Royal Mail hit by pension costs
The group posted earnings of GBP 233m, but said that but for a £75m government loan, this figure would have fallen to GBP 158m – half the GBP 355m made last year.
Pressures from rising pension costs, falling mail volumes and increased competition were blamed.
The figures do not cover the period over the summer when Royal Mail was hit by a series of strikes.
Declining volumes of post, competition in the mail market and the rising use of electronic communication, such as e-mail, continued to eat into Royal Mail’s letters business, with revenues down GBP 78m during the first five trading months of 2007-08 on the previous year.
The revenue fall came despite a rise in postage prices in April.
We anticipate that the company’s current level of contributions to the pension plan will reduce to 22 pct in five years’ time from the existing level of 30 pct.
Royal Mail
These factors, in addition to the “huge investment” that the group is about to make to update its business practices, mean that Royal Mail will make no profit this year or in its 2008-09 period.
And it said that without the contribution from its unregulated European parcel delivery service, General Logistics Systems, one of the few areas of growth for the Royal Mail last year, the group would become loss-making.
There was no indication of the cost to its business from the strikes organised by the main postal union, the Communication Workers Union, between June and October.
Industry observers estimated that about GBP 260m was knocked off profits during this period as a bitter dispute over the firm’s modernisation plans, including unpopular reforms to its pension scheme and radical changes to working practices, led to a series of walkouts.
