Profit at last, but Royal Mail bosses waive bonuses

Executives at Royal Mail are deferring or waiving bonus payments even though the postal organisation has made a profit for the first time in four years, it was announced today.

Executives at Royal Mail are deferring or waiving bonus payments even though the postal organisation has made a profit for the first time in four years, it was announced today.

The Chairman Allan Leighton is to defer his entire bonus, worth £144,000, until the group meets quality of service targets in the 2004/5 financial year.

If the targets are not reached he will lose his entire bonus.

The Chief Executive Adam Crozier will waive the quality of service element of his bonus which is worth tens of thousands of pounds.

Four other executive directors are also waiving the quality of service part of their bonus, while the deputy executive chairman Elmar Toime has agreed to defer half his bonus, worth £150,000 into 2004/5, again conditional on achieving quality of service targets.

The news came as Royal mail announced it had made a profit of £220 million in the 2003/4 financial year compared to loses of £197 million in the previous year, a turn around of more than 200%.

But the company, which has been under fire in recent weeks over late deliveries, missed its target for delivering letters on time.

In the year to March, 90.1% of first class mail was delivered the next day against a target of 92.5% while the figure for second letters was 97.8% compared to a target of 98.5%.

The Royal Mail said unofficial industrial action by postal workers which crippled deliveries last autumn had affected the figures.

The return to profitability followed a two year period when losses reached more than £1 million a day.

But the Royal Mail, which is undergoing a renewal plan which includes the closure of post offices and scrapping second deliveries, said the return on turnover of 2.5% was still much lower than a decade ago and "significantly lower" than its competitors.

Mr Leighton said the biggest single factor behind the company missing its targets was the unofficial strike.

"Without it, we would have reported quality of service levels higher than at the beginning of the renewal plan as well as an even higher profit number."

Mr Leighton said the current reductions in quality which were driven partly by the lack of recovering fully from the unofficial strikes and by the massive modernisation changes were acceptable even though things were beginning to improve.

He went: "In deferring bonuses we are saying we have confidence in everyone in Royal Mail achieving our key targets by the end of this current year.

"This is the right response to the genuine concerns of our customers. It shows our determination to get quality of service back on track everywhere."

Mr Leighton said the unofficial strikes meant that the Royal Mail had no realistic chance of hitting its targets.

"Making a profit however is a major step forward especially when Royal Mail was losing well over £1million a day from it's operations barely two years ago and allows us to invest in our company and in our people's pensions and pay."

Mr Leighton warned that competition was increasing and the company could not assume that future growth in the business would drive profit especially as postage prices were falling in real terms because of a price cap imposed by the regulator.

"That is why it is essential that Royal Mail completes what is in effect a re-engineering of the letters operation."

Mr Crozier said that the shear scale of changes being introduced across the country had inevitably hit quality of service in some areas.

"We are concerned about any single letter which does not arrive on time. Average first class performance has dipped by around 4% during the period of the most intense changes.

"That is not good enough. Overall, Royal Mail provides a good, value for money service but there's a clear need to address the problem spots.

"We will ensure the problems are fixed as quickly as possible. The points where mail is being delayed have been identified and we are putting in place a range of immediate measures to tackle the problems."

Royal Mail announced it had increased its contribution to the company's pension fund by £270 million. Mr Crozier said it was vital a profit of £400million was achieved as this would trigger a payment of £800 to every postal worker.

"Only a radically changed company can deliver this profit. We are now working to complete the changes and ensure our customers are fully aware of them, including a single delivery by lunchtime with earlier deliveries for large firms."

Since the renewal plan was launched two years ago 27,100 workers have left the company and a further 5,000 are expected to leave by September.

Other figures today showed that Parcel Force World-wide halved its losses in the latest year from £198 million to £102 million.

The Royal Mail says the best areas of the country for delivery of first class letters were Huddersfield (94.8% of letters delivered a day after posting), Lincoln (94.3%) Sheffield (94.2%), Sunderland (93.9%), Bolton (93.9%), Dumfries (93.6%), Borders (93.4%), Doncaster (93.3%), Bradford (93.2%), Motherwell (93%).

The worst areas were Northamptonshire (74.3%), London South West (82.1%), London South East (84.4%), London West (84.6%), Harrow (84.8%), Dartford (85.3%), London North West (85.6%), London West Central (85.6%), Chelmsford (85.8%) and Ilford (86.4%).