Tag: UK

Royal Mail’s Chief Executive, Adam Crozier, has been awarded GBP 1.12 million in pay and bonuses as the strike-ridden UK postal service reported a 34.3 per cent fall in profits as a result of increasing pension costs.

The group also revealed today it only expects to break even in the current financial year because of funding its company pension plan, increased investment and falling postal volumes.

Mr Crozier, who was criticised during the recent postal crisis for allegedly failing to attend talks with unions, was paid a basic GBP 633,000 as well as a GBP 469,000 performance-related bonus, some of which has been deferred into a long-term incentive scheme. With GBP 18,000 in benefits, Mr Crozier was rewarded a total £1.12 million.

Allan Leighton, Non-Executive Chairman at Royal Mail, who recruited Mr Crozier in 2003, was paid a performance-related bonus of GBP 200,000 on top of GBP 20,000 in basic pay.

The group admitted that the same competition and volume factors had impacted current trading, with profits down by GBP 78 million in the first five months of the financial year.

Royal Mail said today: “Key issues for the company as we move forward are the continuing high cost of funding the pension scheme, the continuing decline in volumes as customers move to other forms of communication and the beginning of the huge investment we will now make in the modernisation of the company.

Royal Mail Group today announced profits, in line with expectations, of GBP 233m for the 2006-07 financial year – a fall of a third from the previous year, principally as a result of a sharp rise in pension fund costs by £193m to £722m. Underlying profits, omitting the benefit of GBP 75m from the Government’s Social Network Payment to support the loss making Post Office network showed a steeper decline, at £158m, less than half the prior year’s result.

Royal Mail said that pressures on its performance from rising pension costs, falling mail volumes and increased competition underlined the urgency with which it now needs to put the next stages of its modernisation plan into action. The Group now has in place the key elements on which that programme is built:

• Around £4bn commercial funding package from the Government to enable us to modernise the business and incentivise our people through our new ColleagueShare scheme
• Agreement with the unions on the flexibility and changes in working practices that are vital to modernise successfully
• Support from the unions for the pension reform needed to allow the Group to become competitive and to protect a Defined Benefit pension scheme for our existing employees

During the first five trading months of the current year, 2007-08, the pressures of falling mail volumes and competitor activity in the wider communications market have become significantly more pronounced, with revenue in the Royal Mail Letters business down £78m compared to the same five months in 2006-07.

Key issues for the company as we move forward are the continuing high cost of funding the pension scheme, the continuing decline in volumes as customers move to other forms of communication and the beginning of the huge investment we will now make in the modernisation of the company. All these factors combined mean that this year and next we expect to be operating at around breakeven.

The full results for the year and a current trading update are set out in the attached statement from the Chairman and Chief Executive.