Consignia eyes £1.8bn dividend return

CONSIGNIA is in negotiations with the Government over its dividend policy, in a move that could lead to it receiving back-payments of pounds 1.8 billion. The renamed Post Office, which is losing pounds 1 1/2 m a day, is expected to ask for the money, which was given to the Government under a dividend policy, to cover its losses and restructuring. Allan Leighton, the Consignia chairman, is likely to make the request later this month when he unveils the organisation’s full-year results. Consignia is expected to announce a loss of pounds 1.2 billion for last year and the closure of 3,000 of the UK’s 17,500 sub-post offices. Yesterday, the organisation would only confirm that it is in discussions with the Government over its dividend policy. Uniquely, the organisation’s dividend level is set by Government, its only shareholder, and Consignia has paid the Treasury pounds 1.8 billion, over and above normal taxes, in the last two decades. Marisa Cassoni, finance director of Consignia, said at the last set of figures that the dividend policy needed sorting out. The company paid pounds 93m to the Government last year, despite having made a pre-tax profit of just pounds 49m, because the Government had set a minimum level for the dividend. All of the money the organisation has paid to the Government has been invested in gilt-edged securities, and is held on the Consignia books, although it is owned and controlled by the Treasury. It has been built up over the years under a system called the External Financing Limit. It is understood that Consignia believes it has a right to the money to help it through its three year restructuring plan. The Government has already agreed to forgo pounds 64m in dividends this year because of Consignia’s financial difficulties. In September, Consignia announced a loss of pounds 281m after a writedown related to Parcelforce. Operating losses were five times higher than the same time last year, at pounds 100m. The company has been hit by problems at its lossmaking Parcelforce arm, as well as Government plans to pay benefits directly into bank accounts rather than over Post Office Counters. The company invested in a computing system to automate the counters business, which will now be largely obsolete because of the Government’s change of plan. The introduction of postal competition in the organisation’s traditional monopoly area is expected to exacerbate problems, with mail costing under pounds 1 to post being delivered by a number of other companies. The organisation has complained that there is a danger of rivals “cherrypicking” lucrative business mail, while Consignia is hampered by an obligation to maintain a universal service across the country for the same price. The full-year results are also expcected to herald a boardroom shake-up. John Roberts, the chief executive, is expected to be ousted from his position, although the company strenuously denies this. New non-executive directors could also be appointed, including a chair for the Post Office Counters business, which Mr Leighton now chairs.