Consignia restructuring costs double, Post Office losses likely to top £1.1bn for first year of commercial freedom.
The cost of restructuring Consignia, the renamed Post Office, has doubled from earlier predictions of Pounds 400m to at least Pounds 800m.
This means the company’s total losses for the year are likely to top Pounds 1.1bn when they are announced next week, despite better-than- expected operating losses thought to be Pounds 200m-Pounds 300m.
But Allan Leighton, chairman since January, is understood to have won a battle to repair Consignia’s parlous finances with a government rescue package. The company is confident that the Department of Trade and Industry, its sole shareholder, will feed back Pounds 1.8bn of profits paid to the Treasury over the past 20 years.
“The discussions with the government have been fairly positive,” said someone close to the negotiations. “By publishing the results next week, it means the accounts have been signed off by the directors and they have got the assurances about all the back dividends. Discussions are still going on but everyone is confident of a positive outcome.”
The company is pushing through a three-year Pounds 1.2bn restructuring plan, which involves 30,000 job cuts, as it fights to stem spiralling losses. It is likely to confirm 17,000 job cuts at its Royal Mail division when it publishes its results next week.
John Roberts, Consignia’s chief executive, is also expected to outline his future role at the company, with the government set to begin the hunt for his successor.
Mr Leighton has failed to back his chief executive publicly.
Initially it was estimated that the cost of Consignia’s restructuring plans was likely to be about Pounds 400m, but insiders now say the figure could be up to Pounds 1bn.
Successive governments have taken much of the company’s profits over the past few decades but a repayment of past dividends would send an unambiguous sign of a commitment to rebuild the company, which is losing Pounds 1.5m a day. The company has been in negotiations with the government for months over the issue.
Earlier this year Patricia Hewitt, trade and industry secretary, said in parliament that the government was forgoing this year’s dividend of Pounds 64m from the company.
Details of how the money would be transferred have not been confirmed but the group is likely to use it over three years to fund its restructuring plan.
The results will cap a disastrous first year of commercial freedom for the company, which was given plc status in March 2001 -a year in which losses have risen rapidly.
The company also faces the introduction of competition in its core letters market. Last week, after intense lobbying, it won nine months’ breathing space from the postal regulator, which now plans to let British and foreign rivals operate permanently in the bulk business mail market from January 2003, with full liberalisation by spring 2007.
Copyright © 2002: Financial Times Group
