Consignia faces GBP 700M bill to cut 30,000 jobs
THE loss of 30,000 jobs at Consignia will cost the post-office group up to Pounds 700m. When completed, it will be one of the biggest voluntary-redundancy pay outs in British corporate history.
Allan Leighton, Consignia’s chairman, is to report full-year figures on Thursday and will say that an extra 17,000 jobs are to go, in addition to the 13,000 cuts announced already.
Consignia will also announce the biggest loss in the history of the postal service – almost Pounds 1.2 billion. More than Pounds 700m of this will be from exceptional items to cover the huge restructuring programme.
Out of this exceptional figure, about half will cover costs associated with the original 13,000 redundancies. The cost of the remaining 17,000 will be included in the first half of this financial year.
To help Consignia to survive, the government has agreed to allow it to draw on Pounds 1.8 billion of gilts that are held in its balance sheet. This is thought likely to be enough to cover the cost of the restructuring, but Consignia has said that it will take out a commercial loan if it exceeds this sum.
The government has agreed to waive its right to an annual dividend from Consignia for at least three years, or until it becomes profitable again.
Leighton will also confirm this week that he intends to drop the Consignia name and replace it with Royal Mail. This will be phased in because the company is keen to not be seen to waste money on rebranding.
More redundancies will follow within the next two years. There is a review taking place of Consignia’s middle management, and at least two directors from the eight-strong executive board will go. John Roberts, the chief executive, is also retiring.
Post Office Counters, which runs the network of post offices, will remain part of the group for the foreseeable future. Leighton and his predecessor, Neville Bain, had looked at hiving it off into a separate company. The division still requires a heavy subsidy.
Consignia is examining ways to generate additional revenues from its post office network. One aim is to increase its involvement in retail banking.
As part of the restructuring, about 3,000 urban post offices are being closed, but generous terms are being offered to sub-postmasters.
Leighton has secured the support of Patricia Hewitt, the trade and industry secretary. He is believed to have allayed concerns that Consignia will be a financial drain for years to come. The group is asset-rich and can raise finance against its property estate and other revenue streams.
Internally, there is a view among senior managers that morale is picking up and that there is acceptance from the unions that thousands of jobs will have to be axed to make the company competitive. The results will show that the firm is losing Pounds 1.3m a day at the operational level, but once costs are taken out it believes this can be turned round quite quickly.
Consignia intends to drop the second postal delivery, while a number of outsourcing deals have been put on hold.
