Royal Mail racks up GBP 200m of losses
Royal Mail called today for price controls to be lifted after admitting it is now handling 3m letters a day fewer than it was a year ago and has run up GBP 200m of losses from its regulated letters and parcels business.
The figures underline the financial crisis facing the state-owned postal operator from private sector competition and the migration of post to the internet, coupled with the downward pressure on bonds and other investments in its retirement scheme.
The scale of the problems add urgency to a review of the market after an independent inquiry commissioned by the government warned earlier this week that liberalisation of the wider postal market had provided no benefit to the average customer but put the universal service at risk.
The company delivered 80m letters a day in the 12 months to March 31 2008, compared with 83m in the year before. The GBP 200m deficit incurred by its letters and parcels business regulated by Postcomm compared with a GBP 29m loss before and a GBP 200m profit two years ago.
The universal service, which guarantees the same price and delivery date for letters throughout Britain, was in the red – for the first time – to the tune of GBP 100m while the group’s overall letters division reported a GBP 3m loss.
Royal Mail’s group operating profits before exceptionals fell 30pct to GBP 162m while overall revenues rose 2.3pct to GBP 9.8bn. Crozier said the profit figure had been helped by cost-cutting mainly through a heavy programme of redundancies.
Post Office Ltd, which has closed 600 of its branches in the face of much local opposition, saw its operating loss fall from GBP 108m to GBP 34m as the Royal Mail benefited from a GBP 150m annual subsidy for keeping parts of the network open.
The company’s plan to close a further 2,100 post offices continues as Royal Mail reported that four million fewer people a week were visiting their local branch
Postwatch, the consumer watchdog, expressed “concern” that the universal service had moved from profit to loss.
Crozier also revealed that Royal Mail had pumped GBP 800m into its pension scheme in a bid to reduce a deficit valued at GBP 3.4bn in March 2006.
