£1.1 Billion loss underlines urgent need for radical restructuring
Consignia today announced a £1.1 billion, pre-tax loss for the year ending March 2002 as the company unveiled more details of its radical restructuring plan.
The Chairman, Allan Leighton, said: “The underlying loss from operations of £318 million graphically shows why we need to restructure the company and embark on our three-year renewal programme to restore profitability.”
He also announced that Royal Mail would save £350 million a year by moving to a single delivery at a consistent time, six days a week. “This is the most sensible and responsible way to reduce costs with minimum impact on customers,” said Mr Leighton.
At present, the second delivery, which the majority of addresses are scheduled to receive, accounts for 20% of Royal Mail’s total costs and 30% of the time taken to deliver letters, but delivers just 4% of the UK’s mail. “We can make large savings by eliminating this inefficiency,” said Mr Leighton.
These plans, together with other efficiency measures across the Group, will result in a further 17,000 jobs becoming redundant over three years. Consignia expects to offer employees whose jobs are to disappear a choice between redeployment elsewhere in the business or a voluntary redundancy package. Consignia’s three-year renewal plan is expected to reduce annual gross costs by £1.4 billion by April 2005.
Mr Leighton also announced that by the end of 2002, the company’s corporate name would become Royal Mail Group plc. “The new name reflects the greater concentration on our core commercial services and is particularly apt in this Golden Jubilee year,” he said.
John Roberts announced that after seven years as CEO he plans to retire from the company. He intends to step down later this year once his successor has been appointed.
RESULTS BY BUSINESS AREA
Most of the £1.1 billion comprises exceptional costs from restructuring. However, the company lost £318 million on its day-to-day operations, equivalent to £1.2 million every trading day with all core businesses losing money. Overall turnover grew by 3.6% but the growth was outstripped by a 4.8% rise in costs.
Loss on ordinary activities before
Interest, pension benefit and exceptionals £m
Royal Mail domestic business 74 loss
UK parcels 94 loss
International mails and parcels 58 loss
Logistics Solutions 15 loss
Post Office network 163 loss
Group Centre and support services 86 profit
Total 318 loss
“THE LOSS DIDN’T HAPPEN OVERNIGHT”
Mr Leighton, who became Chairman in March, said: “Unresolved issues and problems stretching back for up to a decade are reflected in these results.
A range of factors has come together to produce the £1.1 billion loss. “This loss didn’t spring up over just one year,” said Mr Leighton.
“Making Consignia a great place in which to work is a key priority. Instead of a well-paid, highly motivated workforce and an efficient operation, we’ve got low-paid employees, high operating costs and low morale. Being able to give our people a better reward for the work they do will lift morale and, crucially, this will boost customer service. In addition, management mistakes have been made over a number of years, including a failure to resolve deep-rooted industrial relations problems.”
“We won’t be distracted by internal inquests or political sensitivities. The business needs leadership and a single focus on straightforward, clear priorities.
“We’ve got to restore the morale of our people, improve the service to customers and make the company profitable.
“I would not have taken on this job unless I was convinced this company can be turned around. It’s going to involve hard graft by everyone who works in Consignia – but we can and will achieve our goal.” Mr Leighton added: “Inevitably, restructuring will involve job losses. We will do everything possible to redeploy people whose jobs become redundant, or offer them a voluntary redundancy package.
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