Consignia to report losses of over GBP 1bn

CONSIGNIA, the owner of Britain’s post-office network, is preparing to announce the bloodiest set of full-year results in the 360-year history of the mail service.

Next month, the company is expected to reveal headline losses of more than Pounds 1billion. Some insiders fear the losses could be as high as Pounds 1.3billion because the group will be including a raft of exceptional items to cover its restructuring programme.

The items will cover redundancy costs involving more than 30,000 staff and the closure of 3,000 urban post offices. These two items could cost around Pounds 400m. The total will also include asset write-downs at the loss-making Parcel Force. The figures are likely to show that Consignia is trading at a loss, once its pension credit is taken away.

Some observers believe the bleak outlook could deter the Communication Workers Union (CWU) from holding a series of one-day strikes.

A national postal strike is being planned for May 8. Consignia and John Keggie, the CWU’s deputy general-secretary, are in talks to head off the action. The dispute is about changes to mail deliveries, which will result in a big change in working conditions.

The announcement of Consignia’s figures is likely to coincide with a report by Postcomm, the postal regulator, which will say whether it intends to act on submissions asking for it to slow down the liberalisation of Britain’s postal network. The government is understood to be keen for Postcomm to keep up the pace of change.

Postcomm intends shortly to issue licences for delivery companies to handle batches of mail above 4,000 items.

A number of foreign postal groups such as TPG, the Dutch postal giant, and Germany’s Deutsche Post are keen to increase their operations in the British market. Business Post, the UK-listed parcel-delivery service, also has an interest in Postcomm’s decision.

Postcomm could make a concession by allowing Consignia to increase the amount of money it charges competitors for access to its network. In return, Consignia would have to improve service levels. The level at which network-access charges are set is crucial to Consignia’s future profitability.

Allan Leighton, who recently agreed to become Consignia’s chairman, is understood to be keen to get all the bad news behind him. He has told the government he believes he can restore profitability but he needs a free hand.

The board of Consignia has looked at several ways to raise capital from its business. Options include raising Pounds 2billion from securitising or selling parts of its property estate. The group could also ask the government to release up to Pounds 1.7billion worth of gilts which are sitting on its balance sheet.