Record profits for Royal Mail

The Royal Mail has made record profits of £537 million, triggering a bonus of more than £1,000 for 180,000 postal workers, it was announced today.

The state owned operator also revealed that first class mail deliveries were the best in a decade while the number of letters being lost have been cut by half in the past year.

Chairman Allan Leighton said postmen and women had achieved a "fantastic turnaround" and would now benefit from one of the biggest profit shares with employees in UK corporate history.

Every worker will receive £1,074, amounting to £218 million of the Royal Mail's profits.

Details of payments to executives will be revealed later today although there has been speculation that Chief Executive Adam Crozier was paid almost £3 million last year.

The Royal Mail was losing more than £1.5 million a day before it launched a renewal plan three years ago but today's figures showed that the organisation is now making over £2 million a day in profit.

Quality of service to customers has hit the best levels in a decade with 92.8 per cent of first class mail being delivered on time between January and March, 0.3 per cent above the target.

The 98.5 per cent target for delivering second class mail was bettered by 0.2 per cent.

But almost half of the Royal Mail's 15 targets were still not being achieved, today's figures showed.

The number of letters lost fell from 28 million to 16 million last year, with 99.92 per cent of mail arriving safely.

The £537 million profit amounted to an increase of 144 per cent on the previous years profit of £220 million.

The Royal Mail said its income reached a record £8.96 billion in the last financial year while a record 84 million letters a day were handled, one million more every day than the previous year.

But Post Offices lost £110 million and executives warned that the future of the network rested on the ability to sell a growing range of products and services.

Mr Leighton said that despite the profits there was still "a huge amount to do".

"Transforming our operations, cutting our costs and above all winning the support of our people for the modernisation plan with its top priority being to improve customer service has been Royal Mail's greatest achievement in decades.

"But competing successfully in an open mail market is going to be even more difficult. We've a mountain to climb and we've only reached the base camp."

Mr Crozier added: "The hurdles we face are formidable but we are determined to change fundamentally what we do and how we do it.

"Postmen and women can be justifiably proud of what they have already achieved. They have done a fantastic job.

"The huge task now facing Royal Mail is to make the cultural change needed to succeed as a commercial business and to become the postal operator of choice for customers in an open competitive market."

More than 33,000 jobs have been cut under the renewal plan, with half effecting managers and administrators, while 2,500 urban Post Offices have closed.

Mr Crozier's total pay since he joined the Royal Mail in February 2003 was £3.3 million, today's figures showed.

The package included his annual salary of £500,000 and a performance–related bonus of around £2.2 million.

The Royal Mail said two–thirds of his total remuneration was based on the performance of the company.

Mr Leighton said Mr Crozier deserved his pay because he had led the organisation through a "huge transformation" in the past few years.

Mr Leighton received a bonus last year of £164,000 and he also took up a bonus of £144,000 from the previous year which he had deferred because the Royal Mail had not hit its key quality of service targets. His basic pay is £20,000 a year.

The Communication Workers' Union welcomed today's announcement but said more investment was needed in the postal service and its staff.

General secretary Billy Hayes said: "The turnaround in the business is a testament to the efforts of CWU members and their cooperation in the major change process.

"Postmen and women richly deserve this bonus in compensation for the massive upheavals they have faced over the past three years but we see this payment as a stage in an ongoing process of renewal that still has a considerable way to run."

Deputy general secretary Dave Ward said the emphasis now should be on quality of service and further improvements in meeting targets.

"We have always maintained that Royal Mail's finances were never as bad as originally made out.

"Now that everyone is agreed the business is performing well, I hope we can move on from endless futile speculation about different ownership models."

Watchdog Postwatch congratulated the management and workers on the "excellent" financial performance and on the improvements in deliveries.

The regulator said that, despite failing to achieve 11 of its 15 licence targets in the last financial year, the performance was "encouraging".

"While applauding Royal Mail for continuing its turnaround from serious loss–maker to profitable company, Postwatch maintains that an acceptable postal service will only have been achieved when all minimum licence targets are at least hit.

"Postwatch accepts that remuneration for Royal Mail's senior staff is a matter for the board and the Government as shareholder.

"However, we will continue to press for a substantial part of any package to be linked to achieving performance targets.

"Customers generally care about the service they are receiving, not how much profit the company is making or who owns it."

Mr Leighton told a news conference that today's figures represented the greatest turnaround of any company in Britain of the last 25 years.

The Royal Mail was a "basket case" before the renewal plan began three years ago.

The organisation, then known Consignia, had missed its first class target for 10 years, lost almost 30 million letters a year, had the worst strike record in the country and was losing more than £1 million every working day.

Mr Leighton said the Royal Mail was now delivering the best quality of service performance in a decade, had halved the amount of lost mail and had increased pay for postal workers by almost 25 per cent in the past three years.

Asked about the bonuses given to executives including Mr Crozier, Mr Leighton said he was "very robust" about defending the remuneration.

"Mr Crozier and other executives had joined the company when it was losing money and delivered a poor performance so they deserve to share in the success," he said.

The bonus payments of the executives had always been linked to performance so today's figures were not a surprise.

"It is a very positive thing. If we get success, that is what happens," he said.

But Mr Leighton made it clear that the organisation faced a number of challenges and needed to invest up to £2.5 billion in the next two to five years to help improve performance and deal with a pensions deficit of £2.5 billion.

The money could come from a number of areas, including loans, increased revenue, the government or other areas.

Mr Leighton made it clear that he would support some form of employee ownership, saying it was very important that the workforce had a "big chunk" of the organisation.

Other figures today showed that rural post offices were losing £3 million every week.