Consignia taps dividend cash

CONSIGNIA, the post operator, is believed to have secured access to pounds 1.8 billion from the Government to shore up its battered finances ahead of a three-year emergency restructuring programme. The renamed Post Office, which is losing pounds 1.5m a day, paid the sum in dividends to the Government – its 80pc shareholder – throughout the 1980s and 1990s. Until now, it has only been able to tap the interest. The pounds 1.8 billion is invested in gilt-edged securities held on Consignia’s books but owned by the Treasury. It is not clear whether the sum will be a loan or a gift from the Government. A spokesman for the Department of Trade and Industry said: “We’ve been talking to Consignia and the outcome of these discussions will enable [the organisation] to carry out its complex restructuring plans and give the company a future.” The Government has already agreed to forgo its pounds 64m of dividends this year and negotiations over the pounds 1.8 billion have lasted for almost a month. Consignia believes it has a right to the payments as the policy of returning 80pc of all post-tax profits to the Government left the organisation little with which to reinvest. Consignia urgently needs a rescue package to give chairman Allan Leighton’s restructuring proposals a chance to work. The company risks insolvency without short-term financing. Under his three-year plan, Mr Leighton plans to cut pounds 1.2 billion of costs with 30,000 redundancies to return Consignia to profit by 2005. The organisation, which also needs to invest in its fleet and offices, was scheduled to announce results last week but has delayed the statement until after the Government’s Whitsun recess, which ends on June 10. An official announcement is expected alongside the figures, which are expected to show losses of almost pounds 1.3 billion.