UK Royal Mail stems losses by a third in cost-cutting drive
Royal Mail will announce this month that it has reduced operating losses by a third in the first 12 months of chairman Allan Leighton’s three year cost-cutting programme. Despite the slower than expected axeing of second letter deliveries to homes across the country, the loss in the latest financial year is likely to fall to around GBP200m from GBP318 million previously, largely due to better performance at the core mail and Parcelforce businesses.
Executives, led by former FA chief Adam Crozier, will point to the thinning out of middle management, closure of half of the Parcelforce depots and the shedding of 9,000 out of a total of 30,000 jobs across the business, along with a 90 per cent reduction in days lost to industrial action, as key factors in the improvement.
The group loss including exceptional items will be considerably higher, but will be below the £1.1bn racked up last year, and is likely to come in at below £1bn. Management will concentrate on the operating line, arguing that it is the true measure of business performance.
They are confident that Parcelforce, which has lost £1bn in the past 10 years, the UK mail business, and GLS, the business’s European arm, will bring cash into the group by the end of this year. However this will not be true of Post Office Ltd, the national network of post offices.
A Royal Mail source said: ‘The operating loss will be down around 30 per cent, to around £200m. That is the true measure of the profitability of the business and whether it is generating cash to invest in the future. It has been achieved by doing the simple things better. We have lost about 9,000 jobs, but the industrial relations climate has been much better.’
Executives are pleased about the reduction of days lost to industrial action, as Leighton viewed poor industrial relations as a key stumbling block to change.
They view the introduction of a ‘phantom share scheme’, effectively giving all employees performance-related bonuses, as the major force behind the change.
