH REDEPLOYMENT OR REDUNDANCY

Consignia will restructure its loss making parcels and express business, Parcelforce Worldwide, and make radical changes to its internal logistics and transport networks as the first moves in a three year renewal programme to cut costs by more than £1.2 billion and provide a secure long term foundation for the company and for universal postal services in the UK.
Announcing the plans, Consignia Chairman Allan Leighton said, “Consignia is in a perilous position – losing more than £1.5 million every day. Parcelforce Worldwide is losing £15 million per month as we have failed to reduce our costs fast enough as business has declined. We need to renew our operations and halt the financial losses which put key services at risk. Both measures announced today are
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far reaching – but they are just the start, not the end. They will ensure that real progress is made in the first year of a three year strategy to restore profitability, deliver positive cash flow, improve services and make the business a better place in which to work.”
From July Parcelforce Worldwide will concentrate solely on the growing market for time-guaranteed and next day and two day express deliveries, and will cease its declining and unprofitable portfolio of three day plus delivery products. The market for three to five day deliveries has halved within five years. Consignia will transfer its universal parcel service to Royal Mail, which will use its existing network to provide a uniform and affordable parcel delivery to every UK address, no matter how remote.
The five parcel distribution centres which currently handle Three Day plus deliveries will close and the number of Parcelforce Worldwide depots will reduce from 101 to 51. Parcelforce Worldwide currently employs around 11,700 people, either in a dedicated parcels unit or providing operational support elsewhere in Consignia. The current workforce will, over the next two years, be reduced by around 6,700, over and above natural turnover. Up to 900 of those employees whose current jobs disappear will have the opportunity to work with Parcelforce Worldwide as owner-drivers in line with agreements reached with the trade unions. Consignia expects to offer other current permanent employees a choice between employment elsewhere in the Group, a job in the new Parcelforce Worldwide or a voluntary redundancy package. Formal consultations with the trade unions have begun.

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“Parcelforce Worldwide has been out of step with the marketplace and its business model does not work. Most of our costs – and losses – are tied up in keeping an infrastructure for non time-guaranteed services which customers are moving away from and which we cannot make profitable. In contrast we see real potential in the express marketplace where we’ve grown our next-day revenue by 5.5% in the past 18 months. It’s clear that this is where a successful future lies, and where the best
possible prospects for our remaining employees will be found”, Mr Leighton said.

 A more efficient, cost effective, flexible and robust transport solution

Consignia will also rationalise its various air, rail and road transport operations to create a more efficient single network. We will simplify the way in which we operate our rail and air networks and expect to move more mail by train, but it will be primarily bulk mail carried during the day and, overall, fewer train services will be needed. Consignia will now begin discussions wit